<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
JOINT QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended
SEPTEMBER 30, 1999
Commission File No. 1-6776
CENTEX CORPORATION
A Nevada Corporation
IRS Employer Identification No. 75-0778259
2728 N. Harwood
Dallas, Texas 75201
(214) 981-5000
Commission File Nos. 1-9624 and 1-9625, respectively
3333 HOLDING CORPORATION
A Nevada Corporation
CENTEX DEVELOPMENT COMPANY, L.P.
A Delaware Limited Partnership
IRS Employer Identification Nos. 75-2178860 and 75-2168471, respectively
3100 McKinnon, Suite 370
Dallas, Texas 75201
(214) 981-6700
The registrants have 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 and
have been subject to such filing requirements for the past 90 days.
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 October 29, 1999:
<TABLE>
<S> <C> <C>
Centex Corporation Common Stock 59,267,462 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 29,139 units
</TABLE>
<PAGE> 2
CENTEX CORPORATION AND SUBSIDIARIES
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
SEPTEMBER 30, 1999
CENTEX CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements 1
Condensed Consolidated Statement of Earnings
for the Three Months Ended September 30, 1999 2
Condensed Consolidated Statement of Earnings
for the Six Months Ended September 30, 1999 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statement of Cash Flows
for the Six Months Ended September 30, 1999 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 28
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 29
ITEM 6. Exhibits and Reports on Form 8-K 29
SIGNATURES 30
</TABLE>
i
<PAGE> 3
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Combining Financial Statements 31
Condensed Combining Statement of Operations
for the Three Months Ended September 30, 1999 32
Condensed Combining Statement of Operations
for the Six Months Ended September 30, 1999 33
Condensed Combining Balance Sheets 34
Condensed Combining Statements of Cash Flows
for the Six Months Ended September 30, 1999 35
Notes to Condensed Combining Financial Statements 36
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 42
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 48
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 49
ITEM 5. Other Information 49
ITEM 6. Exhibits and Reports on Form 8-K 49
SIGNATURES 51,52
</TABLE>
ii
<PAGE> 4
CENTEX CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 1.
The condensed consolidated financial statements include the accounts of
Centex Corporation and subsidiaries ("Centex" or the "Company"), and have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. References herein to "Centex" or the
"Company" include references to subsidiaries of Centex Corporation. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K. In the opinion of the Company, all adjustments necessary to
present fairly the information in the following condensed consolidated financial
statements of the Company have been included. The results of operations for such
interim periods are not necessarily indicative of the results for the full year.
-1-
<PAGE> 5
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
September 30,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Home Building
Conventional Homes $ 843,745 $ 648,988
Manufactured Homes 50,987 48,484
Investment Real Estate 7,642 4,019
Financial Services 120,477 107,766
Construction Products 117,841 91,776
Contracting and Construction Services 288,751 342,049
------------ ------------
1,429,443 1,243,082
------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes 773,545 596,782
Manufactured Homes 47,033 44,492
Investment Real Estate (1,369) (2,439)
Financial Services 108,027 84,002
Construction Products 65,931 56,808
Contracting and Construction Services 283,636 337,810
Other, net 1,054 2,455
Corporate General and Administrative 8,130 6,760
Interest Expense 15,533 10,042
Minority Interest 20,592 16,004
------------ ------------
1,322,112 1,152,716
------------ ------------
EARNINGS BEFORE INCOME TAXES 107,331 90,366
Income Taxes 41,836 33,803
------------ ------------
NET EARNINGS $ 65,495 $ 56,563
============ ============
EARNINGS PER SHARE
Basic $ 1.10 $ 0.95
============ ============
Diluted $ 1.07 $ 0.91
============ ============
AVERAGE SHARES OUTSTANDING
Basic 59,435,195 59,549,247
Common Share Equivalents
Options 1,446,764 2,082,015
Convertible Debenture 400,000 400,000
------------ ------------
Diluted 61,281,959 62,031,262
============ ============
CASH DIVIDENDS PER SHARE $ 0.04 $ 0.04
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE> 6
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
-----------------------------
For the Six Months Ended
September 30,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Home Building
Conventional Homes $ 1,598,356 $ 1,210,182
Manufactured Homes 98,818 90,929
Investment Real Estate 11,449 8,913
Financial Services 237,364 207,899
Construction Products 215,021 171,622
Contracting and Construction Services 640,668 664,143
------------ ------------
2,801,676 2,353,688
------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes 1,469,008 1,117,308
Manufactured Homes 93,669 84,177
Investment Real Estate (3,721) (4,948)
Financial Services 204,191 160,423
Construction Products 127,784 109,693
Contracting and Construction Services 629,998 656,428
Other, net 2,901 4,761
Corporate General and Administrative 15,338 12,111
Interest Expense 27,361 18,235
Minority Interest 34,706 28,412
------------ ------------
2,601,235 2,186,600
------------ ------------
EARNINGS BEFORE INCOME TAXES 200,441 167,088
Income Taxes 76,510 62,364
------------ ------------
NET EARNINGS $ 123,931 $ 104,724
============ ============
EARNINGS PER SHARE
Basic $ 2.08 $ 1.76
============ ============
Diluted $ 2.02 $ 1.69
============ ============
AVERAGE SHARES OUTSTANDING
Basic 59,440,650 59,540,096
Common Share Equivalents
Options 1,604,945 2,061,858
Convertible Debenture 400,000 400,000
------------ ------------
Diluted 61,445,595 $ 62,001,954
============ ============
CASH DIVIDENDS PER SHARE $ 0.08 $ 0.08
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE> 7
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------
Centex Corporation
and Subsidiaries
-----------------------------
September 30, March 31,
1999* 1999**
------------- -----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 123,440 $ 111,268
Receivables -
Residential Mortgage Loans 1,145,355 1,395,616
Other 437,479 459,778
Inventories 1,939,706 1,533,819
Investments -
Centex Development Company, L.P. 64,538 63,207
Joint Ventures and Other 71,256 48,594
Unconsolidated Subsidiaries -- --
Property and Equipment, net 324,992 313,655
Other Assets -
Deferred Income Taxes 28,558 49,107
Goodwill, net 245,489 222,162
Mortgage Securitization Residual Interest 127,101 80,152
Deferred Charges and Other 97,527 57,388
----------- -----------
$ 4,605,441 $ 4,334,746
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 1,015,227 $ 1,018,650
Short-term Debt 1,509,343 1,626,600
Long-term Debt 564,581 284,299
Payables to Affiliates -- --
Minority Stockholders' Interest 147,922 140,721
Negative Goodwill 58,837 66,837
Stockholders' Equity -
Preferred Stock, Authorized 5,000,000
Shares, None Issued -- --
Common Stock $.25 Par Value; Authorized
100,000,000 Shares; Issued and Outstanding
59,321,455 and 59,388,350 respectively 14,830 14,847
Capital in Excess of Par Value 13,587 20,822
Retained Earnings 1,281,146 1,161,970
Accumulated Other Comprehensive Loss (32) --
----------- -----------
Total Stockholders' Equity 1,309,531 1,197,639
----------- -----------
$ 4,605,441 $ 4,334,746
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
* Unaudited
** Condensed from audited financial statements.
-4-
<PAGE> 8
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
- ---------------------------- ----------------------------
Centex Corporation Financial Services
- ----------------------------- ----------------------------
September 30, March 31, September 30, March 31,
1999* 1999** 1999* 1999**
- ------------- ----------- ------------- -----------
<C> <C> <C> <C>
$ 102,381 $ 72,279 $ 21,059 $ 38,989
-- -- 1,145,355 1,395,616
402,981 404,043 34,498 55,735
1,939,706 1,533,819 -- --
64,538 63,207 -- --
71,256 48,594 -- --
220,677 221,744 -- --
294,487 285,891 30,505 27,764
20,392 40,541 8,166 8,566
230,727 206,595 14,762 15,567
-- -- 127,101 80,152
53,566 40,962 43,961 16,426
----------- ----------- ----------- -----------
$ 3,400,711 $ 2,917,675 $ 1,425,407 $ 1,638,815
=========== =========== =========== ===========
$ 952,241 $ 926,377 $ 62,986 $ 92,273
369,990 303,656 1,139,353 1,322,944
564,581 284,299 -- --
-- -- 91,236 102,652
145,531 138,867 2,391 1,854
58,837 66,837 -- --
-- -- -- --
14,830 14,847 1 1
13,587 20,822 75,967 75,944
1,281,146 1,161,970 53,473 43,147
(32) -- -- --
----------- ----------- ----------- -----------
1,309,531 1,197,639 129,441 119,092
----------- ----------- ----------- -----------
$ 3,400,711 $ 2,917,675 $ 1,425,407 $ 1,638,815
=========== =========== =========== ===========
</TABLE>
In the supplemental data presented above, "Centex Corporation" represents the
combining of all subsidiaries other than those included in Financial Services.
Transactions between Centex Corporation and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries balance sheets.
-5-
<PAGE> 9
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
------------------------
For the Six Months Ended
September 30,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings $ 123,931 $ 104,724
Adjustments -
Depreciation and Amortization 21,985 19,778
Deferred Income Taxes 5,552 35,508
Equity in (Earnings) Loss of Centex Development
Company, L.P. and Joint Ventures (212) 342
Minority Interest, net of taxes 22,408 18,671
Decrease (Increase) in Receivables 23,370 (89,927)
Decrease (Increase) in Residential Mortgage Loans 250,261 (98,344)
Increase in Inventories (327,986) (251,523)
(Decrease) Increase in Payables and Accruals (13,596) 109,990
Increase in Other Assets (86,564) (103,341)
Other, net (15,207) (21,219)
--------- ---------
3,942 (275,341)
--------- ---------
CASH FLOWS - INVESTING ACTIVITIES
Increase in Advances to Centex Development
Company, L.P. and Joint Ventures (21,629) (36,211)
Acquisition of Home Building Operations (74,119) --
Other Acquisitions (9,349) --
Increase in Property and Equipment, net (30,503) (18,665)
--------- ---------
(135,600) (54,876)
--------- ---------
CASH FLOWS - FINANCING ACTIVITIES
(Decrease) Increase in Debt -
Secured by Residential Mortgage Loans (183,591) 175,878
Other 339,460 163,481
Retirement of Common Stock (14,410) 6,143
Proceeds from Stock Option Exercises 7,158 (14,684)
Dividends Paid (4,755) (4,766)
--------- ---------
143,862 326,052
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (32) --
--------- ---------
NET INCREASE (DECREASE) IN CASH 12,172 (4,165)
CASH AT BEGINNING OF PERIOD 111,268 98,316
--------- ---------
CASH AT END OF PERIOD $ 123,440 $ 94,151
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
-6-
<PAGE> 10
CENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Dollars in thousands)
(unaudited)
(A) A summary of comprehensive income for the three and six months ended
September 30, 1999 is presented below:
<TABLE>
<CAPTION>
-------------------------- ------------------------
For the Three Months Ended For the Six Months Ended
September 30, 1999 September 30, 1999
-------------------------- ------------------------
<S> <C> <C>
Net Earnings $ 65,495 $ 123,931
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments 39 (32)
--------- ---------
Comprehensive Income $ 65,534 $ 123,899
========= =========
</TABLE>
Other Comprehensive Income is the result of Centex's investment in
Centex Development Company, L.P. and subsidiaries. For additional information on
Centex Development Company, L.P. and subsidiaries, see their separate financial
statements and related footnotes included elsewhere in this Report.
(B) A summary of changes in stockholders' equity is presented below:
<TABLE>
<CAPTION>
Accumulated
Capital in Other
Preferred Common Excess of Par Retained Comprehensive
Stock Stock Value Earnings Loss Total
----------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1999 $ -- $ 14,847 $ 20,822 $ 1,161,970 $ -- $ 1,197,639
Net Earnings -- -- -- 123,931 -- 123,931
Exercise of Stock Options -- 96 7,062 -- -- 7,158
Retirement of 450,600
Shares -- (113) (14,297) -- -- (14,410)
Cash Dividends -- -- -- (4,755) -- (4,755)
Foreign Currency
Translation
Adjustments -- -- -- -- (32) (32)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999 $ -- $ 14,830 $ 13,587 $ 1,281,146 $ (32) $ 1,309,531
=========== =========== =========== =========== =========== ===========
</TABLE>
(C) 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, the
dynamics of which are inconsistent with Centex's traditional financial
objectives.
-7-
<PAGE> 11
The Partnership is a limited partnership which is controlled by its
general partner, 3333 Development Corporation ("Development"), which in turn is
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 (the "Securities") 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. The Securities,
held by a 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 four-person Board of Directors of Holding is elected by the
stockholders of Centex. The majority of the Board members are independent
outside directors who are also not directors of Centex. Accordingly, the general
partner of the Partnership is controlled by the stockholders of Centex. The
general partner and independent board of Holding manage the Partnership's
conduct of 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.
The Company accounts for its 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 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"). During fiscal 2000, 2,152 Class C
Units were issued in exchange for assets with a fair market value of $2.2
million. These assets were recorded by the Partnership at fair market value. The
partnership agreement provides that Centex, as the sole 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, which is defined as
its capital contributions, adjusted for cash distributions representing return
of the capital contributions. Unrecovered Capital as of September 30, 1999 was
approximately $62 million and the unpaid preferred return as of that date was
$11.9 million. No preferred return payments were made during the three months or
six months ended September 30, 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.
-8-
<PAGE> 12
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS OF CENTEX CORPORATION AND
SUBSIDIARIES, 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT
COMPANY, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
------------- ----------
SEPTEMBER 30, March 31,
1999 1999*
------------- ----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 141,215 $ 111,632
Receivables 1,596,200 1,860,090
Inventories 2,293,685 1,639,664
Investments in Joint Ventures and Other 72,531 49,266
Property and Equipment, net 329,135 313,886
Other Assets 539,993 410,321
---------- ----------
$4,972,759 $4,384,859
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $1,077,208 $1,026,867
Short-term Debt 1,814,680 1,668,496
Long-term Debt 564,581 284,299
Minority Stockholders' Interest 147,922 140,721
Negative Goodwill 58,837 66,837
Stockholders' Equity 1,309,531 1,197,639
---------- ----------
$4,972,759 $4,384,859
========== ==========
</TABLE>
* Condensed from audited financial statements.
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
--------------------------------
For the Six Months Ended
September 30,
--------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 2,970,072 $ 2,364,371
Costs and Expenses 2,769,059 2,197,689
----------- -----------
Earnings Before Income Taxes 201,013 166,682
Income Taxes 77,082 62,364
----------- -----------
NET EARNINGS 123,931 104,318
Other Comprehensive Loss (32) --
----------- -----------
COMPREHENSIVE INCOME $ 123,899 $ 104,318
=========== ===========
</TABLE>
(D) In order to ensure the future availability of land for the Company's
homebuilding operations, the Company has made deposits totaling approximately
$55 million as of September 30, 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 through the year 2005.
-9-
<PAGE> 13
(E) Interest cost relating to the Financial Services operations is included
in its costs and expenses. Interest cost related to non-financial services
operations is included in interest expense.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Total Interest Cost Incurred $ 35,063 $ 30,817
Less - Financial Services Interest Expense (19,530) (20,775)
-------- --------
Interest Expense, net $ 15,533 $ 10,042
======== ========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Total Interest Cost Incurred $ 63,385 $ 58,595
Less - Financial Services Interest Expense (36,024) (40,360)
-------- --------
Interest Expense, net $ 27,361 $ 18,235
======== ========
</TABLE>
(F) In April 1994, Centex Construction Products, Inc. ("Construction
Products") completed an initial public offering of its stock which began trading
on the New York Stock Exchange under the symbol "CXP". Centex's ownership
interest in Construction Products increased to 62.6% as of September 30, 1999
compared to 57.9% as of September 30, 1998 as a consequence of a share
repurchase program implemented by Construction Products Board of Directors.
(G) In fiscal 1996, the Company acquired certain equity interests in Vista
Properties, Inc. ("Vista"). 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 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) 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 $65 million) is included in the
Investment Real Estate segment.
-10-
<PAGE> 14
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 tables set forth financial information relating to the Conventional
Homes operations (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 843.7 $ 649.0
Cost of Sales (651.1) (505.1)
Selling, General & Administrative Expenses (122.4) (91.7)
------- -------
Operating Earnings $ 70.2 $ 52.2
======= =======
</TABLE>
<TABLE>
<CAPTION>
------------------------
For the Six Months Ended
September 30,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $1,598.4 $1,210.2
Cost of Sales (1,232.4) (945.4)
Selling, General & Administrative Expenses (236.7) (171.9)
-------- --------
Operating Earnings $ 129.3 $ 92.9
======== ========
</TABLE>
MANUFACTURED HOMES
Manufactured Homes operations involve the manufacture of residential
and park model homes and the sale of these homes through a network of
Cavco-owned and independent dealers. The Company entered the Manufactured Homes
industry in March 1997, when a subsidiary acquired approximately 80% of Cavco
Industries.
The following tables set forth financial information relating to the
Manufactured Homes operations (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 51.0 $ 48.5
Cost of Sales (39.0) (38.1)
Selling, General & Administrative Expenses (7.1) (5.7)
Goodwill Amortization (0.9) (0.8)
------- -------
Operating Earnings 4.0 3.9
Minority Interest (0.8) (0.8)
------- -------
Net Operating Earnings to Centex $ 3.2 $ 3.1
======= =======
</TABLE>
-11-
<PAGE> 15
<TABLE>
<CAPTION>
------------------------
For the Six Months Ended
September 30,
-------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 98.8 $ 90.9
Cost of Sales (77.6) (71.5)
Selling, General & Administrative Expenses (14.4) (11.1)
Goodwill Amortization (1.7) (1.6)
------- -------
Operating Earnings 5.1 6.7
Minority Interest (1.0) (1.3)
------- -------
Net Operating Earnings to Centex $ 4.1 $ 5.4
======= =======
</TABLE>
INVESTMENT REAL ESTATE
Investment Real Estate operations involve the development of land
primarily for multi-family, industrial, office, retail and mixed-use projects.
The following tables set forth financial information relating to the Investment
Real Estate operations (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 7.6 $ 4.0
Cost of Sales (0.9) (0.1)
Selling, General & Administrative Expenses (1.7) (1.4)
Negative Goodwill Amortization 4.0 4.0
------- -------
Operating Earnings $ 9.0 $ 6.5
======= =======
</TABLE>
<TABLE>
<CAPTION>
------------------------
For the Six Months Ended
September 30,
-------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 11.4 $ 8.9
Cost of Sales (1.1) (0.2)
Selling, General & Administrative Expenses (3.1) (2.8)
Negative Goodwill Amortization 8.0 8.0
------- -------
Operating Earnings $ 15.2 $ 13.9
======= =======
</TABLE>
Property sales related to Investment Real Estate's nominally valued
assets resulted in operating margins of $5.9 million and $8.9 million for the
three and six months ended September 30, 1999 and $3.2 million and $7.4 million
for the same three month and six month periods last year. As of September 30,
1999, the Investment Real Estate Group had approximately $61.3 million of
nominally valued assets.
-12-
<PAGE> 16
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 tables set forth financial information relating to the Financial
Services operations (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues, including interest income of $27.4 million
in 1999 and $26.0 million in 1998 $ 120.5 $ 107.8
Selling, General & Administrative Expenses (88.5) (63.2)
Interest Expense (19.5) (20.8)
------- -------
Operating Earnings $ 12.5 $ 23.8
======= =======
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues, including interest income of $51.0 million
in 1999 and $50.0 million in 1998 $ 237.4 $ 207.9
Selling, General & Administrative Expenses (168.2) (120.0)
Interest Expense (36.0) (40.4)
------- -------
Operating Earnings $ 33.2 $ 47.5
======= =======
</TABLE>
CONSTRUCTION PRODUCTS
Construction Products operations involve the manufacture and sale of
cement, gypsum wallboard, and concrete and aggregates. The following tables set
forth financial information relating to the Construction Products operations
(dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 117.8 $ 91.7
Interest Income 0.7 0.8
Cost of Sales and Expenses (65.7) (56.7)
Selling, General & Administrative Expenses (0.5) (0.8)
Goodwill Amortization (0.4) --
------- -------
Operating Earnings 51.9 35.0
Minority Interest (19.8) (15.2)
------- -------
Net Operating Earnings to Centex $ 32.1 $ 19.8
======= =======
</TABLE>
-13-
<PAGE> 17
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 215.0 $ 171.6
Interest Income 1.2 1.6
Cost of Sales and Expenses (126.7) (109.5)
Selling, General & Administrative Expenses (1.6) (1.8)
Goodwill Amortization (0.7) --
------- -------
Operating Earnings 87.2 61.9
Minority Interest (33.7) (27.1)
------- -------
Net Operating Earnings to Centex $ 53.5 $ 34.8
======= =======
</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 tables set forth financial information relating to the
Contracting and Construction Services operations. As this segment generates
significant positive cash flow, intercompany interest income (credited at the
prime rate in effect) is reflected in this segment. These amounts are eliminated
in consolidation (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 288.8 $ 342.0
Construction Contract Costs (272.4) (327.0)
Selling, General & Administrative Expenses (11.3) (10.8)
------- -------
Operating Income, as reported 5.1 4.2
Intercompany Interest Income* 2.1 1.4
------- -------
Total Economic Return $ 7.2 $ 5.6
======= =======
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Revenues $ 640.7 $ 664.1
Construction Contract Costs (606.0) (636.3)
Selling, General & Administrative Expenses (24.0) (20.1)
------- -------
Operating Income, as reported 10.7 7.7
Intercompany Interest Income* 4.3 2.8
------- -------
Total Economic Return $ 15.0 $ 10.5
======= =======
</TABLE>
*The "net assets" position of the Contracting and Construction Services
segment provides significant cash flow because payables and accruals
consistently exceed identifiable assets. Intercompany interest income is
computed on the group's cash flow in excess of its equity.
-14-
<PAGE> 18
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 tables summarize financial information relating to the
Corporate and Other, net segments (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Operating Loss - Other, net $ (1.1) $ (2.5)
======= =======
Corporate General and Administrative Expenses $ (8.1) $ (6.8)
======= =======
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
------- -------
<S> <C> <C>
Operating Loss - Other, net $ (2.9) $ (4.8)
======= =======
Corporate General and Administrative Expenses $ (15.3) $ (12.1)
======= =======
</TABLE>
(I) The computation of diluted earnings per share excludes anti-dilutive
options to purchase 4,421,000 common shares at an average price of $37.13, and
3,240,000 common shares at an average price of $37.59 for the three months and
six months ended September 30, 1999, respectively. All anti-dilutive options
have expiration dates ranging from November 2007 to August 2009.
(J) Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued in
June 1998. This statement addressed 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. SFAS No. 133 requires that an entity recognize all derivatives
as either assets or liabilities in the consolidated balance sheet and measure
those instruments at fair value. In June 1999, SFAS No. 137 was issued which
delays the implementation of this statement for the Company until April 2001.
(K) Certain prior period balances have been reclassified to be consistent
with the September 30, 1999 presentation.
-15-
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Centex's consolidated revenues for the three months ended September 30,
1999 were $1.4 billion, a 15% increase over $1.2 billion for the same period
last year. Earnings before income taxes were $107.3 million, 19% higher than
$90.4 million last year. Net earnings for the three months ended September 30,
1999 were $65.5 million, a 16% increase over net earnings of $56.6 million for
the same period last year.
For the six months ended September 30, 1999, consolidated revenues
totaled $2.8 billion, 19% higher than $2.4 billion for the same period last
year. Earnings before income taxes were $200.4 million, 20% higher than $167.1
million for the same period last year. Net earnings were $123.9 million for the
six months ended September 30, 1999, an 18% increase over net earnings of $104.7
for the same period last year.
HOME BUILDING
CONVENTIONAL HOMES
The following is a summary of Conventional Homes's results for the
three and six months ended September 30, 1999 compared to the three and six
months ended September 30, 1998 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
------------------------------------------------------------
For the Three Months Ended September 30,
------------------------------------------------------------
1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Conventional Homes Revenues $ 843.7 100.0% $ 649.0 100.0%
Cost of Sales (651.1) (77.2%) (506.5) (78.0%)
Selling, General & Administrative Expenses (122.4) (14.5%) (90.3) (14.0%)
---------- ---------- ---------- ----------
Operating Earnings $ 70.2 8.3% $ 52.2 8.0%
========== ========== ========== ==========
Units Closed 4,425 3,467
% Change 27.6% 11.2%
Unit Sales Price $187,700 $184,513
% Change 1.7% 0.6%
Operating Earnings Per Unit $ 15,684 $ 15,058
% Change 5.4% 13.1%
</TABLE>
-16-
<PAGE> 20
<TABLE>
<CAPTION>
For the Six Months Ended September 30,
------------------------------------------------------------
1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Conventional Homes Revenues $ 1,598.4 100.0% $ 1,210.2 100.0%
Cost of Sales (1,232.4) (77.1%) (945.4) (78.1%)
Selling, General & Administrative Expenses (236.7) (14.8%) (171.9) (14.2%)
---------- --------- ---------- ----------
Operating Earnings $ 129.3 8.1% $ 92.9 7.7%
========== ========= ========== ==========
Units Closed 8,359 6,449
% Change 29.6% 13.0%
Unit Sales Price $ 188,127 $ 184,444
% Change 2.0% 1.4%
Operating Earnings Per Unit $ 15,474 $ 14,401
% Change 7.5% 18.7%
</TABLE>
Conventional Homes's revenues for the three months and six months ended
September 30, 1999 increased by $194.7 million and $388.2 million, respectively
from revenues for the corresponding periods last year. These increases resulted
from an increased number of existing operating neighborhoods, revenues
attributable to newly acquired operations, and an increased average unit selling
price compared to fiscal 1999 unit sales price.
Operating earnings for the three months ended September 30, 1999 were
0.3% higher as a percentage of revenue and approximately $600 higher on a per
unit basis in comparison to the three months ended September 30, 1998. For the
six months ended September 30, 1999, operating earnings were 0.4% higher as a
percentage of revenue and approximately $1,000 higher on a per unit basis in
comparison with the same period last year.
Home sales (orders) totaled 4,328 units during the three months ended
September 30, 1999 compared to 3,617 units during the same period a year ago.
Home sales (orders) totaled 9,102 units during the six months ended September
30, 1999 compared to last year's 7,206 units. The backlog of homes sold but not
closed at September 30, 1999 was 7,819 units, 26% higher than 6,204 units for
the same period a year ago. The September 30, 1999 backlog includes 304 units
related to the newly acquired Sundance Homes and Real Homes operations.
-17-
<PAGE> 21
MANUFACTURED HOMES
The following is a summary of Manufactured Homes's results for the
three and six months ended September 30, 1999 compared to the three and six
months ended September 30, 1998 (dollars in millions):
<TABLE>
<CAPTION>
-----------------------------------------------------
For the Three Months Ended September 30,
-----------------------------------------------------
1999 1998
----------------------- -----------------------
<S> <C> <C> <C> <C>
Manufactured Homes Revenues (Construction) $ 32.9 100.0% $ 38.6 100.0%
Cost of Sales (24.5) (74.5%) (30.2) (78.3%)
Selling, General & Administrative Expenses (3.7) (11.2%) (3.7) (9.6%)
-------- -------- -------- --------
4.7 14.3% 4.7 12.1%
-------- -------- -------- --------
Retail Sales Revenues 18.0 100.0% 9.9 100.0%
Cost of Sales (14.4) (80.0%) (7.4) (74.7%)
Selling, General & Administrative Expenses (3.5) (19.4%) (2.4) (24.2%)
-------- -------- -------- --------
0.1 0.6% 0.1 1.1%
-------- -------- -------- --------
Construction and Retail Earnings 4.8 4.8
Goodwill Amortization (0.8) (0.8)
Minority Interest (0.8) (0.9)
-------- --------
Group Operating Earnings $ 3.2 $ 3.1
======== ========
Units Sold 1,438 1,536
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
For the Six Months Ended September 30,
-----------------------------------------------------
1999 1998
----------------------- -----------------------
<S> <C> <C> <C> <C>
Manufactured Homes Revenues (Construction) $ 67.7 100.0% $ 72.0 100.0%
Cost of Sales (52.8) (77.9%) (57.0) (79.2%)
Selling, General & Administrative Expenses (7.4) (10.9%) (6.8) (9.4%)
-------- -------- -------- --------
7.5 11.2% 8.2 11.4%
-------- -------- -------- --------
Retail Sales Revenues 31.1 100.0% 18.9 100.0%
Cost of Sales (24.9) (79.9%) (14.5) (76.7%)
Selling, General & Administrative Expenses (6.9) (22.3%) (4.2) (22.2%)
-------- -------- -------- --------
(0.7) (2.2%) 0.2 1.1%
-------- -------- -------- --------
Construction and Retail Earnings 6.8 8.4
Goodwill Amortization (1.7) (1.6)
Minority Interest (1.0) (1.4)
-------- --------
Group Operating Earnings $ 4.1 $ 5.4
======== ========
Units Sold 3,222 3,147
</TABLE>
Cavco operates five manufactured home plants: three in the Phoenix,
Arizona area, one near Albuquerque, New Mexico, and one plant in central Texas
that was opened in January, 1999. As of September 30, 1999, Cavco operated 23
retail locations for the sale of manufactured homes compared to 10 retail
locations in the prior year.
-18-
<PAGE> 22
Operating earnings for the three months ended September 30, 1999 were
$3.2 million, a 3% increase over the same period in the prior year. For the six
months ended September 30, 1999, Manufactured Homes's operating earnings were
$4.1 million compared to $5.4 million for the six months ended September 30,
1998. Second quarter and year-to-date operating earnings were negatively
impacted by start-up and marketing costs associated with the new Texas plant and
retail store openings in Texas.
INVESTMENT REAL ESTATE
The following is a summary of Investment Real Estate's results for the
three and six months ended September 30, 1999 compared to the three and six
months ended September 30, 1998 (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 7.6 $ 4.0
======== ========
Operating Earnings $ 9.0 $ 6.5
======== ========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 11.4 $ 8.9
======== ========
Operating Earnings $ 15.2 $ 13.9
======== ========
</TABLE>
For the three months ended September 30, 1999, Centex's Investment Real
Estate operations, through which all investment property transactions are
reported, had operating earnings of $9.0 million, 38% higher than $6.5 million
for the same period a year ago. For the six months ended September 30, 1999,
Centex's Investment Real Estate operations had operating earnings of $15.2
million, 9% higher than $13.9 million for the same period last year. 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
resulted in operating margins of $5.9 million and $3.3 million for the three
months ended September 30, 1999 and 1998, and $8.9 million and $7.4 million for
the six months ended September 30, 1999 and 1998, respectively. At September 30,
1999, the Investment Real Estate Group had approximately $61.3 million of
nominally valued assets the majority of which is expected to be sold over the
next four years.
Negative goodwill amortization was $4 million for the three months
ended September 30, 1999 and 1998, and $8 million for the six months ended
September 30, 1999 and 1998.
-19-
<PAGE> 23
FINANCIAL SERVICES
The following is a summary of Financial Services's results for the
three and six months ended September 30, 1999 compared to the three and six
months ended September 30, 1998 (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 120.5 $ 107.8
======== ========
Operating Earnings $ 12.5 $ 23.8
======== ========
Origination Volume $ 2,409 $ 2,675
======== ========
Number of Loans Originated
CTX Mortgage Company ("CTX Mortgage")
Centex-built Homes ("Builder") 2,571 2,339
Non-Centex-built Homes ("Retail") 13,069 16,091
-------- --------
15,640 18,430
Centex Home Equity Corporation ("Home Equity") 5,031 3,793
Centex Finance Company 304 212
-------- --------
20,975 22,435
======== ========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 237.4 $ 207.9
======== ========
Operating Earnings $ 33.2 $ 47.5
======== ========
Origination Volume $ 5,182 $ 5,272
======== ========
Number of Loans Originated
CTX Mortgage Company ("CTX Mortgage")
Centex-built Homes ("Builder") 5,040 4,420
Non-Centex-built Homes ("Retail") 28,918 32,333
-------- --------
33,958 36,753
Centex Home Equity Corporation ("Home Equity") 9,870 7,309
Centex Finance Company 472 355
-------- --------
44,300 44,417
======== ========
</TABLE>
Financial Services's operating earnings for the three months ended
September 30, 1999 were $12.5 million, 47% lower than the three months ended
September 30, 1998 operating earnings of $23.8 million. For the six months ended
September 30, 1999, operating earnings were $33.2 million, 30% lower than $47.5
million for the same period last year.
-20-
<PAGE> 24
CTX Mortgage's operating earnings totaled $7.7 million for the three
months ended September 30, 1999, 63% less than earnings for the same period a
year ago. CTX Mortgage originations for the three months ended September 30,
1999 were 15,640, a 15% decrease from the 18,430 originations for the same
period last year. The per loan profit for the three months ended September 30,
1999 was $488, 57% lower than the $1,124 per loan for the same period last year.
CTX Mortgage's operating earnings for the six months ended September 30, 1999
totaled $24.8 million, 41% less than earnings for the same period last year.
Originations from CTX Mortgage were 33,958 for the six months ended September
30, 1999, compared to 36,753 for the same period last year. The per loan profit
for the six months ended September 30, 1999 was $729, 36% lower than the $1,141
for the six months ended September 30, 1998. The decline in CTX Mortgage's
operating earnings is primarily due to the decrease in refinancing activity as a
result of increasing interest rates and the delay in balancing operating costs
with current production levels. CTX Mortgage's total mortgage applications for
the three months ended September 30, 1999 decreased 25% to 14,019 from 18,682
applications for the same period last year. For the six months ended September
30, 1999, CTX Mortgage's applications decreased to 33,013 from 37,873 for the
same period last year. Applications are expected to continue to decline on a
year-over-year basis if mortgage interest rates remain at present levels.
Centex Home Equity reported $6.0 million of operating earnings for the
three months ended September 30, 1999, 63% higher than earnings for the same
period last year. Operating earnings from Home Equity for the six months ended
September 30, 1999 totaled $10.5 million, a 63% increase over the same period
last year. Originations for the three months ended September 30, 1999 were
5,031, which is a 33% increase over the originations for the same period last
year. Originations for the six months ended September 30, 1999 were 9,870, which
is a 35% increase over the 7,309 originated for the same time period in the
prior year. Loan volume for the three months ended September 30, 1999 was $320
million, a 33% improvement over the same period a year ago. Loan volume for the
six months ended September 30, 1999 was $637 million, a 36% improvement over the
prior year. Loan volume for the three and six month periods was favorably
impacted by the opening of new operating locations plus generally increased
activity.
Home Equity's sub-prime applications totaled 28,781 for the three
months ended September 30, 1999, which is an increase of 55% over the 18,599
applications for the same period last year. Home Equity's sub-prime
applications totaled 57,444 for the six months ended September 30, 1999, an 81%
improvement of the 31,687 applications for the same period last year. Per loan
profit was $1,190 and $968 for the three and six month period ending September
30, 1999 compared to $1,068 and $904 for the same period last year. The increase
is primarily related to earnings from the servicing operation partially offset
by the absorption of costs related to an increase in the branch network.
As a consequence of increases in loan volume, during the three months
ended September 30, 1999, Home Equity completed a securitization for $415
million, compared to a $240 million securitization in the prior year. For the
six months ended September 30, 1999, Home Equity completed securitizations
totaling $700 million, compared to $440 million in securitizations for the same
period last year. As a result of the securitization process, Home Equity sells
the loans but retains a residual interest in the securitization instrument as
well as the servicing rights associated with these loans. Home Equity is the
long-term servicer of these loans. Service fee income related to this long-term
servicing was $3.4 million in the three months ended September 30, 1999 and $0.8
million in the same period last year. For the six months ended September 30,
1999, service fee revenue was $6.0 million compared to $1.2 million for the same
period a year ago.
Centex Finance Company, the manufactured homes finance unit, had an
operating loss of approximately $1.2 million for the three months ended
September 30, 1999, compared to a loss of $629,000 for the same period last
year, due to expansion costs. During the three months ended September 30, 1999,
-21-
<PAGE> 25
Centex Finance Company originated 304 loans, a 43% increase over the 212 loans
for the same period last year. For the six months ended September 30, 1999,
Centex Finance Company had an operating loss totaling $2.1 million, compared to
$1.0 million for the same period last year, due to expansion costs. Total
originations for Centex Finance Company were 472 loans for the six months ended
September 30, 1999, a 33% increase over the same period last year.
Revenues include the gains on sales of mortgage loans receivable. Such
gains increased to $76.5 million for the three months ended September 30, 1999
from $71.0 million in the same period last year. For the six months ended
September 30, 1999, gains on sales of mortgage loan receivables totaled $142.9
million, a 23% increase over the same period last year. These increases are
attributable to the expansion of Financial Services's product lines and the
increased origination volume. Gains on sales of mortgage loans includes the gain
recorded upon the completion of securitization, the gain on sale of servicing,
and/or gain on whole loan sales.
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. 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"). Interest income increased slightly for the three months ended
September 30, 1999 to $27.4 million from the same period last year. Interest
expense for the three months ended September 30, 1999 was $19.5 million, a
slight decrease from the same period last year. Interest income for the six
month period ended September 30, 1999 was $51 million, a slight increase over
the same period last year. For the six month period ended September 30, 1999,
interest expense was $36 million, an 11% decrease over the same period last
year.
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.
CONSTRUCTION PRODUCTS
The following is a summary of Construction Products's results for the
three and six months ended September 30, 1999 compared to the three and six
months ended September 30, 1998 (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 117.8 $ 91.7
Interest Income 0.7 0.8
Cost of Sales and Expenses (65.7) (56.7)
Selling, General & Administrative Expenses (0.9) (0.8)
-------- --------
Operating Earnings 51.9 35.0
Minority Interest (19.8) (15.2)
-------- --------
Net Operating Earnings to Centex $ 32.1 $ 19.8
======== ========
</TABLE>
-22-
<PAGE> 26
<TABLE>
<CAPTION>
------------------------
For the Six Months Ended
September 30,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 215.0 $ 171.6
Interest Income 1.2 1.6
Cost of Sales and Expenses (126.7) (109.5)
Selling, General & Administrative Expenses (2.3) (1.8)
-------- --------
Operating Earnings 87.2 61.9
Minority Interest (33.7) (27.1)
-------- --------
Net Operating Earnings to Centex $ 53.5 $ 34.8
======== ========
</TABLE>
Construction Products's revenues were $117.8 million for the three
months ended September 30, 1999, 28% higher than the same period last year. For
the three months ended September 30, 1999, Construction Products's operating
earnings, net of minority interest, were $32.1 million, a 62% increase over
$19.8 million for the same period last year. Revenues from Construction Products
for the current six months ended September 30, 1999 were $215.0 million, 25%
higher than the same period last year. For the six months ended September 30,
1999, Construction Products's operating earnings, net of minority interest, were
$53.5 million, a 53% improvement over results for the same period a year ago.
Construction Products's record operating earnings resulted from
improved results in each of its businesses. Pricing and sales volume improved
for every product, particularly pricing for gypsum wallboard, which rose 34%
over pricing for the same three months last year and 31% for the same six months
last year.
CONTRACTING AND CONSTRUCTION SERVICES
The following is a summary of Contracting and Construction Services's
results for the three and six months ended September 30, 1999 compared to the
three and six months ended September 30, 1998 (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 288.8 $ 342.0
======== ========
Operating Earnings $ 5.1 $ 4.2
======== ========
New Contracts Received $ 260 $ 333
======== ========
Backlog of Uncompleted Contracts $ 1,123 $ 1,219
======== ========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $ 640.7 $ 664.1
======== ========
Operating Earnings $ 10.7 $ 7.7
======== ========
New Contracts Received $ 827 $ 724
======== ========
Backlog of Uncompleted Contracts $ 1,123 $ 1,219
======== ========
</TABLE>
-23-
<PAGE> 27
Contracting and Construction Services's revenues for the three and six
months ended September 30, 1999 were $288.8 million and $640.7 million,
respectively. Operating earnings for the group improved 21% to $5.1 million for
the three months and 39% to $10.7 million for the six months ended September 30,
1999 over the same periods last year. This increase was primarily the result of
a continuing shift in recent years to higher-margin private negotiated projects
rather than the lower-margin public bid work that had historically been its
specialty.
The Contracting and Construction Services operations provided a
positive average net cash flow in excess of Centex's investment in the group of
$97.8 million for the three months ended September 30, 1999 and $65.3 million
for the same period last year. For the six months ended September 30, 1999, the
positive average net cash flow in excess of Centex's investment in the group was
$106.9 million, compared to $65.2 million for the same period last year.
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 the Company considers resolution of Year
2000 issues a priority, 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").
The Task Force has surveyed the Year 2000 Compliance Team regarding
Year 2000 Systems compliance. The surveys indicated that a small number of the
Systems were not Year 2000 compliant. Affected Systems were 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 (or otherwise
remediated) and tested all critical Systems. In substantially all of the cases,
the replacement or upgrading of, or other changes to, the non-compliant Systems
(i) occurred for reasons unrelated to the non-compliance of the Systems and (ii)
was not 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.
The Company does not believe (i) that the relatively few remaining
non-critical 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-critical non-compliant
Systems or (ii) that the cost of replacing, upgrading or otherwise changing the
relatively few remaining non-critical 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 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 were consistent with
the
-24-
<PAGE> 28
Company's internal determinations of its Year 2000 readiness. The Company has
implemented the consulting firm's recommendations for achieving Year 2000
compliance.
The Task Force has completed the Company's overall Year 2000
contingency plan. The Company's overall contingency plan includes ancillary
plans for the Company and each of its subsidiaries. Because of the diverse
businesses in which the Company's subsidiaries are involved, the contingency
plans vary significantly by subsidiary. The plans include the use of alternate
communication devices and services, ensuring that certain key suppliers maintain
inventories of supplies for several weeks of operations, the use of electric
generators as an alternate power supply and the manual reproduction of December
1999 business records to facilitate normal operations.
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, some of which are
not 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 any of these third-parties
(including federal 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 could have a greater effect on the Company's financial services
subsidiaries' operations than on the Company's less technology-intensive
subsidiaries' 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 surveyed 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
varied 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, management of the respective
subsidiaries will continue to follow-up throughout the remainder of the year
through a combination of continued follow-up requests and direct conversations
with those parties whose operations are material to the Company or its
subsidiaries in order to ascertain the Year 2000 readiness of such parties. The
Task Force 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 positive responses from approximately 40% of the total number of owners
and managers surveyed, including responses from all of the owners and managers
that lease material facilities to the Company and its subsidiaries. The
completed surveys from the owners and managers of the material facilities
indicate that such facilities are Year 2000 compliant.
-25-
<PAGE> 29
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.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1999, the Company had cash and cash equivalents of
$123.4 million. The net cash provided or used by the operating, investing, and
financing activities for the six months ended September 30, 1999 and 1998 is
summarized below (dollars in thousands):
<TABLE>
<CAPTION>
---------------------------
For the Six Months Ended
September 30,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN):
Operating activities $ 3,942 $ (275,341)
Investing activities (135,600) (54,876)
Financing activities 143,862 326,052
Effect of exchange rate changes on cash (32) --
---------- ----------
Net increase (decrease) in cash $ 12,172 $ (4,165)
========== ==========
</TABLE>
For the six months ended September 30, 1999, cash was provided by a
decreased investment in mortgage loans offset by an increase in housing
inventories. The decrease in mortgage loans is a result of a decrease in
refinancing activity as well as the timing of loan sales and securitizations.
The increase in housing inventories relates to the addition of new neighborhoods
and acquisitions. Cash was used to fund acquisitions (primarily in the Home
Building segment) and to fund additions to property and equipment (primarily for
new production capacity within the Construction Products segment). The funds
provided by financing activities included new debt used primarily to fund the
increased home building activity.
Short-term debt as of September 30, 1999 was $1.5 billion, which
included $1.1 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 bank borrowings and from 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 Financial Services segment provides most of its own short-term
financing needs through separate facilities which require only limited support
from Centex Corporation. CTX Mortgage has $1.2 billion of secured committed
mortgage warehouse facilities which includes a $300 million asset-backed
commercial paper program. In addition, it has another $665 million of
uncommitted credit facilities. All of these facilities
-26-
<PAGE> 30
are used to finance mortgages that are held during the period they are being
securitized and readied for delivery against forward sale commitments.
Similarly, Centex Home Equity Corporation has $260 million of committed and $160
million of uncommitted secured mortgage warehouse facilities to finance
sub-prime mortgages held until securitization.
Long-term debt outstanding as of September 30, 1999 was as follows (in
thousands):
<TABLE>
<S> <C>
Subordinated Debentures, 7.375%, due in 2005 $ 99,723
Subordinated Debentures, 8.75%, due in 2007 99,496
Other Indebtedness, 5.31% to 9.6%, due through 2027 365,362
-----------
$ 564,581
===========
</TABLE>
Maturities of long-term debt during the next five years are as follows
(in thousands):
<TABLE>
<S> <C>
Fiscal Year ending:
March 31, 2000 $ 608
March 31, 2001 342,679
March 31, 2002 1,212
March 31, 2003 15,143
March 31, 2004 205
-----------
$ 359,847
===========
</TABLE>
The Company believes it has adequate resources and sufficient credit
facilities to satisfy its current needs and to provide for future growth.
OTHER DEVELOPMENTS AND OUTLOOK
During the quarter, Centex's home building operations completed the
acquisition of substantially all of the suburban Chicago, Illinois home building
operating assets of Sundance Homes, Inc. for approximately $50 million in cash.
Also during the quarter, the home building operations completed the acquisition
of the operating assets of Las Vegas based Real Homes, Inc. for approximately
$20 million in cash.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this report on Form 10-Q 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, 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
-27-
<PAGE> 31
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 3. 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 the risk associated with the majority of its 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.
There have been no material changes in the Company's market risk since
March 31, 1999. For information regarding the Company's market risk, refer to
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1999.
-28-
<PAGE> 32
CENTEX CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 1999, Centex held its Annual Meeting of Stockholders. At
the Annual Meeting, Barbara T. Alexander, Juan L. Elek and Paul R. Seegers were
elected as directors to serve for a three-year term until the 2002 Annual
Meeting. Voting results for these nominees are summarized as follows:
<TABLE>
<CAPTION>
Number of Shares
-----------------------------
For Against
---------- -------
<S> <C> <C>
Barbara T. Alexander 51,944,036 481,554
Juan L. Elek 51,943,162 482,428
Paul R. Seegers 51,937,321 488,269
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
Exhibits 27.1 - Financial Data Schedule
(2) Reports on Form 8-K
Current Report on Form 8-K of Centex Corporation dated July
22, 1999.
Current Report on Form 8-K of Centex Corporation dated August
17, 1999.
All other items required under Part II are omitted because they are not
applicable.
-29-
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTEX CORPORATION
-------------------------------------
Registrant
November 12, 1999 /s/ David W. Quinn
-------------------------------------
David W. Quinn
Vice Chairman of the Board and
Chief Financial Officer
(principal financial officer)
November 12, 1999 /s/ John S. Worth
-------------------------------------
John S. Worth
Vice President and Controller
(chief accounting officer)
-30-
<PAGE> 34
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED COMBINING FINANCIAL STATEMENTS
ITEM 1.
The condensed combining financial statements include the accounts of
3333 Holding Corporation and subsidiary ("Holding") and Centex Development
Company, L.P. and subsidiaries (the "Partnership") (collectively the
"Companies"), and have been prepared by the Companies, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Companies believe that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed combining
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Companies' latest Annual Report on Form 10-K.
In the opinion of the Companies, all adjustments necessary to present fairly the
information in the following condensed financial statements of the Companies
have been included. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
-31-
<PAGE> 35
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit/share data)
(unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
For the Three Months Ended September 30,
---------------------------------------------------------------------------------------
1999 1998
------------------------------------------- ------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
-------- ------------- -------------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ 91,130 $ 91,130 $ 154 $ 7,772 $ 7,656 $ 281
COSTS AND EXPENSES 90,763 90,261 656 7,397 7,028 534
-------- ---------- ---------- -------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES 367 869 (502) 375 628 (253)
INCOME TAXES 311 311 -- -- -- --
-------- ---------- ---------- -------- ---------- ----------
NET EARNINGS (LOSS) $ 56 $ 558 $ (502) $ 375 $ 628 $ (253)
======== ========== ========== ======== ========== ==========
NET EARNINGS ALLOCABLE TO LIMITED PARTNER $ 558 $ 628
========== ==========
EARNINGS (LOSS) PER UNIT/SHARE $ 9.09 $ (502) $ 11.79 $ (253)
========== ========== ========== ==========
WEIGHTED-AVERAGE UNITS/SHARES OUTSTANDING 61,399 1,000 53,279 1,000
</TABLE>
See notes to condensed combining financial statements.
-32-
<PAGE> 36
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit/share data)
(unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
For the Six Months Ended September 30,
---------------------------------------------------------------------------------------
1999 1998
------------------------------------------- ------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
--------- ------------- -------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ 169,799 $ 169,799 $ 304 $ 14,080 $ 13,732 $ 757
COSTS AND EXPENSES 169,151 168,076 1,379 14,051 13,297 1,163
--------- ---------- ---------- --------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES 648 1,723 (1,075) 29 435 (406)
INCOME TAXES 572 572 -- -- -- --
--------- ---------- ---------- --------- ---------- ----------
NET EARNINGS (LOSS) $ 76 $ 1,151 $ (1,075) $ 29 $ 435 $ (406)
========= ========== ========== ========= ========== ==========
NET EARNINGS ALLOCABLE TO LIMITED PARTNER $ 1,151 $ 435
========== ==========
EARNINGS (LOSS) PER UNIT/SHARE $ 19.08 $ (1,075) $ 8.49 $ (406)
========== ========== ========== ==========
WEIGHTED-AVERAGE UNITS/SHARES OUTSTANDING 60,340 1,000 51,210 1,000
</TABLE>
See notes to condensed combining financial statements.
-33-
<PAGE> 37
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------- ------------------------------------------
SEPTEMBER 30, 1999* March 31, 1999**
------------------------------------------- ------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
--------- ------------- -------------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 17,775 $ 17,758 $ 17 $ 364 $ 331 $ 33
Accounts Receivable 10,192 14,515 6 1,180 3,133 10
Notes Receivable 3,540 3,540 -- 3,554 3,554 --
Investment in Affiliate -- -- 1,635 -- -- 1,616
Investment in Real Estate Joint Venture 1,275 1,275 -- 672 672 --
Inventories 352,001 351,405 596 104,663 104,288 375
Property and Equipment, net 4,143 4,024 119 231 89 142
Other Assets -
Goodwill, net 30,019 30,019 -- -- -- --
Deferred Charges and Other 11,299 11,074 225 1,512 1,166 346
--------- ---------- ---------- --------- ---------- ----------
$ 430,244 $ 433,610 $ 2,598 $ 112,176 $ 113,233 $ 2,522
========= ========== ========== ========= ========== ==========
LIABILITIES, STOCKHOLDERS' EQUITY
AND PARTNERS' CAPITAL
Accounts Payable and Accrued Liabilities $ 61,981 $ 62,673 $ 4,505 $ 8,968 $ 9,008 $ 2,772
Notes Payable and Long-term Debt 305,337 305,337 -- 42,478 41,896 582
--------- ---------- ---------- --------- ---------- ----------
Total Liabilities 367,318 368,010 4,505 51,446 50,904 3,354
--------- ---------- ---------- --------- ---------- ----------
Stockholders' Equity and Partners' Capital 62,926 65,600 (1,907) 60,730 62,329 (832)
--------- ---------- ---------- --------- ---------- ----------
$ 430,244 $ 433,610 $ 2,598 $ 112,176 $ 113,233 $ 2,522
========= ========== ========== ========= ========== ==========
</TABLE>
* Unaudited.
** Condensed from audited financial statements.
See notes to condensed combining financial statements.
-34-
<PAGE> 38
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
For the Six Months Ended
September 30,
---------------------------------------------------------------------------------------
1999 1998
------------------------------------------- ------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
--------- ------------- -------------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $ 76 $ 1,151 $ (1,075) $ 29 $ 435 $ (406)
Adjustments:
Depreciation and Amortization 1,748 1,726 22 54 33 21
Earnings from Joint Venture -- -- (7) -- -- --
Decrease (Increase) in Receivables 479 475 4 (2,377) 4,540 (907)
Decrease (Increase) in Notes Receivable 14 14 -- (62) (62) --
Decrease (Increase) in Inventories 8,186 8,407 (221) (20,150) (18,545) (582)
(Increase) Decrease in Other Assets (3,730) (3,851) 121 (883) (763) (120)
Increase (Decrease) in Payables
and Accruals 7,232 5,518 1,733 4,496 4,612 (5,897)
--------- ---------- ---------- --------- ---------- ----------
14,005 13,440 577 (18,893) (9,750) (7,891)
--------- ---------- ---------- --------- ---------- ----------
CASH FLOWS - INVESTING ACTIVITIES
(Increase) Decrease in Advances to
Joint Ventures and Investment in
Affiliate (603) (603) (12) 2,344 1,282 (190)
Property and Equipment Additions, net (32) (33) 1 (128) (46) (82)
--------- ---------- ---------- --------- ---------- ----------
(635) (636) (11) 2,216 1,236 (272)
--------- ---------- ---------- --------- ---------- ----------
CASH FLOWS - FINANCING ACTIVITIES
Increase (Decrease) in Notes Payable 3,685 4,267 (582) 8,065 7,563 502
Decrease in Notes Receivable -- -- -- 7,700 -- 7,700
Issuance of Class "C" Partnership Units -- -- -- 1,000 1,000 --
--------- ---------- ---------- --------- ---------- ----------
3,685 4,267 (582) 16,765 8,563 8,202
--------- ---------- ---------- --------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 356 356 -- -- -- --
--------- ---------- ---------- --------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 17,411 17,427 (16) 88 49 39
CASH AT BEGINNING OF PERIOD 364 331 33 260 259 1
--------- ---------- ---------- --------- ---------- ----------
CASH AT END OF PERIOD $ 17,775 $ 17,758 $ 17 $ 348 $ 308 $ 40
========= ========== ========== ========= ========== ==========
SUPPLEMENTAL DISCLOSURES:
Increase in Notes Payable
Related to an Acquisition $ 253,812 $ 253,812 -- -- -- --
Issuance of Class C Units in
Exchange for Assets $ 2,152 $ 2,152 -- $ 12,454 $ 12,454 --
</TABLE>
See notes to condensed combining financial statements.
-35-
<PAGE> 39
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINING FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(unaudited)
(A) 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 controlled by its general partner, 3333 Development
Corporation ("Development"), which in turn is 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 (the
"Securities") 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. The Securities, held by a 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 Board of Directors of Holding is elected by the stockholders of
Centex. In October 1999, the Board of Directors expanded the size of the board
to four directors. The majority of the Board members are independent outside
directors who are also not directors of Centex. Accordingly, the general partner
of the Partnership is controlled by the stockholders of Centex. The general
partner and independent Board of Directors of Holding manage the Partnership's
conduct of 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.
See Note (C) to the condensed consolidated financial statements of
Centex and subsidiaries included elsewhere in this Form 10-Q for supplementary
condensed combined financial statements for Centex and Subsidiaries, Holding and
Subsidiary, and the Partnership and Subsidiaries.
(B) Holding has a service agreement with Centex Service Company, a wholly-owned
subsidiary of Centex, whereby Centex Service Company provides certain tax,
accounting and other similar services for Holding. This agreement was amended in
fiscal 1999 to include development services and the monthly fee was increased
from $2,500 per month to $30,000 per month.
-36-
<PAGE> 40
The Partnership sells lots to Centex Homes pursuant to certain purchase
and sale agreements. Revenues from these sales totaled $1.2 million and $4.3
million for the three and six months ended September 30, 1999, and $883,000 and
$2.8 million for the three and six months ended September 30, 1998,
respectively. Gains associated with these sales totaled $65,000 and $173,000 for
the three and six months ended September 30, 1999 and $66,000 for the six months
ended September 30, 1998, respectively.
(C) A summary of comprehensive income for the three and six months ended
September 30, 1999 is presented below (dollars in thousands):
<TABLE>
<CAPTION>
-------------------------- ------------------------
For the Three Months Ended For the Six Months Ended
September 30, 1999 September 30, 1999
-------------------------- ------------------------
<S> <C> <C>
Net Earnings $ 56 $ 76
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments 39 (32)
----------- ------------
Comprehensive Income $ 95 $ 44
=========== ============
</TABLE>
(D) A summary of changes in stockholders' equity and partners' capital is
presented below (dollars in thousands):
<TABLE>
<CAPTION>
For the Six Months Ended September 30, 1999
-----------------------------------------------------------------------------------
Centex Development Company, L.P. 3333 Holding Corporation
and Subsidiaries 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, 1999 $ 60,730 $ 500 $ 767 $ 61,062 $ 1 $ 800 $ (1,633)
Partnership Units Issued in
Exchange for Assets 2,152 -- -- 2,152 -- -- --
Net Earnings (Loss) 76 -- -- 1,151 -- -- (1,075)
Accumulated Other
Comprehensive Loss:
Foreign Currency
Translation Adjustments (32) -- -- (32) -- -- --
-------- -------- -------- -------- -------- -------- --------
Balance at September 30, 1999 $ 62,926 $ 500 $ 767 $ 64,333 $ 1 $ 800 $ (2,708)
======== ======== ======== ======== ======== ======== ========
</TABLE>
During fiscal year 1998, the partnership agreement governing the
Partnership was amended to allow for the issuance of a new class of limited
partnership units, Class C Preferred Partnership Units ("Class C Units"), to be
issued in exchange for assets. During the first quarter of fiscal 2000, 2,152
Class C Units were issued to Centex Homes, the Partnership's sole limited
partner, in exchange for assets having a fair market value of $2.2 million.
-37-
<PAGE> 41
The partnership agreement provides that 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. Unrecovered Capital
represents initial capital contributions reduced by repayments thereof, and is
the basis for preference accruals. Unrecovered Capital for Class A and Class C
limited partners was approximately $62 million as of September 30, 1999 and the
unpaid preferred return as of that date was $11.9 million. No preferred return
payments were made during the three months or six months ended September 30,
1999.
(E) On April 15, 1999 Centex Development Company UK Limited ("CDC-UK"), a
company incorporated in England and Wales and a wholly-owned subsidiary of the
Partnership, closed its acquisition of all of the voting shares of Fairclough
Homes Group Limited, a British home builder ("Fairclough"). The purchase price
at closing (approximately $226 million) was paid by the delivery of two-year
non-interest bearing promissory notes. Additionally, the seller of the voting
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. During that time period CDC-UK may, however, participate in
Fairclough's earnings in excess of certain specified levels.
However, because the non-voting preference shares retained by the
seller have the characteristics of debt, the preference obligations are being
reported as interest expense in the financial statements. A major portion of the
promissory notes is secured by a letter of credit obtained by the Partnership
from a United Kingdom bank.
During the period between April 15, 1999 and March 31, 2001 Fairclough
will be operated by CDC-UK subject to certain guidelines that were negotiated
with the seller. After March 31, 2001, CDC-UK will redeem, for a nominal value,
the preference shares.
The purchase of Fairclough has been accounted for using the purchase
method of accounting, pursuant to which the total cost of the acquisition has
been allocated to the tangible and intangible assets acquired and liabilities
assumed based upon their estimated fair values. The allocation of the purchase
price is as follows (dollars in thousands):
<TABLE>
<S> <C>
Inventories, Property and Equipment and Other $ 270,902
Other Assets 3,469
Goodwill 30,525
Notes Issued and Liabilities Assumed (304,896)
----------
Cash Paid $ --
==========
</TABLE>
The following unaudited pro forma results of operations for the three
and six months ended September 30, 1998 give effect to the April 15, 1999
acquisition of Fairclough as if such transaction had occurred on April 1, 1998.
The financial information for Fairclough included in the unaudited pro forma
results of operations is derived from Fairclough's operating results for the
three and six months ended September 30, 1998, in accordance with U.S. generally
accepted accounting principles and translated to U.S. dollars. This information
is based on the historical financial statements of the Companies and the
historical financial statements of Fairclough. The pro forma adjustments are
directly attributable to the transaction referenced
-38-
<PAGE> 42
above, and are expected to have a continuing impact on the business, results of
operations, and financial position.
<TABLE>
<CAPTION>
Pro Forma Results of Operations
----------------------------------------------------------
For the Three Months Ended
September 30, 1998
----------------------------------------------------------
(Dollars in thousands, except per unit/share data)
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
---------- ------------- --------------
<S> <C> <C> <C>
Revenues $ 115,664 $ 115,548 $ 281
========= ========== =========
Net Earnings (Loss) $ 325 $ 578 $ (253)
========= ========== =========
Net Earnings Allocable to Limited Partner $ 578
==========
Earnings (Loss) Per Unit/Share $ 10.84 $ (253)
========== =========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Results of Operations
----------------------------------------------------------
For the Six Months Ended
September 30, 1998
----------------------------------------------------------
(Dollars in thousands, except per unit/share data)
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
---------- ------------- --------------
<S> <C> <C> <C>
Revenues $ 168,333 $ 167,985 $ 757
========= ========== ========
Net Earnings (Loss) $ 4 $ 410 $ (406)
========= ========== ========
Net Earnings Allocable to Limited Partner $ 410
==========
Earnings (Loss) Per Unit/Share $ 8.00 $ (406)
========== ========
</TABLE>
The unaudited pro forma results of operations are not necessarily
indicative of what actual results of operations of the Companies would have been
for the period, nor do they represent the Companies' results of operations for
future periods.
The unaudited pro forma results of operations include the following
adjustments:
o Amortization of goodwill and other intangibles based upon the
Partnership's allocation of the purchase price. Goodwill is
being amortized over a 20-year period;
o Elimination of the historical interest expense of Fairclough
related to debt not assumed by the Partnership;
o Additional interest expense representing the preference
payments to the seller;
-39-
<PAGE> 43
o Amortization of deferred debt issuance costs which are being
amortized over the term of the debt;
o Income tax adjustments related to the above pro forma items.
(F) The Partnership operates in five principal business segments: International
Home Building, Domestic Home Building, Commercial Development, Multi-Family
Development and Land Sales. All of the segments, with the exception of
International Home Building, operate in the United States. International Home
Building currently operates in the United Kingdom.
The following tables set forth financial information relating to the
five business segments for the three and six months ended September 30, 1999 and
September 30, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Three Months Ended September 30, 1999
---------------------------------------------------------------------------------------
Home Building
--------------------------
Commercial Multi-Family
International Domestic Development Development Land Sales Total
------------- --------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 67,564 $ 2,587 $ 2,498 $ 17,154 $ 1,327 $ 91,130
Cost of Sales (58,720) (2,212) (1,094) (17,049) (1,157) (80,232)
General & Administrative Expenses (6,003) (339) (575) (495) (146) (7,558)
Interest Expense (2,530) -- (440) (3) -- (2,973)
--------- --------- --------- --------- --------- ---------
Operating Earnings (Loss) $ 311 $ 36 $ 389 $ (393) $ 24 $ 367
========= ========= ========= ========= ========= =========
Identifiable Assets $ 318,179 $ 6,242 $ 54,705 $ 23,033 $ 28,085 $ 430,244
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Three Months Ended September 30, 1998
---------------------------------------------------------------------------------------
Home Building
--------------------------
Commercial Multi-Family
International Domestic Development Development Land Sales Total
------------- --------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues * $ 6,497 $ 58 $ 167 $ 1,050 $ 7,772
Cost of Sales * (5,484) -- -- (883) (6,367)
General & Administrative Expenses * (410) (97) (373) (107) (987)
Interest Expense * -- (22) (21) -- (43)
--------- --------- --------- --------- ---------
Operating Earnings (Loss) $ 603 $ (61) $ (227) $ 60 $ 375
========= ========= ========= ========= =========
</TABLE>
-40-
<PAGE> 44
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Six Months Ended September 30, 1999
---------------------------------------------------------------------------------------
Home Building
--------------------------
Commercial Multi-Family
International Domestic Development Development Land Sales Total
------------- --------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 137,091 $ 5,990 $ 3,584 $ 17,154 $ 5,980 $ 169,799
Cost of Sales (119,816) (5,145) (1,382) (17,049) (5,404) (148,796)
General & Administrative Expenses (11,168) (719) (907) (1,030) (250) (14,074)
Interest Expense (5,535) -- (731) (15) -- (6,281)
--------- --------- --------- --------- --------- ---------
Operating Earnings (Loss) $ 572 $ 126 $ 564 $ (940) $ 326 $ 648
========= ========= ========= ========= ========= =========
Identifiable Assets $ 318,179 $ 6,242 $ 54,705 $ 23,033 $ 28,085 $ 430,244
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Six Months Ended September 30, 1998
---------------------------------------------------------------------------------------
Home Building
--------------------------
Commercial Multi-Family
International Domestic Development Development Land Sales Total
------------- --------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues * $ 8,573 $ 1,686 $ 283 $ 3,538 $ 14,080
Cost of Sales * (7,289) (1,577) -- (3,067) (11,933)
General & Administrative Expenses * (802) (197) (745) (244) (1,988)
Interest Expense * -- (28) (40) (62) (130)
--------- --------- --------- --------- ---------
Operating Earnings (Loss) $ 482 $ (116) $ (502) $ 165 $ 29
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Fiscal Year Ended March 31, 1999
---------------------------------------------------------------------------------------
Home Building
--------------------------
Commercial Multi-Family
International Domestic Development Development Land Sales Total
------------- --------- ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Identifiable Assets * $ 10,920 $ 44,820 $ 31,337 $ 25,099 $ 112,176
</TABLE>
* Business segment did not exist in prior fiscal year.
(G) Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued in June 1998.
This statement addressed 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. SFAS No. 133 requires that an entity recognize all derivatives as
either assets or liabilities in the consolidated balance sheet and measure those
instruments at fair value. In June 1999, SFAS No. 137 was issued which delays
the implementation of this statement for the Companies until April 2001.
(H) Certain prior period balances have been reclassified to be consistent with
the September 30, 1999 presentation.
-41-
<PAGE> 45
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On a combined basis, the Companies' revenues for the three and six
months ended September 30, 1999 totaled $91.1 million and $169.8 million,
respectively. Revenues of $7.8 million and $14.1 million were reported for the
three months and six months ended September 30, 1998, respectively. The
significant increase in revenues for the three and six months ended September
30, 1999 resulted primarily from the Partnership's acquisition of Fairclough.
The companies had combined net earnings for the three and six months
ended September 30, 1999 of $56,000 and $76,000, respectively, compared to
combined net earnings of $375,000 and $29,000 for the three and six months ended
September 30, 1998, respectively.
HOME BUILDING
INTERNATIONAL -
The following is a summary of International Home Building's results for
the three and six months ended September 30, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30, 1999
--------------------------
<S> <C>
Revenues $ 67,564
Cost of Sales (58,720)
General & Administrative Expenses (6,003)
Interest Expense (2,530)
----------
Operating Earnings $ 311
==========
Units Closed 361
===========
</TABLE>
-42-
<PAGE> 46
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30, 1999
--------------------------
<S> <C>
Revenues $ 137,091
Cost of Sale (119,816)
General & Administrative Expenses (11,168)
Interest Expense (5,535)
-----------
Operating Earnings $ 572
===========
Units Closed 770
===========
</TABLE>
The Partnership acquired this segment in the first quarter of fiscal
2000. The seller received $226 million in non-interest bearing promissory notes
due March 31, 2001 and retained preferred non-voting shares in Fairclough. The
preferred shares require a preferred distribution and have a nominal residual
interest value that is mandatorily redeemable on March 31, 2001. During the
three and six months ended September 30, 1999, Fairclough generated earnings
totaling $2.8 million and $5.5 million, respectively, which are subject to
distribution under the preferred share arrangement. The companies have accounted
for the non-interest bearing debt and nominal residual value preferred shares as
if they were a single debt instrument. Accordingly, distributions attributable
to the preferred shares are accrued as interest expense in the accompanying
financial statements.
DOMESTIC -
The following is a summary of Domestic Home Building's results for the
three and six months ended September 30, 1999 compared to the same periods for
the prior year (dollars in thousands):
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales Revenues $ 2,587 $ 6,497
Cost of Sales (2,212) (5,484)
General & Administrative Expenses (339) (410)
---------- ----------
Operating Earnings $ 36 $ 603
========== ==========
Units Closed 8 22
========== ==========
</TABLE>
-43-
<PAGE> 47
<TABLE>
<CAPTION>
-----------------------------
For the Six Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales Revenues $ 5,990 $ 8,573
Cost of Sales (5,145) (7,289)
General & Administrative Expenses (719) (802)
----------- -----------
Operating Earnings $ 126 $ 482
=========== ===========
Units Closed 19 29
=========== ===========
</TABLE>
During the three and six months ended September 30, 1999 and 1998,
sales revenues included revenues from the sale of certain single-family homes in
New Jersey. In July 1999, the Partnership obtained final zoning approval for the
development of an additional 251 single family homes.
COMMERCIAL DEVELOPMENT
The following is a summary of Commercial Development's results for the
three and six months ended September 30, 1999 compared to the three and six
months ended September 30, 1998 (dollars and square feet in thousands):
<TABLE>
<CAPTION>
--------------------------------
For the Three Months Ended
September 30,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Sales Revenues $ 1,422 $ 58
Rental Income 1,076 --
Cost of Sales (1,094) --
General & Administrative Expenses (575) (97)
Interest Expense (440) (22)
------------ ------------
Operating Earnings (Loss) $ 389 $ (61)
============ ============
Operating Square Feet 670 38
============ ============
</TABLE>
-44-
<PAGE> 48
<TABLE>
<CAPTION>
-----------------------------
For the Six Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales Revenues $ 1,864 $ 1,686
Rental Income 1,720 --
Cost of Sales (1,382) (1,577)
General & Administrative Expenses (907) (197)
Interest Expense (731) (28)
----------- -----------
Operating Earnings (Loss) $ 564 $ (116)
=========== ===========
Operating Square Feet 670 --
=========== ===========
</TABLE>
Sales revenues for the three months ended September 30, 1999 included
the sale of certain residential lots in Texas and certain commercial land in
California. Sales revenues for the same period in the prior year included the
sale of industrial land to a joint venture, in which the Partnership owns a 10%
interest.
MULTI-FAMILY DEVELOPMENT
The following is a summary of Multi-Family Development's
("Multi-Family") results for the three and six months ended September 30, 1999
compared to the three and six months ended September 30, 1998 (dollars in
thousands):
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 17,154 $ 167
Cost of Sales (17,049) --
General & Administrative Expenses (495) (373)
Interest Expense (3) (21)
----------- -----------
Operating Loss $ (393) $ (227)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
For the Six Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 17,154 $ 283
Cost of Sales (17,049) --
General & Administrative Expenses (1,030) (745)
Interest Expense (15) (40)
----------- -----------
Operating Loss $ (940) $ (502)
=========== ===========
</TABLE>
-45-
<PAGE> 49
Revenues during the three and six months ended September 30, 1999
resulted from the sale of a Texas apartment complex that had been constructed
subject to a pre-sale agreement. Revenues during the three and six months ended
September 30, 1998 consisted primarily of development fee income.
LAND SALES
The following is a summary of Land Sales' operating results for the
three and six months ended September 30, 1999 compared to the same periods for
the prior year (dollars in thousands):
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales Revenues $ 1,327 $ 1,050
Cost of Sales (1,157) (883)
General & Administrative Expenses (146) (107)
Interest Expense -- --
----------- -----------
Operating Earnings $ 24 $ 60
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
For the Six Months Ended
September 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Sales Revenues $ 5,980 $ 3,538
Cost of Sales (5,404) (3,067)
General & Administrative Expenses (250) (244)
Interest Expense -- (62)
----------- -----------
Operating Earnings $ 326 $ 165
=========== ===========
</TABLE>
Revenues for the three months ended September 30, 1999 included the
sale of certain residential lots in Florida to Centex's homebuilding operations.
Revenues for the six month period ended September 30, 1999 consisted of $3.1
million in residential lot sales to Centex Homes and the sale of certain
commercial land in Texas. Real Estate sales during the six months ended
September 30, 1998 included $2.8 million of lot sales to Centex Homes and the
sale of certain commercial property in Texas.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended September 30, 1999, 2,152 Class C Preferred
Partnership Units were issued in exchange for assets with a fair market value of
$2.2 million. Also during the six months ended September 30, 1999, the Companies
closed on non-recourse commercial development project loans totaling $27.7
million. The project loans are collateralized by commercial properties and have
ten-year maturities with fixed interest rates ranging from 6.9% to 7.4%.
-46-
<PAGE> 50
The Partnership believes that the revenues, earnings, and liquidity
from its current operations will be sufficient to provide the necessary funding
for the 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 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 occurred as part of their normal
ongoing updating. All non-compliant Systems have been replaced (or otherwise
remediated) and tested. During the remediation process, the timetable for
addressing non-compliance of Systems was substantially the same for both IT
Systems and Non-IT Systems.
The Companies do not believe (i) that the relatively few non-critical
non-compliant Systems posed 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-critical non-compliant Systems or
(ii) that the cost of replacing, upgrading or otherwise changing the relatively
few non-critical non-compliant Systems was material to the Companies as a whole,
or to the individual subsidiaries or operating divisions. The Companies used
internally generated cash to fund the correction of Systems that were not
compliant.
Through the services agreement Holding has with Centex Service Company,
the Companies 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 were 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. In addition, The Year 2000 Task Force Team has completed its Year
2000 contingency plan for the Companies.
Achieving Year 2000 compliance is dependent on many factors, some of
which are not 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 any of these third parties (including
federal, 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 surveyed their
-47-
<PAGE> 51
largest customers, contractors, and vendors by sending requests for disclosure
of Year 2000 readiness. The number of surveys sent as well as the form of survey
used varied by the subsidiary or operating division of the Companies making the
request for confirmation of compliance. To date, 80% of the surveys that were
distributed have been returned, and all of the responding third parties have
indicated that they are Year 2000 compliant. 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 through a combination of
continued follow-up requests and 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.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this report on Form 10-Q 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-48-
<PAGE> 52
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 22, 1999, 3333 Holding Corporation held its Annual Meeting of
Stockholders. At the Annual Meeting, Richard C. Decker, Josiah O. Low, III and
David M. Sherer were elected as directors to serve for a one year term until the
2000 Annual Meeting. Voting results for these nominees are summarized as
follows:
<TABLE>
<CAPTION>
Number of Shares
--------------------------------
For Against
------- -------
<S> <C> <C>
Richard C. Decker 873 8
Josiah O. Low, III 874 7
David M. Sherer 874 7
</TABLE>
ITEM 5. OTHER INFORMATION
During the October 1999 Board meeting, the Board of Directors
authorized a fourth directorship position on the Board and immediately
thereafter elected Roger O. West for this position for the remainder of a
standard one year term.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(1) Exhibits
Exhibit 4.12 Instrument constituting Negotiable Loan Notes
2001 dated April 15, 1999 made by Centex
Development Company UK Limited ("CDC-UK")
Exhibit 4.13 Instrument constituting Guaranteed Unsecured
Set Off Loan Notes 2001 dated April 15, 1999
made by CDC-UK
Exhibit 10.19 Irrevocable Letter of Credit dated April 15,
1999 made by National Westminister Bank Plc to
AMEC Finance Limited for certain obligations of
CDC-UK
Exhibit 27.2 Financial Data Schedule
Exhibit 27.3 Financial Data Schedule
-49-
<PAGE> 53
(2) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter
ended September 30, 1999.
All other items required under Part II are omitted because they are not
applicable.
-50-
<PAGE> 54
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
3333 HOLDING CORPORATION
---------------------------------------------
Registrant
November 12, 1999 /s/ Richard C. Decker
---------------------------------------------
Richard C. Decker
Director, Chairman, President and
Chief Executive Officer
(principal executive officer)
November 12, 1999 /s/ Kimberly A. Pinson
---------------------------------------------
Kimberly A. Pinson
Vice President, Treasurer, Controller and
Assistant Secretary
(principal financial officer and
chief accounting officer)
-51-
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTEX DEVELOPMENT COMPANY, L.P.
---------------------------------------------
Registrant
By: 3333 Development Corporation,
General Partner
November 12, 1999 /s/ Richard C. Decker
---------------------------------------------
Richard C. Decker
Director, Chairman, President and
Chief Executive Officer
(principal executive officer)
November 12, 1999 /s/ Kimberly A. Pinson
---------------------------------------------
Kimberly A. Pinson
Vice President, Treasurer, Controller and
Assistant Secretary
(principal financial officer and
chief accounting officer)
-52-
<PAGE> 56
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ ----------------------------------------------------------
<S> <C>
Exhibit 4.12 Instrument constituting Negotiable Loan Notes
2001 dated April 15, 1999 made by Centex
Development Company UK Limited ("CDC-UK")
Exhibit 4.13 Instrument constituting Guaranteed Unsecured
Set Off Loan Notes 2001 dated April 15, 1999
made by CDC-UK
Exhibit 10.19 Irrevocable Letter of Credit dated April 15,
1999 made by National Westminister Bank Plc to
AMEC Finance Limited for certain obligations of
CDC-UK
Exhibit 27.1 Financial Data Schedule - Centex Corporation
Exhibit 27.2 Financial Data Schedule - 3333 Holding Corporation
Exhibit 27.3 Financial Data Schedule - Centex Development Company, L.P.
</TABLE>
<PAGE> 1
EXHIBIT 4.12
DATED 15 APRIL 1999
CENTEX DEVELOPMENT COMPANY UK LIMITED
INSTRUMENT
constituting
Negotiable Loan Notes 2001
LINKLATERS & PAINES
One Silk Street
London EC2Y 8HQ
TEL: (+44) 171 456 2000
Ref: SGG/JLF
<PAGE> 2
"TRANSFER OFFICE" means Goldvale House, Church Street West,
Woking, GU21 1DJ or such other place within the United Kingdom
as the Directors may determine and notify each of the
Noteholders in writing where the Company is situate for the
time being.
1.2 References herein to "THIS INSTRUMENT" or "THIS DEED" shall
include any Schedules hereto and references herein to Clauses,
Conditions, paragraphs, sub-paragraphs or Schedules are to
clauses, conditions, paragraphs, sub-paragraphs hereof or to
the schedules hereto.
1.3 Subject as expressly defined any words and expressions defined
in the Companies Act 1985 and used herein shall have the same
meanings when used in this Instrument.
1.4 References herein to any provision of any statute shall be
deemed also to refer to any statutory modification or
re-enactment thereof from time to time in force.
1.5 Words used herein denoting persons shall include corporations,
the masculine gender shall include the feminine and the neuter
and the singular shall include the plural and vice versa.
1.6 The headings herein are for convenience of reference only, do
not constitute a part of this instrument and shall not be
deemed to limit, extend or otherwise affect the meaning of any
of the provisions hereof.
2 AMOUNT OF THE NOTES
The principal amount of the Notes constituted by this
Instrument is an amount equal to the sum of the Initial
Consideration and the Additional Consideration. The Notes
shall be issued fully-paid in denominations of (pound)1 in
nominal amount or integral multiples thereof and shall be
transferable in such amounts as provided in the Second
Schedule.
3 STATUS OF THE NOTES
The Notes when issued shall rank pari passu equally and
rateably without discrimination or preference and as unsecured
obligations of the Company except for those obligations as may
be preferred by law. The Notes shall be known as "NEGOTIABLE
LOAN NOTES 2001".
4 CONDITIONS OF ISSUE
The Conditions and provisions contained in the Schedules shall
have effect in the same manner as if such Conditions and
provisions were set out herein. The Notes shall be held
subject to and with the benefit of the Conditions and of the
provisions in the Schedules, all of which shall be binding on
the Company and the Noteholders and all persons claiming
through them respectively.
5 COVENANTS BY THE COMPANY
The Company hereby covenants with the Noteholders and each of
them duly to perform and observe the obligations on its part
contained in this Instrument to the intent that this
Instrument shall enure for the benefit of all Noteholders each
of whom may sue for the performance or observance of the
provisions hereof so far as his holding of Notes is concerned.
6 CERTIFICATES FOR NOTES
6.1 Each Noteholder will, subject to the terms of this Instrument,
be entitled without charge to one Certificate for the
aggregate number of Notes registered in his name or, if so
requested by a Noteholder, 2 certificates each representing a
tranche of the Notes registered in his name and together
representing the aggregate number of Notes registered in his
name. Each Certificate shall bear a denoting number and shall
be executed by the Company. Every Certificate shall be
2
<PAGE> 3
in the form or substantially in the form set out in the First
Schedule and shall have the Conditions endorsed thereon.
6.2 The Company shall not be bound to register more than four
persons as the joint holders of any Notes and in the case of
Notes held jointly by several persons the Company shall not be
bound to issue more than one Certificate therefor. Delivery of
a Certificate to one of such persons shall be sufficient
delivery to all. When a Noteholder transfers or has redeemed
part only of his Notes, the old Certificate shall be cancelled
and a new Certificate for the balance of such Notes issued
without charge.
7 REGISTER OF NOTES
7.1 The Company shall at all times keep at the Transfer Office or
at its registered office a Register showing:
(a) the names and addresses of the holders for the time being
of the Notes and, in the case of joint holders, the names of
the joint holders and the address of the first named holder;
(b) the amount of the Notes held by each registered holder
and, in the case of joint holders, the amount of Notes held by
the joint holders taken together;
(c) the date on which the name of each individual registered
holder (including, in the case of joint holders, each joint
holder) is entered in respect of the Notes standing in his or
their name; and
(d) the number of each Certificate for the Notes issued and
the date of issue thereof.
Any change of name or address on the part of any Noteholder
shall forthwith be notified to the Company and as soon as
reasonably practicable (and in any event within 5 Business
Days) the Register shall be altered accordingly. The
Noteholders or any of them and any person (not being a person
to whom the Company may reasonably object) authorised in
writing by any Noteholder shall be at liberty, at all
reasonable times during office hours on any Business Day, to
inspect the Register.
7.2 Except as required by law, the Company will recognise the
registered holder of any Notes as the absolute owner thereof
for all purposes and shall not (except as ordered by a court
of competent jurisdiction) be bound to take notice or see to
the execution of any trust, whether express, implied or
constructive, to which any Notes may be subject and the
receipt of the registered holder for the time being of any
Notes, or in the case of joint registered holders the receipt
of any of them, for the principal moneys payable in respect
thereof or for the interest from time to time accruing due in
respect thereof or for any other moneys payable in respect
thereof shall be a good discharge to the Company,
notwithstanding any notice it may have, whether express or
otherwise, of the right, title, interest or claim of any other
person to or in such Notes, interest or moneys. The Company
shall not be bound to enter any notice of any trust, whether
express, implied or constructive, on the Register in respect
of any Notes.
7.3 Noteholders shall be entitled to receive a copy of this
Instrument without charge on application to the Company.
8 REDEMPTION
By 11 am (London time) on 30 March 2001 (the "REDEMPTION
DATE"), the Company will pay to each of the Noteholders the
principal amount of the Notes held by the relevant Noteholder
on that date.
3
<PAGE> 4
9 GOVERNING LAW
This Instrument and the Notes shall be governed by, and
construed and enforced in accordance with English law without
regard to the conflict of law rules thereof. The Company
irrevocably agrees that the Courts of England are to have
exclusive jurisdiction to settle any disputes which may arise
out of or in connection with this Instrument and the Notes.
IN WITNESS whereof this Instrument has been executed and
delivered as a deed on the date first stated above.
EXECUTED as a DEED by
CENTEX DEVELOPMENT COMPANY )
UK LIMITED )
acting by )
Director /s/ Stewart A. Baseley
Director/Secretary /s/ Paul M. Bak
4
<PAGE> 5
THE FIRST SCHEDULE
FORM OF CERTIFICATE
<TABLE>
<CAPTION>
CERTIFICATE NO. ISSUE DATE AMOUNT
<S> <C> <C>
The aggregate of (i) (pound) and
(ii) amount of the Additional
Consideration referred to in the
Instrument.
</TABLE>
CENTEX DEVELOPMENT COMPANY UK LIMITED
(Incorporated with limited liability under the laws of England
with registered number 3720116)
NEGOTIABLE LOAN NOTES 2001
THIS IS TO CERTIFY THAT the undermentioned is/are the registered
holder(s) of the amount set out below of the Negotiable Loan Notes 2001
constituted by an instrument entered into by the Company on l5 April
1999 (the "INSTRUMENT") and issued with the benefit of and subject to
the provisions contained in the Instrument. Where the context so
admits, words and expressions defined in the Instrument shall bear the
same meanings in the Conditions endorsed hereon.
This Certificate is evidence of entitlement only. Title to the Notes
passes only on due registration on the Register and any payment due on
the Notes will be made only to the duly registered holder.
NAMES OF HOLDER(S) AMOUNT OF NOTES
SIGNED AND DELIVERED AS A DEED
by CENTEX DEVELOPMENT COMPANY UK LIMITED
ACTING BY:
Director /s/ [Illegible] Director/Secretary
DATED: APRIL 1999
NOTES:
1 The Notes are repayable in accordance with the Conditions
endorsed hereon.
2 This Certificate must be surrendered before any transfer,
whether of the whole or any part of the Notes comprised in it,
can be registered or any new Certificate issued in exchange.
3 The Notes are transferable in accordance with the conditions
endorsed hereon and this Certificate must be lodged together
with the instrument of transfer (which must be signed by the
transferor or by a person authorised to sign on behalf of the
transferor) at the Transfer Office.
4 A copy of the Instrument is available for inspection at the
Transfer Office at all reasonable times during office hours on
any Business Day. Noteholders shall be entitled to receive a
copy of the Instrument and its Schedules without charge on
application to the Company.
5 No interest is payable on the Notes.
5
<PAGE> 6
THE SECOND SCHEDULE
THE CONDITIONS
1 REPAYMENT, PURCHASE AND REDEMPTION
Unless previously repaid, redeemed or purchased by the Company
the amount of the Notes held by each Noteholder shall be
repaid by 11 am (London time) on 30 March 2001. Payment of the
amount of the Notes shall be in the manner specified in
Condition 2.
2 PAYMENT
Payment under the terms of this Instrument shall be effected
by crediting on the relevant payment date the account
specified by the relevant Noteholder to the Company at least 3
Business Days prior to the relevant payment date. If no such
account has been specified, payment may be made by cheque made
payable to the Noteholder and sent to his address as set out
in the register of Noteholders or, in the case of joint
holders, to the first named holder or to such person or
persons as the registered holder or joint holders may in
writing, received by the Company at least 3 Business Days
prior to the date of such payment, have directed. Every such
cheque may be sent through the post no later than the Business
Day preceding the due date for payment.
3 CANCELLATION
All Notes repaid, redeemed or purchased by the Company in full
shall be cancelled and the Company shall not be at liberty to
keep the same for the purposes of re-issue or to re-issue the
same.
4 TRANSFER OF NOTES
4.1 The Notes are transferable by instrument in writing in
multiples of (pound)100 in the usual or common form (or in
such other form as the Directors may approve) to (a) any
member of the AMEC Retained Group, (b) National Westminster
Bank Plc (the "Bank") pursuant to the Letter of Credit
No.TFPCYF083358 or (c) any transferee of the Bank pursuant to
and in accordance with Clause 24.2 (Transfers by the Bank) of
the Facility Agreement dated 15 April 1999 between (amongst
others) the Company and the Bank.
4.2 Every instrument of transfer must be signed by the transferor
(or by a person authorised to sign on behalf of the
transferor) and the transferor shall be deemed to remain the
owner of the Notes to be transferred until the name of the
transferee is entered in the Register in respect thereof.
4.3 Every instrument of transfer must be sent for registration to
the Transfer Office accompanied by the Certificate(s) for the
Notes to be transferred together with such other evidence as
the Directors or other officers of the Company authorised to
deal with transfers may reasonably require to prove the title
of the transferor or his right to transfer the Notes and, if
the instrument of transfer is executed by some other person on
his behalf, the authority of that person to do so. All
instruments of transfer which shall be registered may be
retained by the Company.
4.4 No fee shall be charged for the registration of any transfer
or for the registration of any power of attorney or other
document relating to or affecting the title to any Notes.
5 MODIFICATION
The provisions of the Instrument or of the Notes and the
rights of the Noteholders may from time to time be modified,
abrogated or compromised or any arrangement agreed between the
Company and the Noteholders.
6
<PAGE> 7
6 DEALINGS
The Notes shall not be capable of being dealt in on any stock
exchange in the United Kingdom or elsewhere and no application
has been or is intended to be made to any stock exchange for
the Notes to be listed or otherwise traded.
7 RECEIPT OF JOINT HOLDERS
If two or more persons are entered in the Register as joint
registered holders of any Notes then, without prejudice to
Clause 7 of the Instrument, the receipt by any one of such
persons of any interest or principal or other moneys payable
in respect of such Notes shall be as effective a discharge to
the Company as if the person signing such receipt were the
sole registered holder of such Notes.
8 REPLACEMENT OF CERTIFICATES
If the Certificate for any Notes is lost, defaced or
destroyed, it may, upon payment by the Noteholder of any
out-of-pocket expenses of the Company, be renewed, on such
terms (if any) as to evidence and indemnity as the Directors
may require, but so that, in the case of defacement, the
defaced Certificate shall be surrendered before the new
Certificate is issued.
9 RISK TO NOTEHOLDERS
All Certificates, other documents and remittances sent through
the post shall be sent at the risk of the Noteholder(s)
entitled thereto.
10 NOTICES
10.1 Any notice or other communication required, permitted or
contemplated by this Deed ("NOTICE") must be in writing and
delivered to the recipient by registered or certified mail,
return receipt requested or delivered by facsimile mail with
the original counterpart thereof being sent on the same
business day or on the Business Day immediately following the
date of facsimile transmission. Such Notice shall be deemed
received 3 Business Days after a registered or certified
letter containing such Notice, properly addressed with the
postage prepaid is posted or on the same day if transmitted by
facsimile mail.
10.2 Any notice or other document (including Certificates) may be
given or sent to any Noteholder addressed to such Noteholder
at his registered address in the United Kingdom or (if he has
no registered address within the United Kingdom) to the
address (if any) within the United Kingdom supplied by him to
the Company for the giving of notice to him. In the case of
joint registered holders of any Notes, a notice given to the
Noteholder whose name stands first in the Register in respect
of such Notes shall be sufficient notice to all joint holders.
Notice may be given to the persons entitled to any Notes in
consequence of the death or bankruptcy of any Noteholder by
sending the same by post, in a pre-paid envelope addressed to
them by name or by the title of the representative or trustees
of such holder, at the address (if any) in the United Kingdom
supplied for the purpose by such persons or (until such
address is supplied) by giving notice in the manner in which
it would have been given if the death or bankruptcy has not
occurred. Save as otherwise provided in this paragraph, only
Noteholders with a registered address in the United Kingdom
shall be entitled to receive any notice, demand or other
document.
10.3 Any notice, demand or other document (including Certificates
and transfers of Notes) may be served on the Company either
personally or by sending the same by post in a pre-paid letter
addressed to the Company at its registered office for the time
being (marked for the attention of the Company Secretary) or
to such other address in England as the Company may from time
to time notify to Noteholders.
7
<PAGE> 8
11 GENERAL
11.1 The Register together with a copy of the Instrument shall
during business hours be open to the inspection of any
Noteholder or any person (not being a person to whom the
Company may reasonably object) authorised in writing by any
Noteholder without charge at the Transfer Office.
11.2 The Instrument and the Notes are governed by, and will be
construed in accordance with, English law.
8
<PAGE> 9
<TABLE>
<CAPTION>
CERTIFICATE NO. ISSUE DATE AMOUNT
<S> <C> <C>
1 15 April 1999 The aggregate of (i) (pound)98,930,000 and (ii)
amount of the Additional Consideration
referred to in the Instrument.
</TABLE>
CENTEX DEVELOPMENT COMPANY UK LIMITED
(Incorporated with limited liability under the laws of England
with registered number 3720116)
NEGOTIABLE LOAN NOTES 2001
THIS IS TO CERTIFY THAT the undermentioned is/are the registered
holder(s) of the amount set out below of the Negotiable Loan Notes 2001
constituted by an instrument entered into by the Company on 15 April
1999 (the "INSTRUMENT") and issued with the benefit of and subject to
the provisions contained in the Instrument. Where the context so
admits, words and expressions defined in the Instrument shall bear the
same meanings in the Conditions endorsed hereon.
This Certificate is evidence of entitlement only. Title to the Notes
passes only on due registration on the Register and any payment due on
the Notes will be made only to the duly registered holder.
<TABLE>
<CAPTION>
NAMES OF HOLDER(S) AMOUNT OF NOTES
<S> <C>
AMEC Finance Unlimited The aggregate of (i) (pound)98,930,000
and (ii) amount of the Additional
Consideration referred to in the
Instrument.
</TABLE>
SIGNED AND DELIVERED AS A DEED
by CENTEX DEVELOPMENT COMPANY UK LIMITED
ACTING BY
Director /s/ [Illegible] Director
DATED: 15 APRIL 1999
NOTES:
1 The Notes are repayable in accordance with the Conditions
endorsed hereon.
2 This Certificate must be surrendered before any transfer,
whether of the whole or any part of the Notes comprised in it,
can be registered or any new Certificate issued in exchange.
3 The Notes are transferable in accordance with the conditions
endorsed hereon and this Certificate must be lodged together
with the instrument of transfer (which must be signed by the
transferor or by a person authorised to sign on behalf of the
transferor) at the Transfer Office.
4 A copy of the Instrument is available for inspection at the
Transfer Office at all reasonable times during office hours on
any Business Day. Noteholders shall be entitled to receive a
copy of the Instrument and its Schedules without charge on
application to the Company.
5 No interest is payable on the Notes.
9
<PAGE> 10
THE CONDITIONS
1 REPAYMENT, PURCHASE AND REDEMPTION
Unless previously repaid, redeemed or purchased by the Company
the amount of the Notes held by each Noteholder shall be
repaid by 11 am (London time) on 30 March 2001. Payment of the
amount of the Notes shall be in the manner specified in
Condition 2.
2 PAYMENT
Payment under the terms of this Instrument shall be effected
by crediting on the relevant payment date the account
specified by the relevant Noteholder to the Company at least 3
Business Days prior to the relevant payment date. If no such
account has been specified, payment may be made by cheque made
payable to the Noteholder and sent to his address as set out
in the register of Noteholders or, in the case of joint
holders, to the first named holder or to such person or
persons as the registered holder or joint holders may in
writing, received by the Company at least 3 Business Days
prior to the date of such payment, have directed. Every such
cheque may be sent through the post no later than the Business
Day preceding the due date for payment.
3 CANCELLATION
All Notes repaid, redeemed or purchased by the Company in full
shall be cancelled and the Company shall not be at liberty to
keep the same for the purposes of re-issue or to re-issue the
same.
4 TRANSFER OF NOTES
4.1 The Notes are transferable by instrument in writing in
multiples of (pound)100 in the usual or common form (or in
such other form as the Directors may approve) to (a) any
member of the AMEC Retained Group, (b) National Westminster
Bank Plc (the "Bank") pursuant to the Letter of Credit No.
TFPCYF083358 or (c) any transferee of the Bank pursuant to and
in accordance with Clause 24.2 (Transfers by the Bank) of the
Facility Agreement dated 15 April 1999 between (amongst
others) the Company and the Bank.
4.2 Every instrument of transfer must be signed by the transferor
(or by a person authorised to sign on behalf of the
transferor) and the transferor shall be deemed to remain the
owner of the Notes to be transferred until the name of the
transferee is entered in the Register in respect thereof.
4.3 Every instrument of transfer must be sent for registration to
the Transfer Office accompanied by the Certificate(s) for the
Notes to be transferred together with such other evidence as
the Directors or other officers of the Company authorised to
deal with transfers may reasonably require to prove the title
of the transferor or his right to transfer the Notes and, if
the instrument of transfer is executed by some other person on
his behalf, the authority of that person to do so. All
instruments of transfer which shall be registered may be
retained by the Company.
4.4 No fee shall be charged for the registration of any transfer
or for the registration of any power of attorney or other
document relating to or affecting the title to any Notes.
5 MODIFICATION
The provisions of the Instrument or of the Notes and the
rights of the Noteholders may from time to time be modified,
abrogated or compromised or any arrangement agreed between the
Company and the Noteholders.
1
<PAGE> 11
6 DEALINGS
The Notes shall not be capable of being dealt in on any stock
exchange in the United Kingdom or elsewhere and no application
has been or is intended to be made to any stock exchange for
the Notes to be listed or otherwise traded.
7 RECEIPT OF JOINT HOLDERS
If two or more persons are entered in the Register as joint
registered holders of any Notes then, without prejudice to
Clause 7 of the Instrument, the receipt by any one of such
persons of any interest or principal or other moneys payable
in respect of such Notes shall be as effective a discharge to
the Company as if the person signing such receipt were the
sole registered holder of such Notes.
8 REPLACEMENT OF CERTIFICATES
If the Certificate for any Notes is lost, defaced or
destroyed, it may, upon payment by the Noteholder of any
out-of-pocket expenses of the Company, be renewed, on such
terms (if any) as to evidence and indemnity as the Directors
may require, but so that, in the case of defacement, the
defaced Certificate shall be surrendered before the new
Certificate is issued.
9 RISK TO NOTEHOLDERS
All Certificates, other documents and remittances sent through
the post shall be sent at the risk of the Noticeholder(s)
entitled thereto.
10 NOTICES
10.1 Any notice or other communication required, permitted or
contemplated by this Deed ("NOTICE") must be in writing and
delivered to the recipient by registered or certified mail,
return receipt requested or delivered by facsimile mail with
the original counterpart thereof being sent on the same
business day or on the Business Day immediately following the
date of facsimile transmission. Such Notice shall be deemed
received 3 Business Days after a registered or certified
letter containing such Notice, properly addressed with the
postage prepaid is posted or on the same day if transmitted by
facsimile mail.
10.2 Any notice or other document (including Certificates) may be
given or sent to any Noteholder addressed to such Noteholder
at his registered address in the United Kingdom or (if he has
no registered address within the United Kingdom) to the
address (if any) within the United Kingdom supplied by him to
the Company for the giving of notice to him. In the case of
joint registered holders of any Notes, a notice given to the
Noteholder whose name stands first in the Register in respect
of such Notes shall be sufficient notice to all joint holders.
Notice may be given to the persons entitled to any Notes in
consequence of the death or bankruptcy of any Noteholder by
sending the same by post, in a pre-paid envelope addressed to
them by name or by the title of the representative or trustees
of such holder, at the address (if any) in the United Kingdom
supplied for the purpose by such persons or (until such
address is supplied) by giving notice in the manner in which
it would have been given if the death or bankruptcy has not
occurred. Save as otherwise provided in this paragraph, only
Noteholders with a registered address in the United Kingdom
shall be entitled to receive any notice, demand or other
document.
10.3 Any notice, demand or other document (including Certificates
and transfers of Notes) may be served on the Company either
personally or by sending the same by post in a pre-paid letter
addressed to the Company at its registered office for the time
being (marked for the attention of the Company Secretary) or
to such other address in England as the Company may from time
to time notify to Noteholders.
2
<PAGE> 12
11 GENERAL
11.1 The Register together with a copy of the Instrument shall
during business hours be open to the inspection of any
Noteholder or any person (not being a person to whom the
Company may reasonably object) authorised in writing by any
Noteholder without charge at the Transfer Office.
11.2 The Instrument and the Notes are governed by, and will be
construed in accordance with, English law.
3
<PAGE> 1
EXHIBIT 4.13
DATED 15 APRIL 1999
CENTEX DEVELOPMENT COMPANY UK LIMITED
INSTRUMENT
CONSTITUTING
GUARANTEED UNSECURED SET OFF LOAN NOTES 2001
LINKLATERS & PAINES
One Silk Street
London EC2Y 8HQ
TEL: (+44) 171 456 2000
Ref: SGG/JLF
<PAGE> 2
THIS INSTRUMENT is entered into as a deed this 15 day of April 1999 by
CENTEX DEVELOPMENT COMPANY UK LIMITED (Company No 3720116]) whose
registered office is at Goldville House, Church Street West, Woking
GU21 1DJ (hereinafter called the "COMPANY")
WHEREAS:
(A) The Company by a resolution of its Board of Directors or a duly
authorised committee thereof passed on 15 April 1999 authorised
the creation of the Guaranteed Unsecured Loan Notes 2001 in
connection with the acquisition by the Company of the entire
issued class "A" share capital of Fairclough Homes Group Limited
(the "ACQUISITION") to be constituted as hereinafter provided and
subject to and with the benefit of the Schedules which shall be
deemed to be part of this Instrument; and
(B) The payment of amounts due in respect of the Notes and
performance of the Company's obligations under this Deed have
been guaranteed pursuant to a Guarantee (as defined below).
NOW THIS INSTRUMENT WITNESSES AND DECLARES as follows:
1 DEFINITIONS
1.1 In this Instrument and the Schedules the following expressions shall,
unless the context requires otherwise, have the following meanings:
"AMEC" means AMEC Finance Limited;
"AMEC RETAINED GROUP" means AMEC p.l.c. and its subsidiary undertakings
from time to time other than the Group Companies and the Management
Companies (as defined in the Share Purchase Agreement);
"BUSINESS DAY" means any day (excluding Saturdays and Sundays) on which
banks in London are open for business;
"CERTIFICATE" means a certificate substantially in the form set out in
the First Schedule duly executed by the Company relating to the Notes
represented by it;
"CLOSING" shall have the meaning set out in the Share Purchase
Agreement;
"CONDITIONS" means the conditions set out in the Second Schedule as the
same may be modified from time to time in accordance with the
provisions herein contained;
"DIRECTORS" means the Board of Directors for the time being of the
Company or a duly authorised committee thereof;
"FHGL" means Fairclough Homes Group Limited;
"GROUP COMPANY" means any one of Fairclough Homes Group Limited and its
subsidiary undertakings other than in Condition 5 when Group Company
shall have the meaning set out in the Share Purchase Agreement;
"GUARANTEE" means the Guarantee dated of even date hereof executed by
Centex Homes, Centex Development Company L.P., Centex Corporation and
the Company;
"GUARANTORS" means Centex Homes, Centex Development Company LP. and
Centex Corporation;
"INDEBTEDNESS" includes any obligation (whether present or future,
actual or contingent, secured or unsecured, as principal, surety or
otherwise) for the payment or repayment of money;
1
<PAGE> 3
"NOTEHOLDERS" means the several persons for the time being entered on
the Register as the holders of the Notes;
"NOTES" means the Guaranteed Unsecured Loan Notes 2001 hereby
constituted;
"REGISTER" means the register of Noteholders to be maintained by the
Company in accordance with Clause 7;
"REPAYMENT" includes "redemption" and vice versa and the words "repay",
"redeem", "repayable", "redeemable", "repaid" and "redeemed" shall be
construed accordingly;
"SHARE PURCHASE AGREEMENT" means the agreement entered into on even
date hereto between AMEC p.l.c., AMEC Finance Limited and the Company
in connection with the Acquisition; and
"TRANSFER OFFICE" means Goldvale House, Church Street West, Woking,
GU21 1DJ or such other place within the United Kingdom as the Directors
may determine and notify each of the Noteholders in writing where the
Company is situate for the time being.
1.2 References herein to "THIS INSTRUMENT" or "THIS DEED" shall include any
Schedules hereto and references herein to Clauses, Conditions,
paragraphs, sub-paragraphs or Schedules are to clauses, conditions,
paragraphs, sub-paragraphs hereof or to the schedules hereto.
1.3 Subject as expressly defined any words and expressions defined in the
Companies Act 1985 and used herein shall have the same meanings when
used in this Instrument.
1.4 References herein to any provision of any statute shall be deemed also
to refer to any statutory modification or re-enactment thereof from
time to time in force.
1.5 Words used herein denoting persons shall include corporations, the
masculine gender shall include the feminine and the neuter and the
singular shall include the plural and vice versa.
1.6 The headings herein are for convenience of reference only, do not
constitute a part of this instrument and shall not be deemed to limit,
extend or otherwise affect the meaning of any of the provisions hereof.
1.7 "LIQUIDATED LOSS", "LOSS", "OPERATING PROFITS", "SHAREHOLDERS
AGREEMENT" and "WARRANTIES" shall have their respective meanings as set
out in the Share Purchase Agreement.
2 AMOUNT OF THE NOTES
The principal amount of the Notes constituted by this Instrument is
(pounds) l0,000.000. The Notes shall be issued fully-paid in
denominations of (pounds) 1 in nominal amount or integral multiples
thereof and shall be transferable in such amounts as provided in the
Second Schedule.
3 STATUS OF THE NOTES
The Notes when issued shall rank pari passu equally and rateably
without discrimination or preference and as unsecured obligations of
the Company except for those obligations as may be preferred by law.
The Notes shall be known as the "GUARANTEED UNSECURED LOAN NOTES 2001".
4 CONDITIONS OF ISSUE
The Conditions and provisions contained in the Schedules shall have
effect in the same manner as if such Conditions and provisions were set
out herein. The Notes shall be held subject to and with the benefit of
the Conditions and of the provisions in the Schedules, all of which
shall be binding on the Company and the Noteholders and all persons
claiming through them respectively.
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<PAGE> 4
5 COVENANTS BY THE COMPANY
The Company hereby covenants with the Noteholders and each of them duly
to perform and observe the obligations on its part contained in this
Instrument to the intent that this Instrument shall enure for the
benefit of all Noteholders each of whom may sue for the performance or
observance of the provisions hereof so far as his holding of Notes is
concerned.
6 CERTIFICATES FOR NOTES
6.1 Each Noteholder will, subject to the terms of this Instrument, be
entitled without charge to one Certificate for the aggregate number of
Notes registered in his name or, if so requested by a Noteholder, two
Certificates each representing a tranche of the Notes registered in his
name and together representing the aggregate number of Notes registered
in his name. Each Certificate shall bear a denoting number and shall be
executed by the Company. Every Certificate shall be in the form or
substantially in the form set out in the First Schedule and shall have
the Conditions endorsed thereon.
6.2 The Company shall not be bound to register more than four persons as
the joint holders of any Notes and in the case of Notes held jointly by
several persons the Company shall not be bound to issue more than one
Certificate therefor. Delivery of a Certificate to one of such persons
shall be sufficient delivery to all. When a Noteholder transfers or has
redeemed part only of his Notes, the old Certificate shall be cancelled
and a new Certificate for the balance of such Notes issued without
charge.
7 REGISTER OF NOTES
7.1 The Company shall at all times keep at the Transfer Office or at its
registered office a Register showing:
(a) the names and addresses of the holders for the time being of the
Notes and, in the case of joint holders, the names of the joint holders
and the address of the first named holder;
(b) the amount of the Notes held by each registered holder and, in the
case of joint holders, the amount of Notes held by the joint holders
taken together;
(c) the date on which the name of each individual registered holder
(including, in the case of joint holders, each joint holder) is entered
in respect of the Notes standing in his or their name; and
(d) the number of each Certificate for the Notes issued and the date of
issue thereof.
Any change of name or address on the part of any Noteholder shall
forthwith be notified to the Company and as soon as reasonably
practicable (and in any event within 5 Business Days) the Register
shall be altered accordingly. The Noteholders or any of them and any
person (not being a person to whom the Company may reasonably object)
authorised in writing by any Noteholder shall be at liberty, at all
reasonable times during office hours on any Business Day, to inspect
the Register.
7.2 Except as required by law, the Company will recognise the registered
holder of any Notes as the absolute owner thereof for all purposes and
shall not (except as ordered by a court of competent jurisdiction) be
bound to take notice or see to the execution of any trust, whether
express, implied or constructive, to which any Notes may be subject and
the receipt of the registered holder for the time being of any Notes,
or in the case of joint registered holders the receipt of any of them,
for the principal moneys payable in respect thereof or for the interest
from time to time accruing due in respect thereof or for any other
moneys payable in respect thereof shall be a good discharge to the
Company, notwithstanding any notice it may have. whether express or
otherwise, of the right, title, interest or claim of any other person
to or in such Notes, interest or moneys.
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<PAGE> 5
The Company shall not be bound to enter any notice of any trust,
whether express, implied or constructive, on the Register in respect of
any Notes. The provisions of this Clause 7.2 are subject to the
provisions of Condition 5 in Schedule 2.
7.3 Noteholders shall be entitled to receive a copy of this Instrument
without charge on application to the Company.
8 REDEMPTION
On 30 March 2001 (the "REDEMPTION DATE"), the Company will pay to each
of the Noteholders the principal amount of the Notes held by the
relevant Noteholder on that date.
9 SET OFF
The Loan Notes are issued subject to the set off provisions contained
in Condition 5 of Schedule 2.
10 GOVERNING LAW
This Instrument and the Notes shall be governed by, and construed and
enforced in accordance with English law without regard to the conflict
of law rules thereof. The Company irrevocably agrees that the Courts of
England are to have exclusive jurisdiction to settle any disputes which
may arise out of or in connection with this Instrument and the Notes.
IN WITNESS whereof this Instrument has been executed and delivered as a
deed on the date first stated above.
EXECUTED as a DEED by )
CENTEX DEVELOPMENT )
COMPANY UK LIMITED )
acting by )
Director /s/ Stewart A. Baseley
Director/Secretary /s/ Paul M. Bak
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<PAGE> 6
THE FIRST SCHEDULE
FORM OF CERTIFICATE
CERTIFICATE NO. ISSUE DATE AMOUNT
L.
CENTEX DEVELOPMENT COMPANY UK LIMITED
(Incorporated with limited liability under the laws of England
with registered number 3720116)
GUARANTEED UNSECURED LOAN NOTES 2001
THIS IS TO CERTIFY THAT the undermentioned is/are the registered
holder(s) of the amount set out below of the Guaranteed Unsecured Loan
Notes 2001 constituted by an instrument entered into by the Company on
15 April 1999 (the "INSTRUMENT") and issued with the benefit of and
subject to the provisions contained in the Instrument. Where the
context so admits, words and expressions defined in the Instrument
shall bear the same meanings in the Conditions endorsed hereon.
This Certificate is evidence of entitlement only. Title to the Notes
passes only on due registration on the Register and any payment due on
the Notes will be made only to the duly registered holder.
NAMES OF HOLDER(S) AMOUNT OF NOTES
SIGNED AND DELIVERED AS A DEED
by CENTEX DEVELOPMENT COMPANY UK LIMITED
ACTING BY:
Director Director/Secretary
DATED: APRIL 1999
NOTES:
1 The Notes are repayable in accordance with the Conditions endorsed
hereon.
2 This Certificate must be surrendered before any transfer, whether of
the whole or any part of the Notes comprised in it, can be registered
or any new Certificate issued in exchange.
3 The Notes are transferable in accordance with the Conditions endorsed
hereon and this Certificate must be lodged together with the instrument
of transfer (which must be signed by the transferor or by a person
authorised to sign on behalf of the transferor) at the Transfer Office.
4 A copy of the Instrument is available for inspection at the Transfer
Office at all reasonable times during office hours on any Business Day.
Noteholders shall be entitled to receive a copy of the Instrument and
its Schedules without charge on application to the Company.
5 No interest is payable on the Notes.
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<PAGE> 7
THE SECOND SCHEDULE
THE CONDITIONS
1 REPAYMENT, PURCHASE AND REDEMPTION
Unless previously repaid, redeemed or purchased by the Company and
subject to Condition 5, the amount of the Notes held by each Noteholder
shall be repaid on 30 March 2001. Payment of the amount of the Notes
shall be in the manner specified in Condition 3.
2 EVENTS ON WHICH NOTES BECOME IMMEDIATELY REPAYABLE
Notwithstanding any other provisions of the Instrument or these
Conditions, each Noteholder shall be entitled to require all or part of
the Notes registered in the name of that Noteholder (so far as not
previously repaid and unless otherwise agreed in writing by that
Noteholder) to be repaid at par, (subject to any legal requirement to
deduct tax therefrom), in each and every of the following events,
immediately upon written notice by such Noteholder to the Company
whilst the same is continuing:
2.1 failure by the Company to pay, within five Business Days after the due
date for payment, any amount payable on any of the Notes held by that
Noteholder and such failure is not remedied within five Business Days
after notice of that default has been given by such Noteholder to the
Company; or
2.2 the making of an order by a competent court or the passing of an
effective resolution for the winding-up or dissolution of any Group
Company (other than for the purposes of a reconstruction, amalgamation,
merger or members' voluntary winding-up on terms previously approved in
writing by any director or the Company Secretary of AMEC p.l.c., (such
consent not to be unreasonably withheld or delayed); or
2.3 the taking of possession by an encumbrancer of, or the appointment of a
trustee, administrator or administrative receiver or manager or a
similar officer over, or an administration order being made in respect
of, the whole or substantially the whole of the undertaking or property
of any Group Company, unless the same is paid out or discharged within
thirty days or any similar or analogous event in any jurisdiction; or
2.4 the Company does not perform or comply with any one or more of its
other obligations under this Instrument and, if that default is capable
of remedy, it is not remedied within five Business Days after notice of
that default has been given to it by any Noteholder or AMEC p.l.c.; or
2.5 Centex Corporation fails to procure a letter of credit from a USA or UK
bank (reasonably acceptable to AMEC p.l.c.) in accordance with clause 7
of the Guarantee and such failure is not remedied within five Business
Days after notice of that default has been given by any Noteholder or
AMEC p.l.c. to the Company; or
2.6 any other Indebtedness of any Group Company (other than Fairpine
Limited, Viewton Properties and the Management Companies) becomes due
and payable before its normal maturity by reason of any actual default,
event of default or the like (however described) or is not paid when
due nor within any applicable grace period in any agreement relating to
that Indebtedness or, as a result of any actual event of default or the
like (however described) any facility relating to any such Indebtedness
is or is declared to be cancelled or terminated before its normal
expiry date and such failure is not remedied within three Business Days
after notice of that default has been given by any Noteholder to the
Company; or
2.7 Centex Corporation is insolvent or unable to pay its debts, stops,
suspends payment of all or a material part of (or of a particular type
of) its Indebtedness, begins negotiations or takes any other step with
a view to the deferral, rescheduling or other readjustment of all of
(or all of a particular
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<PAGE> 8
type of) its Indebtedness (or of any part which it will or might
otherwise be unable to pay when due), proposes or makes a general
assignment or an arrangement or composition with or for the benefit of
the relevant creditors or a moratorium is agreed or declared in respect
of or affecting all or a material part of (or of a particular type of)
the Indebtedness of the Company, the Guarantors or any Group Company;
2.8 it is or will become unlawful for the Company and/or the Guarantor to
perform or comply with any one or more of its payment obligations under
the Instrument or the Notes;
2.9 the Guarantees contained in the Guarantee are not (or are claimed by
the Company or any one of the Guarantors not to be) in full force and
effect; or
2.10 any event occurs which under the law of any relevant jurisdiction, has
an analogous or equivalent effect to any event mentioned in this
Condition.
The Company shall give the Noteholders notice of the happening of any
of the foregoing events promptly after becoming aware of the same.
3 PAYMENT
Payment under the terms of this Instrument shall be effected by
crediting on the relevant payment date the account specified by the
relevant Noteholder to the Company at least three Business Days prior
to the relevant payment date. If no such account has been specified,
payment may be made by cheque, made payable to the Noteholder and sent
to his address as set out in the register of Noteholders or, in the
case of joint holders, to the first named holder or to such person or
persons as the registered holder or joint holders may in writing,
received by the Company at least three Business Days prior to the date
of such payment, have directed. Every such cheque may be sent through
the post no later than the Business Day preceding the due date for
payment.
4 CANCELLATION
All Notes repaid, redeemed or purchased by the Company in full shall be
cancelled and the Company shall not be at liberty to keep the same for
the purposes of re-issue or to re-issue the same.
5 RIGHT OF SET OFF
5.1 LIQUIDATED LOSSES; SET OFF
5.1.1 Subject to AMEC's right to object to any set off or recoupment
of any Loss which has become a Liquidated Loss, the Company
shall be entitled to set off or recoup any Liquidated Loss
that has been actually incurred by or imposed upon the Company
pursuant to the Share Purchase Agreement against this Set Off
Loan Note (a "SET OFF").
5.1.2 Prior to or concurrently with each exercise by the Company of
its right of Set Off, the Company shall deliver a written
notice to AMEC (the "SET OFF NOTICE"), which notice shall set
forth the amount of the Liquidated Loss, together with a
reasonably detailed statement of the circumstances under which
such Liquidated Loss was incurred and the total of all
Liquidated Losses that have been Set Off by the Company up to
the date of the Set Off Notice.
5.1.3 The Company acknowledges that other than where the provisions
of Condition 5.1.4 below apply, the Company shall not be
entitled to a Set Off to the extent that the amount of any
loss is or has been reflected in a diminution of the Operating
Profits or a provision or reserve has been made by the Company
or the Group Company (and not disputed by AMEC).
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<PAGE> 9
5.1.4 If at the time the Company is entitled to a Set Off the
Company has injected equity capital into the Group Companies
or any of them pursuant to the Shareholders' Agreement, and
accordingly the Company is entitled to a proportionate share
of the net after tax earnings of the Group Companies, then
such Set Off will be applied against this Set Off Loan Note as
opposed to reducing the Operating Profits.
5.2 UNLIQUIDATED LOSSES; SET OFF RESERVES
5.2.1 ESTABLISHMENT OF SET OFF RESERVES
Subject to AMEC's right to object to any set off or recoupment
of any Loss as provided below, at any time prior to the date
of redemption of this Set Off Loan Note (the "REDEMPTION
DATE"), if and to the extent that the Company reasonably
determines that it has a bona fide claim under the Warranties
that has not yet become a Liquidated Loss (an "UNLIQUIDATED
LOSS"), the Company shall be entitled to establish a reserve
equivalent to the amount it reasonably considers to be a
genuine estimate of the amount of the Loss (a "SET OFF
RESERVE") against this Set Off Loan Note in respect of such
Unliquidated Loss, provided that AMEC receives from the
Company the Set Off Reserve Notice 10 Business Days prior to
the Redemption Date. The Company shall take into consideration
the availability of insurance coverage for any Unliquidated
Loss in establishing any Set Off Reserve.
5.2.2 SET OFF RESERVE NOTICE
10 Business Days prior to the establishment of a Set Off
Reserve, the Company shall deliver a written notice to AMEC
(the "SET OFF RESERVE NOTICE"), which notice shall set forth
the amount of the Unliquidated Loss, together with a
reasonably detailed statement of the basis for the Company's
determination that such Unliquidated Loss is reasonably likely
to be incurred by or imposed and the total of all Unliquidated
Losses that have been reserved by the Company to the date of
the Set Off Reserve Notice.
5.2.3 SUSPENSION OF OBLIGATIONS
The obligation of the Company to pay this Set Off Loan Note to
AMEC, as provided in this Set Off Loan Note Instrument, shall
be suspended (but not the accrual of interest payable pursuant
to Condition 5.2.4) to the extent of the aggregate amount of
Set Off Reserves not settled pursuant to this Condition 5.2 at
the time of such payment.
5.2.4 SETTLEMENT OF SET OFF RESERVES
If at any time it is determined (whether by agreement between
the parties or pursuant to the dispute resolution procedures
set forth in Condition 5.4 or as a result of a judicial
determination of the Final Loss Amount (as defined below))
that any Set Off Reserve exceeds the aggregate amount of the
Losses ultimately incurred by or imposed upon the Company as a
result of or based upon the events or conditions to which the
Set Off Reserve relates (or that Claim to which the Set Off
Reserve relates is not a valid claim) (the "FINAL LOSS
AMOUNT") or that the claim to which the Set Off Reserve
relates is not a valid claim, the amount of such Set Off
Reserve in excess of such Final Loss Amount or, as
appropriate, the entire Set Off Reserve, shall cease to be
suspended and shall be paid within 2 Business Days under and
in accordance with the terms of this Set Off Loan Note
together with interest at the rate of 1 % above the base rate
of National Westminster Bank Plc from 30 March 2001 until the
date of payment.
If and to the extent that at any time an Unliquidated Loss (in
respect of which a Set Off Reserve has been established)
becomes a Liquidated Loss which has not otherwise been
satisfied (the "FINAL LOSS AMOUNT"), the nominal value of this
Set Off Loan Note equivalent to the Final Loss Amount shall be
paid by the Company immediately upon such Unliquidated Loss
becoming a Liquidated Loss but the Company shall be deemed
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<PAGE> 10
to be irrevocably and conditionally instructed by the
Noteholder to apply the proceeds of such repayment in payment
of the Liquidated Loss in full and final settlement of the
Liquidated Loss and so that AMEC shall have no further
liability to the Company in respect of the amount of Set Off
Reserve relating to such Liquidated Loss but, without
prejudice to the Company's right to recover the balance of
such Liquidated Loss from AMEC and the Company shall have no
further liability to any Noteholder in relation to this Set
Off Loan Note subject to such to repayment.
If and to the extent any Set Off Reserve has been established
and a provision is subsequently made in the accounts prepared
pursuant to clause 5 of the Shareholders' Agreement, then the
amount of such Set Off Reserve shall be reduced to the extent
that the preferential dividend paid to the holders of the "B"
Shares in the Company on or around 30 June 2001 is reduced by
the inclusion of such provision and the relevant amount shall
cease to be suspended and shall be paid within 2 Business Days
of the date on which the preferential dividend is paid
together with interest at the rate of 1% above the base rate
of National Westminster Bank Plc from 30 March 2001 until the
date of payment.
For the purpose of this Condition 5.2, "Loss" or "Losses"
shall not include any amount of a claim in respect of
Taxation.
5.3 OBJECTION PROCEDURE
If AMEC disputes any exercise by the Company of its right to make a Set
Off or a Set Off Reserve, then AMEC shall deliver a written notice to
the Company ("OBJECTION NOTICE") within 5 Business Days following
receipt of a Set Off Reserve Notice. The Objection Notice shall state
the portion of the applicable Loss to which AMEC objects and a
reasonably detailed description of the basis of such objection. AMEC
and the Company shall negotiate in good faith to resolve any dispute
with respect to the matters set forth in the Objection Notice for a
period of 20 days following receipt of such Objection Notice by the
Company.
5.4 DETERMINATION BY AN EXPERT
5.4.1 If AMEC and the Company are not able to agree during the
dispute resolution period provided above:
(a) whether or not there are reasonable grounds for making a claim
under the Warranties; and/or
(b) whether or not the amount of the claim under the Warranties
represents a reasonable estimate of the loss and/or liability
which is likely to be awarded in respect of such claim.
((a) and (b) together being the "CLAIM CRITERIA"), either of
them may by written request to the other specify a counsel of
at least 10 years' standing (or other appropriate person) whom
they wish to opine on the Claim Criteria. If they cannot agree
on the counsel or other appropriate person within 3 Business
Days of the written request then either of them may at any
time thereafter apply to the President of the Bar Council to
nominate a counsel of at least 10 years' standing to opine on
the Claim Criteria. The counsel or other appropriate person so
agreed or appointed (who shall act as an expert and not as an
arbitrator and whose costs shall be borne as he shall direct
and whose determination shall (subject to Condition 5.4.2) be
final and binding on the Company and AMEC) shall be asked to
opine on the Claim Criteria.
5.4.2 Any Claim Criteria determined in accordance with this
Condition 5.4 shall be relevant solely for the purpose of
determining whether a claim under the Warranties constitutes
an Unliquidated Loss and if so what the appropriate amount of
such loss is and shall
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<PAGE> 11
have no other effect whatsoever. and in particular shall not
operate to determine or settle any actual liability or the
quantum thereof on account of any claim under the Warranties.
5.4.3 If the amount of the Unliquidated Loss determined by the
expert is less than any Set Off Reserve already established,
the amount of such difference shall cease to be suspended and
shall be paid to AMEC within two Business Days together with
interest at the rate of 1% above the base rate of National
Westminster Bank Plc from 30 March 2001 until the date of
payment.
5.5 OBLIGATION TO RESOLVE WARRANTY CLAIMS
To the extent that any Set Off Reserve has been established in
relation to any Unliquidated Loss, the Company shall use
reasonable endeavours to pursue the claim in respect of such
Unliquidated Loss under the Warranties to which such
Unliquidated Loss applies with a view to ensuring that the Set
Off Reserve is reduced as quickly as possible.
6 TRANSFER OF NOTES
6.1 The Notes are transferable by instrument in writing in
multiples of (pound)100 in the usual or common form (or in
such other form as the Directors may approve) to any member of
the AMEC Retained Group.
6.2 Every instrument of transfer must be signed by the transferor
(or by a person authorised to sign on behalf of the
transferor) and the transferor shall be deemed to remain the
owner of the Notes to be transferred until the name of the
transferee is entered in the Register in respect thereof.
6.3 Every instrument of transfer must be sent for registration to
the Transfer Office accompanied by the Certificate(s) for the
Notes to be transferred together with such other evidence as
the Directors or other officers of the Company authorised to
deal with transfers may reasonably require to prove the title
of the transferor or his right to transfer the Notes and, if
the instrument of transfer is executed by some other person on
his behalf, the authority of that person to do so. All
instruments of transfer which shall be registered may be
retained by the Company.
6.4 No fee shall be charged for the registration of any transfer
or for the registration of any power of attorney or other
document relating to or affecting the title to any Notes.
7 MODIFICATION
The provisions of the Instrument or of the Notes and the
rights of the Noteholders may from time to time be modified,
abrogated or compromised or any arrangement agreed between the
Company and the Noteholders.
8 DEALINGS
The Notes shall not be capable of being dealt in on any stock
exchange in the United Kingdom or elsewhere and no application
has been or is intended to be made to any stock exchange for
the Notes to be listed or otherwise traded.
9 RECEIPT OF JOINT HOLDERS
If two or more persons are entered in the Register as joint
registered holders of any Notes then, without prejudice to
Clause 7 of the Instrument, the receipt by any one of such
persons of any interest or principal or other moneys payable
in respect of such Notes shall be as effective a discharge to
the Company as if the person signing such receipt were the
sole registered holder of such Notes.
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<PAGE> 12
10 REPLACEMENT OF CERTIFICATES
If the Certificate for any Notes is lost, defaced or
destroyed, it may, upon payment by the Noteholder of any
out-of-pocket expenses of the Company, be renewed. on such
terms (if any) as to evidence and indemnity as the Directors
may require, but so that, in the case of defacement, the
defaced Certificate shall be surrendered before the new
Certificate is issued.
11 RISK TO NOTEHOLDERS
All Certificates, other documents and remittances sent through
the post shall be sent at the risk of the Noteholder(s)
entitled thereto.
12 NOTICES
12.1 Any notice or other communication required, permitted or
contemplated by this Deed ("NOTICE") must be in writing and
delivered to the recipient by registered or certified mail,
return receipt requested or delivered by facsimile mail with
the original counterpart thereof being sent on the same
business day or on the business day immediately following the
date of facsimile transmission. Such Notice shall be deemed
received three Business Days after a registered or certified
letter containing such Notice, properly addressed with the
postage prepaid is posted or on the same day if transmitted by
facsimile mail.
12.2 Any notice or other document (including Certificates) may be
given or sent to any Noteholder addressed to such Noteholder
at his registered address in the United Kingdom or (if he has
no registered address within the United Kingdom) to the
address (if any) within the United Kingdom supplied by him to
the Company for the giving of notice to him. In the case of
joint registered holders of any Notes, a notice given to the
Noteholder whose name stands first in the Register in respect
of such Notes shall be sufficient notice to all joint holders.
Notice may be given to the persons entitled to any Notes in
consequence of the death or bankruptcy of any Noteholder by
sending the same by post, in a pre-paid envelope addressed to
them by name or by the title of the representative or trustees
of such holder, at the address (if any) in the United Kingdom
supplied for the purpose by such persons or (until such
address is supplied) by giving notice in the manner in which
it would have been given if the death or bankruptcy has not
occurred. Save as otherwise provided in this paragraph, only
Noteholders with a registered address in the United Kingdom
shall be entitled to receive any notice, demand or other
document.
12.3 Any notice, demand or other document (including Certificates
and transfers of Notes) may be served on the Company either
personally or by sending the same by post in a pre-paid letter
addressed to the Company at its registered office for the time
being (marked for the attention of the Company Secretary) or
to such other address in England as the Company may from time
to time notify to Noteholders.
13 GENERAL
13.1 The Register together with a copy of the Instrument shall
during business hours be open to the inspection of any
Noteholder or any person (not being a person to whom the
Company may reasonably object) authorised in writing by any
Noteholder without charge at the Transfer Office.
13.2 The Instrument and the Notes are governed by, and will be
construed in accordance with, English law.
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<PAGE> 13
CERTIFICATE NO. ISSUE DATE AMOUNT
15 April 1999 L.10,000,000
CENTEX DEVELOPMENT COMPANY UK LIMITED
(Incorporated with limited liability under the laws of England
with registered number 3720116)
GUARANTEED UNSECURED LOAN NOTES 2001
THIS IS TO CERTIFY THAT the undermentioned is/are the registered
holder(S) of the amount set out below of the Guaranteed Unsecured Loan
Notes 2001 constituted by an instrument entered into by the Company on
15 April 1999 (the "INSTRUMENT") and issued with the benefit of and
subject to the provisions contained in the Instrument. Where the
context so admits. words and expressions defined in the Instrument
shall bear the same meanings in the Conditions endorsed hereon.
This Certificate is evidence of entitlement only. Title to the Notes
passes only on due registration on the Register and any payment due on
the Notes will be made only to the duly registered holder.
NAMES OF HOLDER(S) AMOUNT OF NOTES
AMEC Finance Limited L.10,000,000
SIGNED AND DELIVERED AS A DEED
by CENTEX DEVELOPMENT COMPANY UK LIMITED
ACTING BY:
Director /s/ [Illegible] Director
DATED: 15 APRIL 1999
NOTES:
1 The Notes are repayable in accordance with the Conditions endorsed
hereon.
2 This Certificate must be surrendered before any transfer, whether of
the whole or any part of the Notes comprised in it, can be registered
or any new Certificate issued in exchange.
3 The Notes are transferable in accordance with the Conditions endorsed
hereon and this Certificate must be lodged together with the instrument
of transfer (which must be signed by the transferor or by a person
authorised to sign on behalf of the transferor) at the Transfer Office.
4 A copy of the Instrument is available for inspection at the Transfer
Office at all reasonable times during office hours on any Business Day.
Noteholders shall be entitled to receive a copy of the Instrument and
its Schedules without charge on application to the Company.
5 No interest is payable on the Notes.
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<PAGE> 14
THE CONDITIONS
1 REPAYMENT, PURCHASE AND REDEMPTION
Unless previously repaid. redeemed or purchased by the Company and
subject to Condition 5. the amount of the Notes held by each Noteholder
shall be repaid on 30 March 2001. Payment of the amount of the Notes
shall be in tie manner specified in Condition 3.
2 EVENTS ON WHICH NOTES BECOME IMMEDIATELY REPAYABLE
Notwithstanding any other provisions of the Instrument or these
Conditions, each Noteholder shall be entitled to require all or part of
the Notes registered in the name of that Noteholder (so far as not
previously repaid and unless otherwise agreed in writing by that
Noteholder) to be repaid at par, (subject to any legal requirement to
deduct tax therefrom), in each and every of the following events,
immediately upon written notice by such Noteholder to the Company
whilst the same is continuing:
2.1 failure by the Company to pay, within five Business Days after the due
date for payment, any amount payable on any of the Notes held by that
Noteholder and such failure is not remedied within five Business Days
after notice of that Default has been given by such Noteholder to the
Company; or
2.2 the making of an order by a competent Court or the passing of an
effective resolution for the winding-up or dissolution of any Group
Company (other than for the purposes of a reconstruction. amalgamation,
merger or members' voluntary winding-up on terms previously approved in
writing by any director or the Company Secretary of AMEC p.l.c.; (such
consent not to be unreasonably withheld or delayed); or
2.3 the taking of possession by an encumbrancer of, or the appointment of a
trustee, administrator or administrative receiver or manager or a
similar officer over, or an administration order being made in respect
of, the whole or substantially the whole of the undertaking or property
of any Group Company, unless the same is paid out or discharged within
thirty days or any similar or analogous event in any jurisdiction: or
2.4 the Company does not perform or comply with any one or more of its
other obligations under this Instrument and, if that default is capable
of remedy, it is not remedied within five Business Days after notice of
that default has been given to it by any Noteholder or AMEC p.l.c.; or
2.5 Centex Corporation fails to procure a letter of credit from a USA or UK
bank (reasonably acceptable to AMEC p.l.c.) in accordance with clause 7
of the Guarantee and such failure is not remedied within five Business
Days after notice of that default has been given by any Noteholder or
AMEC p.l.c. to the Company; or
2.6 any other Indebtedness of any Group) Company (other than Fairpine
Limited, Viewton Properties and the Management Companies) becomes due
and payable before its normal maturity by reason of any actual default,
event of default or the like (however described) or is not paid when
due nor within any applicable grace period in any agreement relating to
that Indebtedness or, as a result of any actual event of default or the
like (however described) any facility relating to any such Indebtedness
is or is declared to be cancelled or terminated before its normal
expiry date and such failure is not remedied within three Business Days
after notice of that default has been given by any Noteholder to the
Company; or
2.7 Centex Corporation is insolvent or unable to pay its debts, stops,
suspends payment of all or a material part of (or of a particular type
of) its Indebtedness begins negotiations or takes any other step with a
view to the deferral, rescheduling or other readjustment of all of (or
all of a particular type of) its Indebtedness (or of any part which it
will or might otherwise be unable to pay when due), proposes or makes a
general assignment or an arrangement or composition with or for the
benefit of the relevant creditors or a moratorium is agreed or declared
in respect of or affecting all
1
<PAGE> 15
or a material part of (or of a particular type of) the Indebtedness of
the Company, the Guarantors, or any Group Company:
2.8 it is or will become unlawful for the Company and/or the Guarantor to
perform or comply with any one or more of its payment obligations under
the Instrument or the Notes;
2.9 the Guarantees contained in the Guarantee are not (or are claimed by
the Company or any one of the Guarantors not to be) in full force and
effect; or
2.10 any event occurs which, under the law of any relevant jurisdiction, has
an analogous or equivalent effect to any event mentioned in this
Condition.
The Company shall give the Noteholders notice of the happening of any
of the foregoing events promptly after becoming aware of the same.
3 PAYMENT
Payment under the terms of this Instrument shall be effected by
crediting on the relevant payment date the account specified by the
relevant Noteholder to the Company at least three Business Days prior
to the relevant payment date. If no such account has been specified,
payment may be made by cheque, made payable to the Noteholder and sent
to his address as set out in the register of Noteholders or, in the
case of joint holders, to the first named holder or to such person or
persons as the registered holder or joint holders may in writing,
received by the Company at least three Business Days prior to the date
of such payment, have directed. Every such cheque may be sent through
the post no later than the Business Day preceding the due date for
payment.
4 CANCELLATION
All Notes repaid, redeemed or purchased by the Company in full shall be
cancelled and the Company shall not be at liberty to keep the same for
the purposes of re-issue or to re-issue the same.
5 RIGHT OF SET OFF
5.1 LIQUIDATED LOSSES; SET OFF
5.1.1 Subject to AMEC's right to object to any set off or recoupment
of any Loss which has become a Liquidated Loss, the Company
shall be entitled to set off or recoup any Liquidated Loss
that has been actually incurred by or imposed upon the Company
pursuant to the Share Purchase Agreement against this Set Off
Loan Note (a "SET OFF").
5.1.2 Prior to or concurrently with each exercise by the Company of
its right of Set Off, the Company shall deliver a written
notice to AMEC (the "SET OFF NOTICE"), which notice shall set
forth the amount of the Liquidated Loss, together with a
reasonably detailed statement of the circumstances under which
such Liquidated Loss was incurred and the total of all
Liquidated Losses that have been Set Off by the Company up to
the date of the Set Off Notice.
5.1.3 The Company acknowledges that other than where the provisions
of Condition 5.1.4 below apply, the Company shall not be
entitled to a Set Off to the extent that the amount of any
loss is or has been reflected in a diminution of the Operating
Profits or a provision or reserve has been made by the Company
or the Group Company (and not disputed by AMEC).
5.1.4 If at any time the Company is entitled to a Set Off the
Company has injected equity capital into the Group Companies
or any of them pursuant to the Shareholders' Agreement and
accordingly the Company is entitled to a proportionate share
of the net
2
<PAGE> 16
after tax earnings of the Group Companies, then such Set Off
will be applied against this Set Off Loan Note as opposed to
reducing the Operating Profits.
5.2 UNLIQUIDATED LOSSES; SET OFF RESERVES
5.2.1 ESTABLISHMENT OF SET OFF RESERVES
Subject to AMEC's right to object to any set off or recoupment
of any Loss as provided below, at any time prior to the date
of redemption of this Set Off Loan Note (the "REDEMPTION
DATE"), if and to the extent that the Company reasonably
determines that it has a bona fide claim under the Warranties
that has not yet become a Liquidated Loss (an "UNLIQUIDATED
LOSS"), the Company shall be entitled to establish a reserve
equivalent to the amount it reasonably considers to be a
genuine estimate of the amount of the Loss (a "SET OFF
RESERVE") against this Set Off Loan Note in respect of such
Unliquidated Loss, provided that AMEC receives from the
Company the Set Off Reserve Notice 10 Business Days prior to
the Redemption Date. The Company shall take into consideration
the availability of insurance coverage for any Unliquidated
Loss in establishing any Set Off Reserve.
5.2.2 SET OFF RESERVE NOTICE
10 Business Days prior to the establishment of a Set Off
Reserve, the Company shall deliver a written notice to AMEC
(the "SET OFF RESERVE NOTICE"), which notice shall set forth
the amount of the Unliquidated Loss, together with a
reasonably detailed statement of the basis for the Company's
determination that such Unliquidated Loss is reasonably likely
to be incurred by or imposed and the total of all Unliquidated
Losses that have been reserved by the Company to the date of
the Set Off Reserve Notice.
5.2.3 SUSPENSION OF OBLIGATIONS
The obligation of the Company to pay this Set Off Loan Note to
AMEC, as provided in this Set Off Loan Note Instrument, shall
be suspended (but not the accrual of interest payable pursuant
to Condition 5.2.4) to the extent of the aggregate amount of
Set Off Reserves not settled pursuant to this Condition 5.2 at
the time of such payment.
5.2.4 SETTLEMENT OF SET OFF RESERVES
If at any time it is determined (whether by agreement between
the parties or pursuant to the dispute resolution procedures
set forth in Condition 5.4 or as a result of a judicial
determination of the Final Loss Amount (as defined below))
that any Set Off Reserve exceeds the aggregate amount of the
Losses ultimately incurred by or imposed upon the Company as a
result of or based upon the events or conditions to which the
Set Off Reserve relates (or that Claim to which the Set Off
Reserve relates is not a valid claim) (the "FINAL LOSS
AMOUNT") or that the claim to which the Set Off Reserve
relates is not a valid claim, the amount of such Set Off
Reserve in excess of such Final Loss Amount or, as
appropriate, the entire Set Off Reserve. shall cease to be
suspended and shall be paid within 2 Business Days under and
in accordance with the terms of this Set Off Loan Note
together with interest at the rate of 1% above the base rate
of National Westminster Bank Plc from 30 March 2001 until the
date of payment.
If and to the extent that at any time an Unliquidated Loss (in
respect of which a Set Off Reserve has been established)
becomes a Liquidated Loss which has not otherwise been
satisfied (the "FINAL LOSS AMOUNT"), the nominal value of this
Set Off Loan Note equivalent to the Final Loss Amount shall be
paid by the Company immediately upon such Unliquidated Loss
becoming a Liquidated Loss but the Company shall be deemed to
be irrevocably and conditionally instructed by the Noteholder
to apply the proceeds of such repayment in payment of the
Liquidated Loss in full and final settlement of the Liquidated
Loss and so that AMEC shall have no further liability to the
Company in
3
<PAGE> 17
respect of the amount of Set Off Reserve relating to such
Liquidated Loss but, without prejudice to the Company's right
to recover the balance of such Liquated Loss from, AMEC and
the Company shall have no further liability to any Noteholder
in relation to this Set Off Loan Note subject to such
repayment.
If and to the extent any Set Off Reserve has been established
and a provision is subsequently made in the accounts prepared
pursuant to clause 5 of the Shareholders Agreement, then the
amount of such Set Off Reserve shall be reduced to the extent
that the preferential dividend paid to the holders of the "B"
Shares in the Company on or around 30 June 2001 is reduced by
the inclusion of such provision and the relevant amount shall
cease to be suspended and shall be paid within 2 Business Days
of the date on which the preferential dividend is paid
together with interest at the rate of 1% above the base rate
of National Westminster Bank Plc from 30 March 2001 until the
date of payment.
For the purpose of this Condition 5.2. "Loss" or "Losses"
shall not include any amount of a claim in respect of
Taxation.
5.3 OBJECTION PROCEDURE
If AMEC disputes any exercise by the Company of its right to make a Set
Off or a Set Off Reserve, then AMEC shall deliver a written notice to
the Company ("OBJECTION NOTICE") within 5 Business Days following
receipt of a Set Off Reserve Notice. The Objection Notice small state
the portion of the applicable Loss to which AMEC objects and a
reasonably detailed description of the basis of such objection. AMEC
and the Company shall negotiate in good faith to resolve any dispute
with respect to the matters set forth in the Objection Notice for a
period of 20 days following receipt of such Objection Notice by the
Company.
5.4 DETERMINATION BY AN EXPERT
5.4.1 If AMEC and the Company are not able to agree during the
dispute resolution period provided above:
(a) whether or not there are reasonable grounds for making a claim
under the Warranties and/or
(b) whether or not the amount of the claim under the Warranties
represents a reasonable estimate of the loss and/or liability
which is likely to be awarded in respect of such. claim,
((a) and (b) together being the "CLAIM CRITERIA"), either of
them may by written request to the other specify a counsel of
at least 10 years' standing (or other appropriate person) whom
they wish to opine on the Claim Criteria. If they cannot agree
on the counsel or other appropriate person within 3 Business
Days of the written request then either of them may at any
time thereafter apply to the President of the Bar Council to
nominate a counsel of at least 10 years' standing to opine on
the Claim Criteria. The counsel or other appropriate person so
agreed or appointed (who shall act as an expert and not as an
arbitrator and whose costs shall be borne as he shall direct
and whose determination shall (subject to Condition 5.4.2) be
final and binding on the Company and AMEC) shall be asked to
opine on the Claim Criteria.
5.4.2 Any Claim Criteria determined in accordance with this
Condition 5.4 shall be relevant solely for the purpose of
determining whether a claim under the Warranties constitutes
an Unliquidated Loss and if so what the appropriate amount of
such loss is and shall have no other effect whatsoever, and in
particular shall not operate to determine or settle any actual
liability or the quantum thereof on account of any claim under
the Warranties.
4
<PAGE> 18
5.4.3 If the amount of the Unliquidated Loss determined by the
expert is less than any Set Off Reserve already established,
the amount of such difference shall cease to be suspended and
shall be paid to AMEC within two Business Days together with
interest at the rate of 1% above the base rate of National
Westminster Bank Plc from 30 March 2001 until the date of
payment.
5.5 OBLIGATION TO RESOLVE WARRANTY CLAIMS
To the extent that any Set Off Reserve has been established in relation
to any Unliquidated Loss, the Company shall use reasonable endeavours
to pursue the claim in respect of such Unliquidated Loss under the
Warranties to which such Unliquidated Loss applies with a view to
ensuring that the Set Off Reserve is reduced as quickly as possible.
6 TRANSFER OF NOTES
6.1 The Notes are transferable by instrument in writing in multiples of
(pounds)100 in the usual or common form (or in such other form as the
Directors may approve) to any member of the AMEC Retained Group.
6.2 Every instrument of transfer must be signed by the transferor (or by a
person authorised to sign on behalf of the transferor) and the
transferor shall be deemed to remain the owner of the Notes to be
transferred until the name of the transferee is entered in the Register
in respect thereof.
6.3 Every instrument of transfer must be sent for registration to the
Transfer Office accompanied by the Certificate(s) for the Notes to be
transferred together with such other evidence as the Directors or other
officers of the Company authorised to deal with transfers may
reasonably require to prove the title of the transferor or his right to
transfer the Notes and, if the instrument of transfer is executed by
some other person on his behalf, the authority of that person to do so.
All instruments of transfer which shall be registered may be retained
by the Company.
6.4 No fee shall be charged for the registration of any transfer or for the
registration of any power of attorney or other document relating to or
affecting the title to any Notes.
7 MODIFICATION
The provisions of the Instrument or of the Notes and the rights of the
Noteholders may from time to time be modified. abrogated or compromised
or any arrangement agreed between the Company and the Noteholders.
8 DEALINGS
The Notes shall not be capable of being dealt in on any stock exchange
in the United Kingdom or elsewhere and no application has been or is
intended to be made to any stock exchange for the Notes to be listed or
otherwise traded.
9 RECEIPT OF JOINT HOLDERS
If two or more persons are entered in the Register as joint registered
holders of any Notes then, without prejudice to Clause 7 of the
Instrument, the receipt by any one of such persons of any interest or
principal or other moneys payable in respect of such Notes shall be as
effective a discharge to the Company as if the person signing such
receipt were the sole registered holder of such Notes.
5
<PAGE> 19
10 REPLACEMENT OF CERTIFICATES
If the Certificate for any Notes is lost, defaced or destroyed, it may,
upon payment by the Noteholder of any out-of-pocket expenses of the
Company, be renewed, on such terms (if any) as to evidence and
indemnity as the Directors may require, but so that, in the case of
defacement, the defaced Certificate shall be surrendered before the new
Certificate is issued.
11 RISK TO NOTEHOLDERS
All Certificates, other documents and remittances sent through the post
shall be sent at the risk of the Noteholder(s) entitled thereto.
12 NOTICES
12.1 Any notice or other communication required. permitted or contemplated
by this Deed ("NOTICE") must be in writing and delivered to the
recipient by registered or certified mail, return receipt requested or
delivered by facsimile mail with the original counterpart thereof being
sent on the same business day or on the business day immediately
following the date of facsimile transmission. Such Notice shall be
deemed received three Business Days after a registered or certified
letter containing such Notice, properly addressed with the postage
prepaid is posted or on the same day if transmitted by facsimile mail.
12.2 Any notice or other document (including Certificates) may be given or
sent to any Noteholder addressed to such Noteholder at his registered
address in the United Kingdom or (if he has no registered address
within the United Kingdom) to the address (if any) within the United
Kingdom supplied by him to the Company for the giving of notice to him.
In the case of joint registered holders of any Notes, a notice given to
the Noteholder whose name stands first in the Register in respect of
such Notes shall be sufficient notice to all joint holders. Notice may
be given to the persons entitled to any Notes in consequence of the
death or bankruptcy of any Noteholder by sending the same by post, in a
pre-paid envelope addressed to them by name or by the title of the
representative or trustees of such holder, at the address (if any) in
the United Kingdom supplied for the purpose by such persons or (until
such address is supplied) by giving notice in the manner in which it
would have been given if the death or bankruptcy has not occurred. Save
as otherwise provided in this paragraph, only Noteholders with a
registered address in the United Kingdom shall be entitled to receive
any notice, demand or other document.
12.3 Any notice, demand or other document (including Certificates and
transfers of Notes) may be served on the Company either personally or
by sending the same by post in a prepaid letter addressed to the
Company at its registered office for the time being (marked for the
attention of the Company Secretary) or to such other address in England
as the Company may from time to time notify to Noteholders.
13 GENERAL
13.1 The Register together with a copy of the Instrument shall during
business hours be open to the inspection of any Noteholder or any
person (not being a person to whom the Company may reasonably object)
authorised in writing by any Noteholder without charge at the Transfer
Office.
13.2 The Instrument and the Notes are governed by, and will be construed in
accordance with, English law.
6
<PAGE> 1
EXHIBIT 10.19
<TABLE>
<S> <C> <C> <C>
CITY INTERNATIONAL BANKING CENTRE Structured Trade Finance Direct line: 0171 714 6097
4th Floor, Juno Court Facsimile: 0171 714 6160
24 Prescot Street Telex: 8812868 NWB BIS G
London El 8BB
</TABLE>
Your ref:
Our ref:
[NATIONAL WESTMINISTER BANK LOGO]
AMEC Finance Limited
Sandiway House
Hertford, Northwich
Cheshire
England CW8 2YA
15 April 1999
Dear Sirs,
IRREVOCABLE LETTER OF CREDIT NO. TFPCYFO83358
This Letter of Credit is issued by National Westminster Bank Plc of City
International Banking Centre, Structured Trade Finance, Level 4, Juno Court, 24
Prescot Street, London El 8BB, (the "L/C BANK") in favour of AMEC Finance
Limited (the "BENEFICIARY") on the following terms:
1. Subject to the terms hereof, the L/C Bank shall pay on demand a maximum
amount of (pound)130,000,000.00 [say One hundred and thirty million Pounds
Sterling] (the "ORIGINAL L/C AMOUNT") in respect of any payment obligations
incurred or to be incurred by Centex Development Company UK Limited ("CDC
UK") in up to ten negotiable loan notes (the "NEGOTIABLE LOAN NOTES")
issued by CDC UK to the Beneficiary pursuant to a purchase agreement dated
on or about 15 April, 1999 between CDC UK, the Beneficiary and AMEC p.l.c.
2. The L/C Bank shall not be obliged to make payments hereunder exceeding in
aggregate the Original L/C Amount. Any payment made by the L/C Bank in
respect of a Negotiable Loan Note hereunder shall reduce its liability to
make any further payments hereunder by the face amount of that Negotiable
Loan Note.
3. This Letter of Credit shall expire at 2 p.m. London time on 30 March, 2001
(the "EXPIRY DATE").
4. Subject to paragraph 3 above, upon receipt of (a) a Negotiable Loan Note
transferred to the L/C Bank and (b) the Beneficiary's disposal instructions
at the address set out below, such disposal instructions being in the form
set out in Appendix 1 hereto, the L/C Bank shall pay to the Beneficiary or
as directed by the Beneficiary in Sterling, by close of business on the
business day of presentment of the Negotiable Loan Note in accordance with
this paragraph 4, an amount calculated by discounting the face amount of
the Negotiable Loan Note by the Discount Rate (such discounted amount being
the "DISCOUNTED AMOUNT"). Upon such payment, this Letter of Credit will be
reduced in accordance with paragraph 2 above.
<PAGE> 2
For the purposes of this paragraph 4, "DISCOUNT RATE" means the rate per
annum equal to the aggregate of (a) the L/C Bank's London Inter-Bank
Offered Rate for the period from the date of presentment of the Negotiable
Loan Note to the Expiry Date plus (b) a margin of 0.625%, expressed as a
straight discount rate.
5. The L/C Bank may not assign or transfer its rights and obligations
hereunder without the prior written consent of the Beneficiary and CDC UK.
The Beneficiary may not assign or transfer its rights hereunder without the
prior written consent of the L/C Bank.
6. This Letter of Credit is irrevocable.
7. Any communication made pursuant to this Letter of Credit shall only be made
by tested telex, by authenticated swift or personal delivery and shall only
be deemed to have been duly given or made on receipt.
8. Subject to paragraph 9 below, this Letter of Credit sets forth in full the
terms of our undertaking. Such undertaking shall not in any way be
modified, amended or amplified by reference to any document or instrument
referred to herein or in which this Letter of Credit is referred to or to
which this Letter of Credit relates and any such reference shall not be
deemed to incorporate herein by reference any document or instrument.
9. This Letter of Credit is subject to Uniform Customs and Practice for
Documentary Credits International Chamber of Commerce, Publication No. 500
- 1993 Revision and shall be governed by and construed in accordance with
the laws of England.
<TABLE>
<S> <C>
/s/ Clive Thompson /s/ David Morgan
For National Westminster Bank Plc For National Westminster Bank Plc
Clive Thompson T381 David Morgan M175
Address for receipt of disposal instructions:
City International Banking Centre
Structured Trade Finance
level 4
Juno Court
24 Prescot Street
London E1 8BB
Attention: D Morgan, Senior Manager
Telex: 885361 NWBLDN G
SWIFT NWBKGB2L
</TABLE>
<PAGE> 3
APPENDIX 1
The undersigned, a duly authorised officer of AMEC Finance Limited (the
"PAYEE"), hereby requests National Westminster Bank Plc (the "BANK"), with
reference to Irrevocable Letter of Credit No.TFPCYFO83358 (the "LETTER OF
CREDIT") issued by the Bank in favour of the Payee, to pay the Discounted Amount
(as defined in the Letter of Credit) to [ ] in respect of the attached
Negotiable Loan Note (as defined in the Letter of Credit) transferred to the
Bank.
AMEC Finance Limited
By:
--------------------------
Name:
Title
Date: [ ]
We confirm that the signatory/signatories of AMEC Finance Limited hereon is/are
authorised so to sign.
[AMEC Finance Limited's Bankers]
By:
--------------------------
Name:
Title
Date: [ ]
This Appendix forms an integral part of Letter of Credit number TFPCYF083358
<TABLE>
<S> <C>
/s/ Clive Thompson /s/ David Morgan
For National Westminster Bank Plc For National Westminster Bank Plc
Clive Thompson T381 David Morgan M175
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX
CORPORATION'S SEPTEMBER 30, 1999, FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000018532
<NAME> CENTEX CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 123,440
<SECURITIES> 0
<RECEIVABLES> 1,582,834
<ALLOWANCES> 0
<INVENTORY> 1,939,706
<CURRENT-ASSETS> 0
<PP&E> 583,931
<DEPRECIATION> 258,939
<TOTAL-ASSETS> 4,605,441
<CURRENT-LIABILITIES> 0
<BONDS> 564,581
0
0
<COMMON> 14,830
<OTHER-SE> 1,294,701
<TOTAL-LIABILITY-AND-EQUITY> 4,605,441
<SALES> 2,801,676
<TOTAL-REVENUES> 2,801,676
<CGS> 2,523,830
<TOTAL-COSTS> 2,523,830
<OTHER-EXPENSES> 50,044
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,361
<INCOME-PRETAX> 200,441
<INCOME-TAX> 76,510
<INCOME-CONTINUING> 123,931
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123,931
<EPS-BASIC> 2.08
<EPS-DILUTED> 2.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3333 HOLDING
CORPORATION'S SEPTEMBER 30, 1999, FORM 10-Q 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> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 17
<SECURITIES> 0
<RECEIVABLES> 6
<ALLOWANCES> 0
<INVENTORY> 596
<CURRENT-ASSETS> 0
<PP&E> 191
<DEPRECIATION> 72
<TOTAL-ASSETS> 2,598
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (1,908)
<TOTAL-LIABILITY-AND-EQUITY> 2,598
<SALES> 304
<TOTAL-REVENUES> 304
<CGS> 1,379
<TOTAL-COSTS> 1,379
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,075)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,075)
<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 JUNE 30, 1999, FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000818764
<NAME> CENTEX DEVELOPMENT COMPANY, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 17,758
<SECURITIES> 0
<RECEIVABLES> 18,055
<ALLOWANCES> 0
<INVENTORY> 351,405
<CURRENT-ASSETS> 0
<PP&E> 4,356
<DEPRECIATION> 332
<TOTAL-ASSETS> 433,610
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 65,600
<TOTAL-LIABILITY-AND-EQUITY> 433,610
<SALES> 169,799
<TOTAL-REVENUES> 169,799
<CGS> 168,076
<TOTAL-COSTS> 168,076
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,723
<INCOME-TAX> 572
<INCOME-CONTINUING> 1,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,151
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
