<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, 2000
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
2728 N. Harwood
Dallas, Texas 75201
(214) 981-6770
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 31, 2000:
<TABLE>
<S> <C> <C>
Centex Corporation Common Stock 59,049,283 shares
3333 Holding Corporation Common Stock 1,000 shares
Centex Development Company, L.P. Class A Unit of Limited Partnership Interest 32,260 units
Centex Development Company, L.P. Class C Unit of Limited Partnership Interest 38,409 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, 2000
CENTEX CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements 1
Condensed Consolidated Statements of Earnings
for the Three Months Ended September 30, 2000 2
Condensed Consolidated Statements of Earnings
for the Six Months Ended September 30, 2000 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended September 30, 2000 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 29
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 30
ITEM 6. Exhibits and Reports on Form 8-K 30
SIGNATURES 31
</TABLE>
i
<PAGE> 3
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Combining Financial Statements 32
Condensed Combining Statements of Operations
for the Three Months Ended September 30, 2000 33
Condensed Combining Statements of Operations
for the Six Months Ended September 30, 2000 34
Condensed Combining Balance Sheets 35
Condensed Combining Statements of Cash Flows
for the Six Months Ended September 30, 2000 36
Notes to Condensed Combining Financial Statements 37
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 44
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 49
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 50
ITEM 6. Exhibits and Reports on Form 8-K 50
SIGNATURES 51
</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. 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. The
Company suggests 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 STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Home Building
Conventional Homes $ 1,027,003 $ 843,745
Manufactured Homes 33,797 50,987
Investment Real Estate 3,163 7,642
Financial Services 106,500 120,477
Construction Products 99,772 117,841
Contracting and Construction Services 330,445 288,751
------------ ------------
1,600,680 1,429,443
------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes 937,444 773,545
Manufactured Homes 34,890 47,033
Investment Real Estate (3,910) (1,369)
Financial Services 104,295 108,027
Construction Products 67,294 65,931
Contracting and Construction Services 323,879 283,636
Other, net (1,597) 1,054
Corporate General and Administrative 8,774 8,130
Interest Expense 22,189 15,533
Minority Interest 11,497 20,592
------------ ------------
1,504,755 1,322,112
------------ ------------
EARNINGS BEFORE INCOME TAXES 95,925 107,331
Income Taxes 36,831 41,836
------------ ------------
NET EARNINGS $ 59,094 $ 65,495
============ ============
EARNINGS PER SHARE
Basic $ 1.00 $ 1.10
============ ============
Diluted $ 0.98 $ 1.07
============ ============
AVERAGE SHARES OUTSTANDING
Basic 58,954,694 59,435,195
Common Share Equivalents
Options 949,184 1,446,764
Convertible Debenture 400,000 400,000
------------ ------------
Diluted 60,303,878 61,281,959
============ ============
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 STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Home Building
Conventional Homes $ 1,914,025 $ 1,598,356
Manufactured Homes 70,283 98,818
Investment Real Estate 6,644 11,449
Financial Services 202,409 237,364
Construction Products 200,097 215,021
Contracting and Construction Services 629,104 640,668
------------ ------------
3,022,562 2,801,676
------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes 1,751,916 1,469,008
Manufactured Homes 71,473 93,669
Investment Real Estate (6,531) (3,721)
Financial Services 200,136 204,191
Construction Products 131,464 127,784
Contracting and Construction Services 616,034 629,998
Other, net (1,917) 2,901
Corporate General and Administrative 17,505 15,338
Interest Expense 43,955 27,361
Minority Interest 24,533 34,706
------------ ------------
2,848,568 2,601,235
------------ ------------
EARNINGS BEFORE INCOME TAXES 173,994 200,441
Income Taxes 66,695 76,510
------------ ------------
NET EARNINGS $ 107,299 $ 123,931
============ ============
EARNINGS PER SHARE
Basic $ 1.82 $ 2.08
============ ============
Diluted $ 1.79 $ 2.02
============ ============
AVERAGE SHARES OUTSTANDING
Basic 58,879,433 59,440,650
Common Share Equivalents
Options 800,202 1,604,945
Convertible Debenture 400,000 400,000
------------ ------------
Diluted 60,079,635 61,445,595
============ ============
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,
2000* 2000**
------------ ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 202,280 $ 139,563
Receivables -
Residential Mortgage Loans 1,203,515 409,697
Other 539,672 483,381
Inventories 2,141,687 1,954,037
Investments -
Centex Development Company, L.P. 89,231 65,550
Joint Ventures and Other 72,606 65,944
Unconsolidated Subsidiaries -- --
Property and Equipment, net 368,421 360,604
Other Assets -
Deferred Income Taxes 48,840 49,907
Goodwill, net 256,340 251,780
Mortgage Securitization Residual Interest 159,592 160,999
Deferred Charges and Other 146,396 97,278
------------ ------------
$ 5,228,580 $ 4,038,740
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 1,117,378 $ 1,125,807
Short-term Debt 750,185 562,235
Long-term Debt 1,650,307 751,160
Payables to Affiliates -- --
Minority Stockholders' Interest 140,189 129,352
Negative Goodwill 42,837 50,837
Stockholders' Equity -
Preferred Stock, Authorized 5,000,000
Shares, None Issued -- --
Common Stock $.25 Par Value; Authorized
100,000,000 Shares; Issued and Outstanding
59,045,083 and 58,806,217 respectively 14,761 14,702
Capital in Excess of Par Value 4,420 --
Retained Earnings 1,508,480 1,405,895
Accumulated Other Comprehensive Income (Loss) 23 (1,248)
------------ ------------
Total Stockholders' Equity 1,527,684 1,419,349
------------ ------------
$ 5,228,580 $ 4,038,740
============ ============
</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,
2000* 2000** 2000* 2000**
------------ ------------ ------------ ------------
<S> <C> <C> <C>
$ 172,685 $ 123,411 $ 29,595 $ 16,152
-- -- 1,203,515 409,697
449,141 418,810 90,531 64,571
2,128,207 1,945,899 13,480 8,138
89,231 65,550 -- --
72,606 65,944 -- --
293,793 267,177 -- --
328,886 319,255 39,535 41,349
13,502 24,018 35,338 25,889
238,882 233,059 17,458 18,721
-- -- 159,592 160,999
117,534 71,302 28,862 25,976
------------ ------------ ------------ ------------
$ 3,904,467 $ 3,534,425 $ 1,617,906 $ 771,492
============ ============ ============ ============
$ 1,044,694 $ 1,038,641 $ 72,684 $ 87,166
242,121 146,908 508,064 415,327
909,359 751,160 740,948 --
-- -- 59,232 64,246
137,772 127,530 2,417 1,822
42,837 50,837 -- --
-- -- -- --
14,761 14,702 1 1
4,420 -- 180,467 150,467
1,508,480 1,405,895 54,093 52,463
23 (1,248) -- --
------------ ------------ ------------ ------------
1,527,684 1,419,349 234,561 202,931
------------ ------------ ------------ ------------
$ 3,904,467 $ 3,534,425 $ 1,617,906 $ 771,492
============ ============ ============ ============
</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 STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings $ 107,299 $ 123,931
Adjustments -
Depreciation and Amortization 27,027 21,985
Deferred Income Taxes (204) 5,552
Equity in Earnings of Centex Development
Company, L.P. and Joint Ventures (984) (212)
Minority Interest, net of taxes 15,603 22,408
(Increase) Decrease in Receivables (56,291) 23,370
(Increase) Decrease in Residential Mortgage Loans (793,818) 250,261
Increase in Inventories (190,977) (327,986)
Decrease in Payables and Accruals (7,843) (13,596)
Increase in Other Assets (62,789) (86,564)
Other, net (4,766) (15,207)
------------ ------------
(967,743) 3,942
------------ ------------
CASH FLOWS - INVESTING ACTIVITIES
Increase in Advances to Centex Development
Company, L.P. and Joint Ventures (26,032) (21,629)
Acquisition of Home Building Operations -- (74,119)
Other Acquisitions -- (9,349)
Increase in Property and Equipment, net (31,055) (30,503)
------------ ------------
(57,087) (135,600)
------------ ------------
CASH FLOWS - FINANCING ACTIVITIES
Increase (Decrease) in Debt -
Secured by Residential Mortgage Loans 833,685 (183,591)
Other 253,412 339,460
Retirement of Common Stock (784) (14,410)
Proceeds from Stock Option Exercises 5,263 7,158
Dividends Paid (4,714) (4,755)
------------ ------------
1,086,862 143,862
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 685 (32)
------------ ------------
NET INCREASE IN CASH 62,717 12,172
CASH AT BEGINNING OF PERIOD 139,563 111,268
------------ ------------
CASH AT END OF PERIOD $ 202,280 $ 123,440
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-6-
<PAGE> 10
CENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Dollars in thousands)
(unaudited)
(A) A summary of comprehensive income for the three and six
months ended September 30, 2000 is presented below:
<TABLE>
<CAPTION>
-------------------------- ------------------------
For the Three Months Ended For the Six Months Ended
September 30, 2000 September 30, 2000
-------------------------- ------------------------
<S> <C> <C>
Net Earnings $ 59,094 $ 107,299
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments (197) (467)
Unrealized Gain on Investment 1,738 1,738
------------ ------------
Comprehensive Income $ 60,635 $ 108,570
============ ============
</TABLE>
The Foreign Currency Translation Adjustments are 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 included elsewhere in this report. The Unrealized
Gain on Investment is the result of a mark-to-market adjustment to securities
available for sale held by the Company's 65.3%-owned subsidiary, Centex
Construction Products, Inc.
(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 Income (Loss) Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 2000 $ -- $ 14,702 $ -- $ 1,405,895 $ (1,248) $ 1,419,349
Net Earnings -- -- -- 107,299 -- 107,299
Exercise of Stock Options -- 68 5,195 -- -- 5,263
Retirement of 35,400 Shares -- (9) (775) -- -- (784)
Cash Dividends -- -- -- (4,714) -- (4,714)
Unrealized Gain on
Investments -- -- -- -- 1,738 1,738
Foreign Currency
Translation Adjustments -- -- -- -- (467) (467)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 2000 $ -- $ 14,761 $ 4,420 $ 1,508,480 $ 23 $ 1,527,684
============ ============ ============ ============ ============ ============
</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 managed by its
general partner, 3333 Development Corporation ("Development"), a wholly-owned
subsidiary of 3333 Holding Corporation ("Holding"). Holding is a separate public
company whose stock trades in tandem with Centex's stock. The common stock of
Holding was distributed in 1987 (with warrants to purchase approximately 80% of
the Class B limited partnership units in the Partnership) as a dividend to the
stockholders of Centex and is held by a nominee. These securities, held by the
nominee on behalf of the stockholders, will trade in tandem with the common
stock of Centex until such time as they are detached. The securities may be
detached at any time by Centex's Board of Directors, but the warrants to
purchase Class B Units automatically become detached in November 2007.
The stockholders of Centex elect the four-person Board of Directors of
Holding. Three of the Board members, representing the majority of the Board, are
independent outside directors who are also not directors of Centex. Thus,
through Holding, the stockholders of Centex control the general partner of the
Partnership. The general partner and independent board of Holding manage how the
Partnership conducts its activities, including the sales, development,
maintenance and zoning of properties. The general partner may sell or acquire
properties, including the contributed property, and enter into other business
transactions without the consent of the limited partners. In addition, the
limited partners cannot remove the general partner.
The Company accounts for its limited partner investment in the
Partnership on the equity method of accounting because the Company's interest in
the cash and earnings of the Partnership is limited to defined amounts, and the
Company does not control the Partnership.
During fiscal year 1998, the agreement governing the Partnership was
amended to allow for the issuance of a new class of limited partnership units,
Class C Limited Partnership Units ("Class C Units"). Additionally, during fiscal
1998, the 1,000 Class A Units were converted to 32,260 new Class A Units. As of
September 30, 2000, 38,409 Class C Units had been issued in exchange for assets
with a fair market value of $38.4 million. These assets were recorded by the
Partnership at fair market value. The partnership agreement provides that
Centex, as the Class A and Class C limited partner, is entitled to a cumulative
preferred return of 9% per annum on the average outstanding balance of its
Unrecovered Capital, defined as its capital contributions, adjusted for cash
distributions representing return of the capital contributions. Unrecovered
Capital as of September 30, 2000 totaled $71 million. Preference payments in
arrears at September 30, 2000 amounted to $18 million. No preference payments
were made during fiscal 2000 or fiscal 2001 year to date.
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
<TABLE>
<CAPTION>
------------------------------
SEPTEMBER 30, March 31,
2000 2000*
------------ ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 208,248 $ 197,877
Receivables 1,750,377 907,367
Inventories 2,590,913 2,343,682
Investments in Joint Ventures and Other 72,689 68,539
Property and Equipment, net 371,673 364,182
Other Assets 661,918 599,526
------------ ------------
$ 5,655,818 $ 4,481,173
============ ============
Liabilities And Stockholders' Equity
Accounts Payable and Accrued Liabilities $ 1,225,514 $ 1,244,500
Short-term Debt 1,015,070 834,897
Long-term Debt 1,704,524 802,238
Minority Stockholders' Interest 140,189 129,352
Negative Goodwill 42,837 50,837
Stockholders' Equity 1,527,684 1,419,349
------------ ------------
$ 5,655,818 $ 4,481,173
============ ============
</TABLE>
* Condensed from audited financial statements.
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
-----------------------------
For the Six Months Ended
September 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 3,163,576 $ 2,970,072
Costs and Expenses 2,989,525 2,769,059
------------ ------------
Earnings Before Income Taxes 174,051 201,013
Income Taxes 66,752 77,082
------------ ------------
NET EARNINGS 107,299 123,931
Other Comprehensive Income (Loss) 1,271 (32)
------------ ------------
COMPREHENSIVE INCOME $ 108,570 $ 123,899
============ ============
</TABLE>
(D) The Company's home building activities comprise the acquisition of raw and
semi-developed land, the planning, supervision and funding of subcontractors'
activities to complete development of that land primarily into single family
home sites, and the construction of houses thereon for sale to individual home
purchasers. Land acquisition and development activities are accomplished by the
Company directly and via its participation in joint ventures in which the
Company holds less than a majority interest. Home construction is likewise
accomplished by subcontractors.
-9-
<PAGE> 13
In order to ensure the future availability of land for home building,
the Company has made deposits totaling approximately $59 million as of September
30, 2000 for options to purchase undeveloped land and developed lots having a
total purchase price of approximately $1.4 billion. These options and
commitments expire at various dates through the year 2006. The Company has
committed to purchase for approximately $0.5 million certain developed lots from
the Partnership.
(E) Interest expense relating to the Financial Services operations is included
in its costs and expenses. Interest related to non-financial services is
included in interest expense. For the three and six month periods ending
September 30, 2000, total interest expense is net of $2,750 of interest
capitalized to qualifying assets, principally within the Home Building business
segment.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Total Interest Expense $ 43,059 $ 35,063
Less - Financial Services (20,870) (19,530)
------------ ------------
Interest Expense, net $ 22,189 $ 15,533
============ ============
</TABLE>
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Total Interest Expense $ 76,933 $ 63,385
Less - Financial Services (32,978) (36,024)
------------ ------------
Interest Expense, net $ 43,955 $ 27,361
============ ============
</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 CXP
was 65.3% as of September 30, 2000, 64.4% as of March 31, 2000, and 62.6% as of
September 30, 1999.
(G) In fiscal 1996, the Company acquired an equity interest in Vista Properties,
Inc. ("Vista"), which owned a real estate portfolio of properties located in
seven states in which the Company has significant operations. The Investment
Real Estate portfolio was reduced to a nominal "book basis" after recording
certain deferred tax benefits related to this acquisition. Accordingly, as these
properties are developed or sold, the net sales proceeds are reflected as
operating margin.
Negative Goodwill related to the Vista acquisition is being amortized
to earnings over the estimated period over which the land will be developed,
sold or realized. All investment property operations are being reported through
the "Investment Real Estate" business segment.
-10-
<PAGE> 14
(H) A Centex subsidiary has a deferred tax asset of approximately $132 million,
primarily related to net operating loss carryforwards. If unused, the
carryforwards will expire in varying amounts through 2021. A valuation allowance
equal to the deferred tax asset has been provided by the subsidiary, valuing the
deferred tax asset at zero.
(I) 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 $89.2 million) is included in the
Investment Real Estate segment.
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.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 1,027.0 $ 843.7
Cost of Sales (789.3) (651.1)
Selling, General & Administrative Expenses (148.1) (122.4)
---------- ----------
Operating Earnings $ 89.6 $ 70.2
========== ==========
</TABLE>
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
(Dollars in millions)
<S> <C> <C>
Revenues $ 1,914.0 $ 1,598.3
Cost of Sales (1,468.8) (1,232.4)
Selling, General & Administrative Expenses (283.1) (236.6)
------------ ------------
Operating Earnings $ 162.1 $ 129.3
============ ============
</TABLE>
-11-
<PAGE> 15
MANUFACTURED HOMES
Manufactured Homes operations involve the manufacture of residential
and park model homes and the sale of these homes through a network of
Company-owned and independent dealers. The following tables set forth financial
information relating to the Manufactured Homes operations.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 33.8 $ 51.0
Cost of Sales (27.3) (39.0)
Selling, General & Administrative Expenses (7.6) (8.0)
---------- ----------
Operating (Loss) Earnings (1.1) 4.0
Minority Interest -- (0.8)
---------- ----------
Net Operating (Loss) Earnings to Centex $ (1.1) $ 3.2
========== ==========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 70.3 $ 98.8
Cost of Sales (56.6) (77.6)
Selling, General & Administrative Expenses (14.9) (16.1)
---------- ----------
Operating (Loss) Earnings (1.2) 5.1
Minority Interest -- (1.0)
---------- ----------
Net Operating (Loss) Earnings to Centex $ (1.2) $ 4.1
========== ==========
</TABLE>
INVESTMENT REAL ESTATE
Investment Real Estate operations involve the development of land
relating primarily to multi-family, industrial, office, retail and mixed-use
projects. The following tables set forth financial information relating to the
Investment Real Estate operations.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 3.1 $ 7.6
Cost of Sales -- (0.9)
Selling, General & Administrative Expenses -- (1.7)
Negative Goodwill Amortization 4.0 4.0
---------- ----------
Operating Earnings $ 7.1 $ 9.0
========== ==========
</TABLE>
-12-
<PAGE> 16
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 6.6 $ 11.4
Cost of Sales (0.3) (1.1)
Selling, General & Administrative Expenses (1.1) (3.1)
Negative Goodwill Amortization 8.0 8.0
---------- ----------
Operating Earnings $ 13.2 $ 15.2
========== ==========
</TABLE>
Property sales related to Investment Real Estate's nominally valued
assets resulted in operating margins of $2.9 and $4.7 million for the three and
six months ended September 30, 2000 and $5.9 million and $8.9 million for the
three and six months periods last year. As of September 30, 2000, the Investment
Real Estate Group had approximately $34.9 million of nominally valued assets.
FINANCIAL SERVICES
Financial Services operations involve the financing of conventional
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.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues* $ 106.5 $ 120.5
Selling, General & Administrative Expenses (83.4) (88.5)
Interest Expense (20.9) (19.5)
---------- ----------
Operating Earnings $ 2.2 $ 12.5
========== ==========
</TABLE>
* Financial Services revenues include interest income of $25.9 million
and $27.4 million for the three months ended September 30, 2000 and
1999, respectively.
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues* $ 202.4 $ 237.4
Selling, General & Administrative Expenses (167.1) (168.2)
Interest Expense (33.0) (36.0)
---------- ----------
Operating Earnings $ 2.3 $ 33.2
========== ==========
</TABLE>
* Financial Services revenues include interest income of $42.0 million
and $51.0 million for the six months ended September 30, 2000 and 1999,
respectively.
-13-
<PAGE> 17
Securitizations entered into prior to March 31, 2000 by Financial
Services' Centex Home Equity Corporation subsidiary ("Home Equity") had legal
and economic structures that caused them to be accounted for as sales. The
resulting gains on such sales were reported as revenues during the month in
which the securitizations closed. Home Equity has changed the structure for
securitizations occurring subsequent to March 31, 2000, such that
securitizations after that date are being accounted for as borrowings. Although
the change from accounting for the securitizations as sales to borrowings will
have no effect on the profit recognized over the life of each mortgage loan, the
change does affect the timing of profit recognition. The approximate impact of
this change for the first two quarters of fiscal 2001 was to reduce Home
Equity's pre-tax earnings by $10.7 million and $22.2 million for the three and
six months ended September 30, 2000, respectively, from the amount it would have
reported if the securitizations had been structured as sales.
CONSTRUCTION PRODUCTS
Construction Products operations involve the manufacture, production,
distribution, and sale of cement, gypsum wallboard, and aggregates and readymix
concrete. The following tables set forth financial information relating to the
Construction Products operations.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 99.8 $ 117.8
Interest Income 2.0 0.7
Cost of Sales (67.7) (65.7)
Selling, General & Administrative Expenses (1.6) (0.9)
---------- ----------
Operating Earnings 32.5 51.9
Minority Interest (11.5) (19.8)
---------- ----------
Net Operating Earnings to Centex $ 21.0 $ 32.1
========== ==========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 200.1 $ 215.0
Interest Income 3.7 1.2
Cost of Sales (131.9) (126.7)
Selling, General & Administrative Expenses (3.3) (2.3)
---------- ----------
Operating Earnings 68.6 87.2
Minority Interest (24.5) (33.7)
---------- ----------
Net Operating Earnings to Centex $ 44.1 $ 53.5
========== ==========
</TABLE>
-14-
<PAGE> 18
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; however, these amounts are
eliminated in consolidation.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 330.4 $ 288.8
Construction Contract Costs (310.0) (272.4)
Selling, General & Administrative Expenses (13.8) (11.3)
---------- ----------
Operating Income, as reported 6.6 5.1
Intercompany Interest Income* 2.1 2.1
---------- ----------
Total Economic Return $ 8.7 $ 7.2
========== ==========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Revenues $ 629.1 $ 640.7
Construction Contract Costs (589.1) (606.0)
Selling, General & Administrative Expenses (26.9) (24.0)
---------- ----------
Operating Income, as reported 13.1 10.7
Intercompany Interest Income* 4.4 4.3
---------- ----------
Total Economic Return $ 17.5 $ 15.0
========== ==========
</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.
-15-
<PAGE> 19
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. The following tables summarize financial
information relating to the Corporate and Other, net segments.
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Corporate General and Administrative Expenses $ (8.8) $ (8.1)
========== ==========
Operating Earnings (Loss)-Other, net $ 1.6 $ (1.1)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
(Dollars in millions)
<S> <C> <C>
Corporate General and Administrative Expenses $ (17.5) $ (15.3)
========== ==========
Operating Earnings (Loss)-Other, net $ 1.9 $ (2.9)
========== ==========
</TABLE>
(J) The computation of diluted earnings per share excludes anti-dilutive options
to purchase 4,245,000 common shares at an average price of $37.04, and 5,213,000
common shares at an average price of $34.64 for the three months and six months
ended September 30, 2000, respectively. All anti-dilutive options have
expiration dates ranging from September 2007 to September 2010.
(K) Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued in June 1998.
This statement addresses the accounting for derivative instruments, including
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and hedging activities as well as the disclosure of these
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the consolidated balance sheet and measure those
instruments at fair value. In June 1999, SFAS No. 137 was issued which delays
the implementation of SFAS No. 133 for the Company until April 2001. In June
2000, SFAS No. 138 was issued which amends SFAS No. 133.
SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," was issued in September 2000. This
statement replaces SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS 140 revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral and requires certain disclosures, but carries most of SFAS
125's provisions without reconsideration. This statement will become effective
for the Company in April 2001. The Company is in the process of assessing the
impact SFAS Nos. 133, 138, and 140 will have on its financial statements.
-16-
<PAGE> 20
(L) During November 2000 Construction Products purchased certain strategic
assets from Republic Group LLC (formerly Republic Group Incorporated). The
purchase price was approximately $392 million, including the assumption of $100
million of subordinated debt. Funding came from cash on hand and borrowings
under Construction Products' $325 million senior credit facility entered into
during November 2000.
The principal strategic assets acquired were: the 1.1 billion square
foot gypsum wallboard plant located in Duke, Oklahoma; a short line railroad and
railcars linking the Duke plant to adjacent railroads; the recently completed
220,000 ton-per-year lightweight paper mill in Lawton, Oklahoma; the 50,000
ton-per-year Commerce City (Denver), Colorado paper mill; and three recycled
paper fiber collection sites. The gypsum wallboard operations will be operated
by Construction Products' American Gypsum Company located in Albuquerque, New
Mexico. The paper operations will be located in Lawton, Oklahoma, and will
focus primarily on the gypsum wallboard paper business.
(M) Certain prior year balances have been reclassified to be consistent with the
September 30, 2000 presentation.
-17-
<PAGE> 21
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,
2000 were $1.6 billion, a 12% increase over $1.4 billion for the same period
last year. Earnings before income taxes were $95.9 million, 11% lower than
$107.3 million last year. Net earnings for the three months ended September 30,
2000 were $59.1 million, a 10% decrease from net earnings of $65.5 million for
the same period last year.
For the six months ended September 30, 2000, consolidated revenues
totaled $3.0 billion, 8% higher than $2.8 billion for the same period last year.
Earnings before income taxes were $174.0 million, 13% lower than $200.4 million
for the same period last year. Net earnings were $107.3 million for the six
months ended September 30, 2000, a 13% decrease from net earnings of $123.9
million for the same period last year.
HOME BUILDING
CONVENTIONAL HOMES
The following summarizes Conventional Homes' results for the three and
six months ended September 30, 2000 compared to the three and six months ended
September 30, 1999 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
------------------------------------------------------------
For the Three Months Ended September 30,
------------------------------------------------------------
2000 1999
--------------------------- --------------------------
Conventional Homes Revenues $ 1,027.0 100.0% $ 843.7 100.0%
Cost of Sales (789.3) (76.9%) (651.1) (77.2%)
Selling, General & Administrative Expenses (148.1) (14.4%) (122.4) (14.5%)
---------- ---------- ---------- ----------
Operating Earnings $ 89.6 8.7% $ 70.2 8.3%
========== ========== ========== ==========
Units Closed 4,901 4,425
% Change 10.8% 27.6%
Unit Sales Price $ 203,900 $ 187,700
% Change 8.6% 1.7%
Operating Earnings Per Unit $ 18,274 $ 15,684
% Change 15.2% 5.4%
<CAPTION>
------------------------------------------------------------
For the Six Months Ended September 30,
------------------------------------------------------------
2000 1999
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Conventional Homes Revenues $ 1,914.0 100.0% $ 1,598.3 100.0%
Cost of Sales (1,468.8) (76.7%) (1,232.4) (77.1%)
Selling, General & Administrative Expenses (283.1) (14.8%) (236.6) (14.8%)
---------- ---------- ---------- ----------
Operating Earnings $ 162.1 8.5% $ 129.3 8.1%
========== ========== ========== ==========
Units Closed 9,309 8,359
% Change 11.4% 29.6%
Unit Sales Price $ 200,308 $ 188,127
% Change 6.5% 2.0%
Operating Earnings Per Unit $ 17,414 $ 15,474
% Change 12.5% 7.5%
</TABLE>
-18-
<PAGE> 22
Conventional Homes' revenues for the three months and six months ended
September 30, 2000 increased by $183.3 million and $315.7 million, respectively
from revenues for the corresponding periods last year. These improvements
resulted from an increased number of existing operating neighborhoods along with
a higher average unit selling price compared to the fiscal 2000 per unit sales
price.
Operating earnings for the three and six months ended September 30,
2000 were 8.7% and 8.5% as a percentage of revenue and approximately $18,274 and
$17,414 on a per unit basis compared to operating earnings of 8.3% and 8.1% of
revenue and approximately $15,864 and $15,474 on a per unit basis for the same
periods last year.
Home sales (orders) totaled 5,338 units during the three months ended
September 30, 2000, compared to 4,328 units during the same quarter a year ago,
representing a 23% increase. Home sales (orders) totaled 10,875 units during the
six months ended September 30, 2000 compared to last year's 9,102 units for the
same period. The backlog of homes sold but not closed at September 30, 2000 was
9,145 units, 17% more than the 7,819 units for the same period a year ago.
MANUFACTURED HOMES
The following summarizes Manufactured Homes' results for the three and
six months ended September 30, 2000 compared to the three and six months ended
September 30, 1999 (dollars in millions):
<TABLE>
<CAPTION>
-------------------------------------------------------------
For the Three Months Ended September 30,
-------------------------------------------------------------
2000 1999
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Manufactured Homes Revenues (Construction) $ 21.2 100.0% $ 32.9 100.0%
Cost of Sales (18.1) (85.5%) (24.5) (74.5%)
Selling, General & Administrative Expenses (2.5) (11.6%) (3.7) (11.2%)
---------- ---------- ---------- ----------
0.6 2.9% 4.7 14.3%
---------- ========== ---------- ==========
Retail Sales Revenues 11.4 100.0% 18.0 100.0%
Cost of Sales (9.1) (80.0%) (14.4) (79.8%)
Selling, General & Administrative Expenses (2.9) (25.6%) (3.5) (19.6%)
---------- ---------- ---------- ----------
(0.6) (5.6%) 0.1 0.6%
---------- ========== ---------- ==========
Construction and Retail Earnings 0.0 4.8
Subdivision Development Activities (0.2) --
Goodwill Amortization (0.9) (0.8)
Minority Interest -- (0.8)
---------- ----------
Group Operating (Loss) Earnings $ (1.1) $ 3.2
========== ==========
Units Sold 1,129 1,438
</TABLE>
-19-
<PAGE> 23
<TABLE>
<CAPTION>
-------------------------------------------------------------
For the Six Months Ended September 30,
-------------------------------------------------------------
2000 1999
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Manufactured Homes Revenues (Construction) $ 45.1 100.0% $ 67.7 100.0%
Cost of Sales (37.2) (82.4%) (52.8) (77.9%)
Selling, General & Administrative Expenses (5.9) (13.1%) (7.4) (10.9%)
---------- ---------- ---------- ----------
2.0 4.5% 7.5 11.2%
---------- ========== ---------- ==========
Retail Sales Revenues 24.0 100.0% 31.1 100.0%
Cost of Sales (19.4) (80.9%) (24.9) (79.9%)
Selling, General & Administrative Expenses (5.9) (24.6%) (6.9) (22.3%)
---------- ---------- ---------- ----------
(1.3) (5.5%) (0.7) (2.2%)
---------- ========== ---------- ==========
Construction and Retail Earnings 0.7 6.8
Subdivision Development Activities (0.2) --
Goodwill Amortization (1.7) (1.7)
Minority Interest -- (1.0)
---------- ----------
Group Operating (Loss) Earnings $ (1.2) $ 4.1
========== ==========
Units Sold 2,355 3,222
</TABLE>
Manufactured Homes currently operates four manufacturing plants: three
in the Phoenix, Arizona area, and one in central Texas, and also operates 23
retail locations. As a consequence of increased interest rates, the reduced
availability of financing, and corresponding reduced consumer demand,
Manufactured Housing's construction sales and retail sales for the three and six
months ended September 30, 2000 declined from the corresponding fiscal 2000
amounts. In response, management has idled its New Mexico plant and slowed
production in its other plants until the return of more favorable market
conditions.
INVESTMENT REAL ESTATE
The following summarizes Investment Real Estate's results for the three
and six months ended September 30, 2000 compared to the three and six months
ended September 30, 1999 (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 3.1 $ 7.6
========== ==========
Operating Earnings $ 7.1 $ 9.0
========== ==========
</TABLE>
<TABLE>
<CAPTION>
-------------------------
For the Six Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 6.6 $ 11.4
========== ==========
Operating Earnings $ 13.2 $ 15.2
========== ==========
</TABLE>
-20-
<PAGE> 24
For the three and six months ended September 30, 2000, Centex's
Investment Real Estate operations, through which all investment property
transactions are reported, had operating earnings of $7.1 and $13.2 million,
respectively, 22% and 13% lower than $9.0 and $15.2 million for the same periods
a year ago. 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 $2.9 million and $5.9
million for the three months ended September 30, 2000 and 1999, and $4.7 million
and $8.9 million for the six months ended September 30, 2000 and 1999,
respectively. As of September 30, 2000, the Investment Real Estate Group has
approximately $34.9 million of nominally valued assets which are expected to be
sold over the next three years.
Negative goodwill amortization was $4 million in the three month
periods ended September 30, 2000 and 1999, and $8 million in the six month
periods ended September 30, 2000 and 1999.
FINANCIAL SERVICES
The following summarizes Financial Services' results for the three and
six months ended September 30, 2000 compared to the three and six months ended
September 30, 1999 (dollars in millions):
<TABLE>
<CAPTION>
-------------------------
For the Three Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 106.5 $ 120.5
========== ==========
Operating Earnings $ 2.2 $ 12.5
========== ==========
Origination Volume $ 2,476 $ 2,402
========== ==========
Number of Loans Originated
CTX Mortgage Company ("CTX Mortgage")
Centex-built Homes ("Builder") 2,839 2,571
Non-Centex-built Homes ("Retail") 11,263 12,845
---------- ----------
14,102 15,416
Centex Home Equity Corporation ("Home Equity") 7,317 5,031
Centex Finance Company (closed during fiscal 2000) -- 304
---------- ----------
21,419 20,751
========== ==========
</TABLE>
-21-
<PAGE> 25
<TABLE>
<CAPTION>
-------------------------
For the Six Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 202.4 $ 237.4
========== ==========
Operating Earnings $ 2.3 $ 33.2
========== ==========
Origination Volume $ 4,855 $ 5,170
========== ==========
Number of Loans Originated
CTX Mortgage
Builder 5,305 5,040
Retail 22,962 28,470
---------- ----------
28,267 33,510
Home Equity 13,746 9,870
Centex Finance Company (closed during fiscal 2000) -- 472
---------- ----------
42,013 43,852
========== ==========
</TABLE>
Financial Services' operating earnings for the three months ended
September 30, 2000 were $2.2 million compared to $12.5 million for the three
months ended September 30, 1999. For the six months ended September 30, 2000,
operating earnings were $2.3 million compared to $33.2 million for the same
period last year.
Financial Services' revenues for the second quarter of fiscal 2001 were
$106.5 million versus $120.5 million for the prior year's second quarter, and
$202.4 million for the first six months of fiscal 2001 compared to $237.4
million for the same period last year. Gains on sales of mortgage loans
receivable, a component of Financial Services' revenues, decreased to $47.4
million for the quarter ended September 30, 2000 from $76.5 million for the
comparable quarter of the prior year, and to $88.0 million for the six months
ended September 30, 2000 as compared to $142.9 million for the first six months
of fiscal 2000. This decline is primarily due to the change, discussed below, in
the method of accounting for securitizations completed by Home Equity.
CTX Mortgage's operating earnings totaled $5.6 million for the three
months ended September 30, 2000 and $10.8 million for the six months ended
September 30, 2000, 27% and 56%, respectively, less than earnings of $7.6
million and $24.8 million, respectively for the comparable periods of fiscal
year 2000. The decline in CTX Mortgage's operating earnings is primarily due to
an increase in interest rates compared to the first half of fiscal 2000, which
has resulted in a decrease in refinancing activity, a more competitive pricing
environment, and a change in product mix to a greater volume of adjustable rate
loans, which have lower profit margins. Originations for the six months ended
September 30, 2000 totaled 28,267 compared to 33,510 originations in the first
half of fiscal year 2000. The per-loan profit for the six months ended September
30, 2000 was $383, 48% lower than $739 for the same six months of last fiscal
year. CTX Mortgage's total mortgage applications for the three months ended
September 30, 2000 increased 10% to 15,368 from 14,019 applications for the same
period last year. For the six months ended September 30, 2000, CTX Mortgage's
applications decreased to 31,196 from 33,013 for the same period last year.
-22-
<PAGE> 26
Home Equity reported operating losses of $3.4 million and $8.5 million,
respectively, for the quarter and six months ended September 30, 2000, compared
to operating earnings of $6.0 million and $10.5 million, respectively, for the
comparable periods last fiscal year. As discussed below, this decline primarily
resulted from accounting for the $400 million in securitizations completed
during the quarter ended September 30, 2000 and $750 million in securitizations
year-to-date in fiscal 2001 as borrowings rather than as sales.
Home Equity's originations for the three months ended September 30,
2000 were 7,317, a 45% increase over 5,031 originations for the same period last
year. Originations for the six months ended September 30, 2000 were 13,746, a
39% increase over 9,870 originations for the same period in the prior year. Loan
volume for the three months ended September 30, 2000 was $457 million, a 43%
increase over the same period a year ago. Loan volume for the six months ended
September 30, 2000 was $853 million, a 34% increase over the same period in the
prior year. Loan volume for the three and six months ended September 30, 2000
was favorably impacted by the opening of new operating locations during the
later quarters of fiscal 2000 plus generally increased activity. Home Equity's
sub-prime applications totaled 37,095 for the quarter ended September 30, 2000,
an increase of 29% over the 28,781 applications for the same period last year.
Home Equity's sub-prime applications totaled 74,748 for the six months ended
September 30, 2000, an increase of 30% over the 57,444 applications for the same
period last year.
During the quarter ended September 30, 2000, Home Equity completed $400
million in loan securitizations, compared to $415 million of loan
securitizations during the second quarter of fiscal 2000. For the six months
ended September 30, 2000, Home Equity completed securitizations totaling $750
million, compared to $700 million in securitizations for the same period last
year. Home Equity retains the servicing rights associated with these securitized
loans and is the long-term servicer of these loans. Service fee income related
to this long-term servicing was $5.9 million in the three months ended September
30, 2000, a 74% increase from the $3.4 million in the same period last year. For
the six months ended September 30, 2000, service fee revenue was $11.0 million
compared to $6.0 million for the same period a year ago.
Home Equity's securitizations entered into prior to March 31, 2000 had
legal and economic structures that caused them to be accounted for as sales, and
the resulting gains on such sales were reported as revenues during the month in
which the securitization closed. Home Equity has changed the structure for
securitizations occurring subsequent to March 31, 2000, such that all
securitizations during fiscal 2001 and subsequent years are being accounted for
as borrowings. Although the change from accounting for the securitizations as
sales to borrowings will have no effect on the profit recognized over the life
of each mortgage loan, the change does affect the timing of profit recognition.
The approximate impact of this change was to reduce Home Equity's pre-tax
earnings by $10.7 million and $22.2 million, respectively, for the three and six
months ended September 30, 2000, from the amount it would have reported if the
securitizations had been structured as sales.
In the normal course of its activities, Financial Services carries
inventories of loans pending sale or securitization and earns a positive spread
between the interest income earned on those loans and its cost of financing
those loans. Interest income decreased 5% for the quarter ended September 30,
2000 to $25.9 million from $27.4 million for the same quarter of last fiscal
year. Interest income decreased 18% for the six months ended September 30, 2000
to $42 million from $51 million for the same period last year. Interest expense
for the quarter ended September 30, 2000 was $20.9 million, a 7% increase from
$19.5 million for the second quarter of last fiscal year. Interest expense for
the six months ended September 30, 2000 was $33
-23-
<PAGE> 27
million, an 8% decrease from $36 million for the same period last year. The
decrease in net interest income was due to the reduction in the inventory of
loans sold to Centex Home Mortgage, LLC, as discussed below, and the compression
of spread between mortgage rates and short-term interest rates.
Until the third quarter of fiscal 2000, substantially all of the
mortgage loans generated by CTX Mortgage were sold forward upon closing and
subsequently delivered to third-party purchasers within approximately 60 days
thereafter. In mid-December 1999, CTX Mortgage began to sell the majority of its
mortgage loans to Centex Home Mortgage, LLC ("CHM"), a non-affiliated limited
liability company. This arrangement is discussed in more detail in the Financial
Condition and Liquidity section below. Substantially all of the mortgage loans
produced by Home Equity are securitized, generally on a quarterly basis.
Financial Services' other sources of income include, among other
things, loan origination fees, servicing fee income, title policy fees and
insurance commissions, mortgage loan broker fees, and fees for mortgage loan
quality control and processing services.
CONSTRUCTION PRODUCTS
The following summarizes Construction Products' results for the three
and six months ended September 30, 2000 compared to the three and six months
ended September 30, 1999 (dollars in millions):
<TABLE>
<CAPTION>
--------------------------
For the Three Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 99.8 $ 117.8
Interest Income 2.0 0.7
Cost of Sales (67.7) (65.3)
Selling, General and Administrative Expenses (1.2) (0.9)
Goodwill Amortization (0.4) (0.4)
---------- ----------
Operating Earnings 32.5 51.9
Minority Interest (11.5) (19.8)
---------- ----------
Net Operating Earnings to Centex $ 21.0 $ 32.1
========== ==========
</TABLE>
-24-
<PAGE> 28
<TABLE>
<CAPTION>
--------------------------
For the Six Months Ended
September 30,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 200.1 $ 215.0
Interest Income 3.7 1.2
Cost of Sales (131.9) (126.0)
Selling, General & Administrative Expenses (2.4) (2.3)
Goodwill Amortization (0.9) (0.7)
---------- ----------
Operating Earnings 68.6 87.2
Minority Interest (24.5) (33.7)
---------- ----------
Net Operating Earnings to Centex $ 44.1 $ 53.5
========== ==========
</TABLE>
Construction Products' revenues were $99.8 million for the three months
ended September 30, 2000, a 15% decrease from the same period last year. For the
three months ended September 30, 2000, Construction Products' operating
earnings, net of minority interest, were $21.0 million, a 35% decrease from the
$32.1 million reported for the same period last year. Revenues from Construction
Products for the six months ended September 30, 2000 were $200.1 million, 7%
lower than the same period last year. For the six months ended September 30,
2000, Construction Products' operating earnings, net of minority interest, were
$44.1 million, 18% lower than the results for the same period a year ago. The
decrease in revenues and operating earnings for the three and six month periods
ending September 30, 2000 are primarily the result of lower pricing,
particularly in Gypsum Wallboard.
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services' results
for the three and six months ended September 30, 2000 compared to the three and
six months ended September 30, 1999 (dollars in millions):
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
September 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 330.4 $ 288.8
============ ============
Operating Earnings $ 6.6 $ 5.1
============ ============
New Contracts Received $ 415.8 $ 260.0
============ ============
Backlog of Uncompleted Contracts $ 1,472 $ 1,123
============ ============
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
For the Six Months Ended
September 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 629.1 $ 640.7
============ ============
Operating Earnings $ 13.1 $ 10.7
============ ============
New Contracts Received $ 719.1 $ 827.0
============ ============
Backlog of Uncompleted Contracts $ 1,472 $ 1,123
============ ============
</TABLE>
-25-
<PAGE> 29
Contracting and Construction Services' revenues for the three and six
months ended September 30, 2000 were $330.4 million and $629.1 million,
respectively. Operating earnings for the group improved 28% to $6.6 million for
the three months and 22% to $13.1 million for the six months ended September 30,
2000 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
from lower-margin public bid work.
The Contracting and Construction Services operations provided a
positive average net cash flow in excess of Centex's investment in the group of
$89.6 million for the three months ended September 30, 2000 and $97.8 million
for the same period last year. For the six months ended September 30, 2000, the
positive average net cash flow in excess of Centex's investment in the group was
$93.1 million, compared to $106.9 million for the same period last year.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 2000, the Company had cash and cash equivalents of
$202.3 million, including $17.0 of restricted cash and $146.9 million belonging
to the Company's 65.3%-owned Construction Products subsidiary. The net cash used
in or provided by the operating, investing, and financing activities for the six
months ended September 30, 2000 and 1999 is summarized below (dollars in
thousands):
<TABLE>
<CAPTION>
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net Cash provided by (used in)
Traditional Operations*
Operating Activities $ (115,553) $ (190,244)
Investing Activities (53,421) (128,468)
Financing Activities 217,563 348,846
------------ ------------
48,589 30,134
------------ ------------
Financial Services
Operating Activities $ (852,190) $ 194,186
Investing Activities (3,666) (7,132)
Financing Activities 869,299 (204,984)
------------ ------------
13,443 (17,930)
------------ ------------
Effect of Exchange Rates 685 (32)
------------ ------------
Net Increase in Cash $ 62,717 $ 12,172
============ ============
</TABLE>
* Traditional operations is the combining of all subsidiaries other than
those included in the Financial Services business segment.
For the first half of fiscal 2001, cash was used in the operations to
finance increases in residential mortgage loans and housing inventories. The
increase in housing inventories relates to the increased level of sales and
resulting units under construction during the year and to the acquisition of
expansion land. The funds provided by financing activities included new debt
used to fund both residential mortgage loans and the increased home building
activity.
-26-
<PAGE> 30
Short-term debt as of September 30, 2000 was $0.7 billion, which
included $0.5 billion of debt applicable to the Financial Services operation
(see below). In June, the Company issued $200 million in Senior Notes, maturing
in 2006. The proceeds were used to repay short-term debt and for general
corporate purposes. Excluding Financial Services, the Company's short-term
borrowings are generally accomplished at prevailing market interest rates from
the Company's commercial paper programs and from uncommitted bank facilities. In
August, the Company entered into a $600 million committed multi-bank revolving
credit facility which serves as a backup for commercial paper borrowings. This
new facility expires in 2005.
The Financial Services segment obtains most of its own short-term
liquidity needs through separate facilities which require only limited support
from Centex Corporation. During the third quarter of fiscal 2000, CTX Mortgage
began selling to CHM substantially all of the conforming, Jumbo A, and GNMA
eligible mortgages originated by CTX Mortgage under a revolving sales agreement.
CHM, an unaffiliated special purpose entity, acquires and then resells mortgages
originated by CTX Mortgage into secondary markets. Under the sales agreement
between CTX Mortgage and CHM, which has a five year term with certain renewal
options, CTX Mortgage is not required to sell its mortgage loans to CHM;
however, CHM has committed to purchase all eligible loans offered by CTX
Mortgage. This arrangement gives CTX Mortgage daily access, on a revolving
basis, to CHM's $1.5 billion of capacity. CTX Mortgage also maintains $150
million of secured committed mortgage warehouse facilities and $150 million of
uncommitted credit facilities to finance mortgages not sold to CHM.
Similarly, Home Equity has $325 million of committed and $150 million
of uncommitted secured mortgage warehouse facilities to finance sub-prime
mortgages held until securitization.
In addition, Financial Services has $125 million of uncommitted
unsecured credit facilities under which it can borrow and, in turn, allocate
such borrowed funds to its CTX Mortgage, Home Equity, and other subsidiaries. At
September 30, 2000, Financial Services had borrowed $125 million under these
facilities; $65 million of such borrowings were allocated to CTX Mortgage and
$60 million to Home Equity. All borrowings under these unsecured facilities are
guaranteed by Centex Corporation.
The Company is exposed to market risks related to fluctuations in
interest rates on mortgage loans receivable, residual interest in mortgage
securitizations, and in debt. The Company utilizes forward sale commitments to
mitigate the risk associated with the majority of CTX Mortgage's mortgage loan
portfolio and forward starting interest rate swaps for most of the unsecuritized
mortgage portfolio of Home Equity. The Company does not utilize 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, 2000. At September 30, 2000, market risk
associated with the swaps mentioned above is considered minimal.
-27-
<PAGE> 31
Long-term debt outstanding as of September 30, 2000 was as follows (dollars in
thousands):
<TABLE>
<S> <C>
Centex Corporation:
Subordinated Debentures, 7.375%, due in 2006 $ 99,772
Subordinated Debentures, 8.75%, due in 2007 99,547
Medium-Term Note Programs, 7.165% to 7.95%, due through 2004 461,987
Senior Note Programs, 6.4% to 9.75%, due through 2006 214,961
Other Indebtedness, weighted-average 7.6%, due through 2027 33,092
------------
909,359
Financial Services:
Home Equity Loans Asset-backed Certificates, 6.60%
to 8.48%, due through 2031 340,948
Home Equity Loans Asset-backed Certificates, 6.60%
to 7.99%, due through 2030 400,000
------------
Centex Corporation and Subsidiaries $ 1,650,307
============
</TABLE>
Maturities of long-term debt (in thousands) are: 2001, $87,958; 2002,
$596,070; 2003, $187,299; 2004, $99,075; 2005, $64,226; and $615,679 thereafter.
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
RECENT DEVELOPMENTS
During November 2000 Construction Products purchased certain strategic
assets from Republic Group LLC (formerly Republic Group Incorporated). The
purchase price was approximately $392 million, including the assumption of $100
million of subordinated debt. Funding came from cash on hand and borrowings
under Construction Products' $325 million senior credit facility entered into
during November 2000.
The principal strategic assets acquired were: the 1.1 billion square
foot gypsum wallboard plant located in Duke, Oklahoma; a short line railroad and
railcars linking the Duke plant to adjacent railroads; the recently completed
220,000 ton-per-year lightweight paper mill in Lawton, Oklahoma; a 50,000
ton-per-year Commerce City (Denver), Colorado paper mill; and three recycled
paper fiber collection sites. The gypsum wallboard operations will be operated
by Construction Products' American Gypsum Company located in Albuquerque, New
Mexico. The paper operations will be located in Lawton, Oklahoma, and will focus
primarily on the gypsum wallboard paper business.
In October 2000, Centex Homes signed a letter of intent to acquire the
home building assets of The Selective Group, based in Farmington Hills,
Michigan. The closing is scheduled for January 2001, subject to customary
conditions.
-28-
<PAGE> 32
OUTLOOK
The Company expects home sales to remain strong and closings and
margins to continue to increase. Fiscal 2001 Home Building results should exceed
fiscal 2000's record levels, and Centex also expects all-time high results from
its Contracting and Construction Services operations. However, operating
earnings from Financial Services will continue to be negatively impacted by the
low level in refinancings at CTX Mortgage and CHEC's change in accounting for
loan securitizations. Declining Gypsum Wallboard prices are impacting
Construction Products' results.
--------------------------------------------------------------------------------
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 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 its direct debt obligations, on mortgage loans receivable,
residual interest in mortgage securitizations, and securitizations classified as
debt. The Company utilizes derivative instruments, including interest rate
swaps, in conjunction with its overall strategy to manage the debt outstanding
that is subject to changes in interest rates. The Company utilizes forward sale
commitments to mitigate the risk associated with the majority of its mortgage
loan portfolio. Other than the forward commitments and interest rate swaps
discussed earlier, the Company does not utilize 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 from
March 31, 2000. For further 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, 2000.
-29-
<PAGE> 33
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 27, 2000, Centex held its Annual Meeting of Stockholders. At
the Annual Meeting, Dan W. Cook, III, Laurence E. Hirsch, and Charles H. Pistor,
Jr. were elected as directors to serve for a three-year term until the 2003
Annual Meeting. Voting results for these nominees are summarized as follows:
<TABLE>
<CAPTION>
Number of Shares
-------------------------------
For Withheld
------------- -----------
<S> <C> <C>
Dan W. Cook, III 48,072,329 172,394
Laurence E. Hirsch 48,069,733 174,990
Charles H. Pistor, Jr. 48,069,204 175,519
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
Exhibit 10.1 Centex Corporation Amended and Restated 1987 Stock
Option Plan (Filed herewith)
Exhibit 10.2 Third Amended and Restated 1998 Centex Corporation
Employee Non-Qualified Stock Option Plan (Filed
herewith)
Exhibit 27.1 Financial Data Schedule
(2) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter
ended September 30, 2000.
-30-
<PAGE> 34
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 13, 2000 /s/ Leldon E. Echols
------------------------------
Leldon E. Echols
Executive Vice President and
Chief Financial Officer
(principal financial officer)
November 13, 2000 /s/ John S. Worth, Sr.
------------------------------
John S. Worth, Sr.
Vice President and Controller
(chief accounting officer)
-31-
<PAGE> 35
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. The Companies suggest 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 combining 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.
-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 Three Months Ended September 30,
---------------------------------------------------------------------------------------
2000 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>
REVENUES $ 70,641 $ 70,641 $ -- $ 91,130 $ 91,130 $ 154
COSTS AND EXPENSES 71,416 71,298 118 90,763 90,261 656
-------- ------------ -------------- -------- ------------ --------------
EARNINGS (LOSS) BEFORE INCOME TAXES (775) (657) (118) 367 869 (502)
INCOME TAXES (589) (589) -- 311 311 --
-------- ------------ -------------- -------- ------------ --------------
NET EARNINGS (LOSS) $ (186) $ (68) $ (118) $ 56 $ 558 $ (502)
======== ============ ============== ======== ============ ==============
NET EARNINGS ALLOCABLE TO LIMITED PARTNER $ (68) $ 558
============ ============
EARNINGS (LOSS) PER UNIT/SHARE $ (0.96) $ 118 $ 9.09 $ (502)
============ ============== ============ ==============
WEIGHTED-AVERAGE UNITS/SHARES OUTSTANDING 70,669 1,000 61,399 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 STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit/share data)
(unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
For the Six Months Ended September 30,
--------------------------------------------------------------------------------------
2000 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>
REVENUES $141,758 $ 141,757 $ 1 $169,799 $ 169,799 $ 304
COSTS AND EXPENSES 141,486 141,263 223 169,151 168,076 1,379
-------- ------------ -------------- -------- ------------ --------------
EARNINGS (LOSS) BEFORE INCOME TAXES 272 494 (222) 648 1,723 (1,075)
INCOME TAXES 57 57 -- 572 572 --
-------- ------------ -------------- -------- ------------ --------------
NET EARNINGS (LOSS) $ 215 $ 437 $ (222) $ 76 $ 1,151 $ (1,075)
======== ============ ============== ======== ============ ==============
NET EARNINGS ALLOCABLE TO LIMITED PARTNER $ 437 $ 1,151
============ ============
EARNINGS (LOSS) PER UNIT/SHARE $ 6.33 $ (222) $ 19.08 $ (1,075)
============ ============== ============ ==============
WEIGHTED-AVERAGE UNITS/SHARES OUTSTANDING 69,022 1,000 60,340 1,000
</TABLE>
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 BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
SEPTEMBER 30, 2000* March 31, 2000**
---------------------------------------- ----------------------------------------
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 $ 5,968 $ 5,966 $ 2 $ 58,314 $ 58,298 $ 16
Accounts Receivable 4,232 9,722 -- 13,077 17,948 6
Notes Receivable 2,958 2,958 -- 3,131 3,131 --
Inventories 374,706 373,076 1,630 329,941 328,928 1,013
Investments -
Commercial Properties, net 65,786 65,786 -- 61,420 61,420 --
Real Estate Joint Ventures 2,383 2,383 -- 2,595 2,595 --
Affiliate -- -- 1,716 -- -- 1,716
Property and Equipment, net 3,252 3,174 78 3,578 3,481 97
Other Assets -
Goodwill, net 29,326 29,326 -- 30,727 30,727 --
Deferred Charges and Other 15,920 15,745 175 8,835 8,660 175
-------- ------------ -------------- -------- ------------ --------------
$504,531 $ 508,136 $ 3,601 $511,618 $ 515,188 $ 3,023
======== ============ ============== ======== ============ ==============
LIABILITIES, STOCKHOLDERS' EQUITY
AND PARTNERS' CAPITAL
Accounts Payable and Accrued Liabilities $118,720 $ 119,002 $ 5,782 $118,693 $ 119,162 $ 4,982
Notes Payable 313,551 313,551 -- 323,740 323,740 --
-------- ------------ -------------- -------- ------------ --------------
Total Liabilities 432,271 432,553 5,782 442,433 442,902 4,982
-------- ------------ -------------- -------- ------------ --------------
Stockholders' Equity and Partners' Capital 72,260 75,583 (2,181) 69,185 72,286 (1,959)
-------- ------------ -------------- -------- ------------ --------------
$504,531 $ 508,136 $ 3,601 $511,618 $ 515,188 $ 3,023
======== ============ ============== ======== ============ ==============
</TABLE>
* Unaudited.
** Condensed from audited financial statements.
See notes to condensed combining financial statements.
-35-
<PAGE> 39
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,
----------------------------------------------------------------------------------------
2000 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>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $ 215 $ 437 $ (222) $ 76 $ 1,151 $ (1,075)
Adjustments:
Depreciation and Amortization 2,433 2,413 20 1,748 1,726 22
Equity in Earnings from Joint Ventures (168) (168) -- -- -- (7)
Decrease in Receivables 6,483 6,477 6 479 475 4
Decrease in Notes Receivable 117 117 -- 14 14 --
(Increase) Decrease in Inventories (63,358) (62,741) (617) 8,186 8,407 (221)
Increase in Commercial Properties (5,250) (5,250) -- -- -- --
(Increase) Decrease in Other Assets (10,251) (10,251) -- (3,730) (3,851) 121
Increase in Payables and Accruals 10,056 9,256 800 7,232 5,518 1,733
-------- ------------ -------------- -------- ------------ --------------
(59,723) (59,710) (13) 14,005 13,440 577
-------- ------------ -------------- -------- ------------ --------------
CASH FLOWS - INVESTING ACTIVITIES
Decrease (Increase) in Advances to
Joint Ventures and Investment in
Affiliate 380 380 -- (603) (603) (12)
(Increase) Decrease in Property and
Equipment, net (180) (179) (1) (32) (33) 1
-------- ------------ -------------- -------- ------------ --------------
200 201 (1) (635) (636) (11)
-------- ------------ -------------- -------- ------------ --------------
CASH FLOWS - FINANCING ACTIVITIES
Increase (Decrease) in Notes Payable 9,154 9,154 -- 3,685 4,267 (582)
-------- ------------ -------------- -------- ------------ --------------
9,154 9,154 -- 3,685 4,267 (582)
-------- ------------ -------------- -------- ------------ --------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (1,977) (1,977) -- 356 356 --
-------- ------------ -------------- -------- ------------ --------------
NET (DECREASE) INCREASE IN CASH (52,346) (52,332) (14) 17,411 17,427 (16)
CASH AT BEGINNING OF PERIOD 58,314 58,298 16 364 331 33
-------- ------------ -------------- -------- ------------ --------------
CASH AT END OF PERIOD $ 5,968 $ 5,966 $ 2 $ 17,775 $ 17,758 $ 17
======== ============ ============== ======== ============ ==============
SUPPLEMENTAL DISCLOSURES:
Increase in Notes Payable
Related to an Acquisition $ -- $ -- -- $253,812 $ 253,812 --
Issuance of Class C Units in
Exchange for Assets $ 3,327 $ 3,327 -- $ 2,152 $ 2,152 --
</TABLE>
See notes to condensed combining financial statements.
-36-
<PAGE> 40
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINING FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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 certain
properties at their historical cost basis in exchange for 1,000 limited
partnership units ("Class A Units").
The Partnership is managed by its general partner, 3333 Development
Corporation ("Development"), which is in turn wholly-owned by 3333 Holding
Corporation ("Holding"). Holding is a separate public company whose stock trades
in tandem with Centex's stock. The common stock of Holding was distributed in
1987 (with warrants to purchase approximately 80% of the Class B limited
partnership units in the Partnership) as a dividend to the stockholders of
Centex. 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 stockholders of Centex elect the four-person Board of Directors of
Holding. Three of the Board members, representing the majority of the Board, are
independent outside directors who are also not directors of Centex. Thus,
through Holding, the stockholders of Centex control the general partner of the
Partnership. The general partner and independent board of Holding manage how the
Partnership conducts its activities, including the sales, development,
maintenance and zoning of properties. The general partner, acting on behalf of
the Partnership, 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 Corporation and subsidiaries included elsewhere in this Form 10-Q for
supplementary condensed combined financial statements for Centex Corporation 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 development, tax, accounting and other similar services for Holding.
This agreement was amended for fiscal 2001 to increase the monthly fee from
$30,000 per month to $86,000 per month to reimburse Centex for the estimated
cost of the expanded services it now provides to Holding.
-37-
<PAGE> 41
The Partnership sells lots to Centex Homes pursuant to certain purchase
and sale agreements. Revenues from these sales were zero for the three and six
months ended September 30, 2000, and $1.2 million and $4.3 million for the three
and six months ended September 30, 1999, respectively. Gains associated with the
sales for the three and six months ended September 30, 1999 were $65,000 and
$173,000, respectively.
(C) A summary of comprehensive income for the three and six months ended
September 30, 2000 is presented below (dollars in thousands):
<TABLE>
<CAPTION>
----------------------------------------------------------
For the Three Months Ended For the Six Months Ended
September 30, 2000 September 30, 2000
-------------------------- -------------------------
<S> <C> <C>
Net Earnings (Loss) $ (186) $ 215
Accumulated Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments (197) (467)
-------- --------
Comprehensive Income (Loss) $ (383) $ (252)
======== ========
</TABLE>
(D) A summary of changes in stockholders' equity and partners' capital is
presented below (dollars in thousands):
<TABLE>
<CAPTION>
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, 2000 $ 69,185 $ 500 $ 1,142 $ 70,644 $ 1 $ 800 $ (2,760)
Partnership Units Issued in
Exchange for Assets 3,327 -- -- 3,327 -- -- --
Net Earnings 215 -- -- 437 -- -- (222)
Accumulated Other
Comprehensive Income (Loss):
Foreign Currency
Translation Adjustments (467) -- -- (467) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT SEPTEMBER 30, 2000 $ 72,260 $ 500 $ 1,142 $ 73,941 $ 1 $ 800 $ (2,982)
========== ========== ========== ========== ========== ========== ==========
</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 six months ended September 30, 2000,
3,327 Class C Units were issued in exchange for assets with a fair market value
of $3.3 million to Centex Homes, the Partnership's sole limited partner.
-38-
<PAGE> 42
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 aggregated approximately $71 million as of September 30, 2000
and as of that date preference payments in arrears totaled $18 million. No
preference payments were made during fiscal 2000 or fiscal 2001 year to date.
(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 $225 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 to March 31, 2001,
Fairclough's operations will be carried out subject to certain guidelines
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 $ 270,450
Goodwill 34,904
Notes Issued and Liabilities Assumed (303,649)
------------
Cash Paid $ 1,705
============
</TABLE>
(F) The Companies operate in five principal business segments: International
Home Building, Domestic Home Building, Commercial Development, Multi-Family
Development, and Land Sales. All of the segments operate in the United States
except for International Home Building, which acquires and develops residential
properties and constructs single and multi-family housing units in the United
Kingdom. International Home Building currently operates in the United Kingdom.
-39-
<PAGE> 43
INTERNATIONAL HOME BUILDING
The following tables set forth financial information relating to the
International Home Building operations for the three and six months ended
September 30, 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 59,702 $ 67,564
Costs and Expenses (53,270) (58,720)
Selling, General & Administrative Expenses (5,524) (6,003)
Interest (1,760) (2,530)
------------ ------------
Operating (Loss) Earnings $ (852) $ 311
============ ============
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 123,874 $ 137,091
Costs and Expenses (108,591) (119,816)
Selling, General & Administrative Expenses (11,184) (11,168)
Interest (4,296) (5,535)
------------ ------------
Operating (Loss) Earnings $ (197) $ 572
============ ============
</TABLE>
DOMESTIC HOME BUILDING
The following tables set forth financial information relating to the
Domestic Home Building operations for the three and six months ended September
30, 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 8,253 $ 2,587
Cost of Sales (7,121) (2,212)
Selling, General & Administrative Expenses (551) (339)
------------ ------------
Operating Earnings $ 581 $ 36
============ ============
</TABLE>
-40-
<PAGE> 44
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 11,699 $ 5,990
Cost of Sales (10,141) (5,145)
Selling, General & Administrative Expenses (973) (719)
------------ ------------
Operating Earnings $ 585 $ 126
============ ============
</TABLE>
COMMERCIAL DEVELOPMENT
The following tables set forth financial information relating to the
Commercial Development operations for the three and six months ended September
30, 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales Revenues $ -- $ 1,422
Rental Income 2,538 1,076
Cost of Sales -- (1,094)
Selling, General & Administrative Expenses (1,454) (575)
Interest (1,018) (440)
------------ ------------
Operating Earnings $ 66 $ 389
============ ============
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales Revenues $ -- $ 1,864
Rental Income 4,918 1,720
Cost of Sales -- (1,382)
Selling, General & Administrative Expenses (2,935) (907)
Interest (2,025) (731)
------------ ------------
Operating (Loss) Earnings $ (42) $ 564
============ ============
</TABLE>
-41-
<PAGE> 45
MULTI-FAMILY DEVELOPMENT
The following tables set forth financial information relating to the
Multi-Family operation for the three and six months ended September 30, 2000 and
1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 4 $ 17,154
Cost of Sales -- (17,049)
Selling, General & Administrative Expenses (555) (495)
Interest -- (3)
------------ ------------
Operating Loss $ (551) $ (393)
============ ============
</TABLE>
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 1,008 $ 17,154
Cost of Sales -- (17,049)
Selling, General & Administrative Expenses (1,031) (1,030)
Interest -- (15)
------------ ------------
Operating Loss $ (23) $ (940)
============ ============
</TABLE>
LAND SALES
The following tables set forth financial information relating to the
Land Sales operations for the three and six months ended September 30, 2000 and
1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales Revenues $ -- $ 1,222
Other Revenues 144 105
Cost of Sales -- (1,157)
Selling, General & Administrative Expenses (163) (146)
------------ ------------
Operating (Loss) Earnings $ (19) $ 24
============ ============
</TABLE>
-42-
<PAGE> 46
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales Revenues $ -- $ 5,746
Other Revenues 259 234
Cost of Sales -- (5,404)
Selling, General & Administrative Expenses (310) (250)
------------ ------------
Operating (Loss) Earnings $ (51) $ 326
============ ============
</TABLE>
(G) Certain prior year balances have been reclassified to be consistent with the
September 30, 2000 presentation.
-43-
<PAGE> 47
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, 2000 totaled $70.6 million and $141.8 million,
respectively. Revenues of $91.1 million and $169.8 million were reported for the
three and six months ended September 30, 1999, respectively. Operating results
for the three and six months ended September 30, 2000 reflect a $186,000 loss
for the quarter and $215,000 of net earnings for the year to date period,
respectively, compared to net earnings of $56,000 and $76,000 for the same
periods last year. The significant decrease in revenues for the three and six
months ended September 30, 2000 compared to the same periods last year primarily
resulted from decreased sales revenue in the Companies' Land Sales, Multi-Family
and International Homebuilding business segments.
INTERNATIONAL HOME BUILDING
The following summarizes International Home Building's results for the
three and six months ended September 30, 2000, compared to the three and six
months ended September 30, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 59,702 $ 67,564
Costs and Expenses (53,270) (58,720)
Selling, General & Administrative Expenses (5,524) (6,003)
Interest (1,760) (2,530)
------------ ------------
Operating (Loss) Earnings $ (852) $ 311
============ ============
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
Revenues $ 123,874 $ 137,091
Costs and Expenses (108,591) (119,816)
Selling, General & Administrative Expenses (11,184) (11,168)
Interest (4,296) (5,535)
------------ ------------
Operating (Loss) Earnings $ (197) $ 572
============ ============
</TABLE>
International Home Building's operating results include results for
Fairclough, its parent holding company, and goodwill amortization attributable
to the Fairclough acquisition. The preferred distribution to the seller totaled
$1.8 and $4.3 million for the three and six months ended September 30, 2000,
respectively. Although preferred stock is ordinarily treated as an equity
security, in this case the preferred stock has the essential characteristics of
debt and, among other things, has a nominal residual interest value that is
mandatorily redeemable in two years. Therefore, the preferred stock has been
treated as debt and the preferred distribution has been recorded as interest
expense.
-44-
<PAGE> 48
DOMESTIC HOME BUILDING
The following summarizes Domestic Home Building's results for the three
and six months ended September 30, 2000, compared to the three and six months
ended September 30, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 8,253 $ 2,587
Cost of Sales (7,121) (2,212)
Selling, General & Administrative Expenses (551) (339)
------------ ------------
Operating Earnings $ 581 $ 36
============ ============
Units Closed 32 8
============ ============
Gross Margin Per Unit $ 35 $ 47
============ ============
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 11,699 $ 5,990
Cost of Sales (10,141) (5,145)
Selling, General & Administrative Expenses (973) (719)
------------ ------------
Operating Earnings $ 585 $ 126
============ ============
Units Closed 49 29
============ ============
Gross Margin Per Unit $ 32 $ 29
============ ============
</TABLE>
During the three and six months ended September 30, 2000 and 1999,
revenues resulted from sales of single-family homes in New Jersey.
-45-
<PAGE> 49
COMMERCIAL DEVELOPMENT
The following summarizes Commercial Development's results for the three
and six months ended September 30, 2000, compared to the three and six months
ended September 30, 1999 (dollars and square feet in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales Revenues $ -- $ 1,422
Rental Income 2,538 1,076
Cost of Sales -- (1,094)
Selling, General & Administrative Expenses (1,454) (575)
Interest (1,018) (440)
------------ ------------
Operating Earnings $ 66 $ 389
============ ============
Operating Square Feet 1,104 670
============ ============
</TABLE>
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales Revenues $ -- $ 1,864
Rental Income 4,918 1,720
Cost of Sales -- (1,382)
Selling, General & Administrative Expenses (2,935) (907)
Interest (2,025) (731)
------------ ------------
Operating (Loss) Earnings $ (42) $ 564
============ ============
Operating Square Feet 1,104 670
============ ============
</TABLE>
During the three and six months ended September 30, 2000, construction
was completed on 100,000 and 128,000 square feet of office and industrial space,
respectively. At September 30, 2000, the Company owned, either directly or
through interests in joint ventures, 1,104,000 square feet of office and
industrial space in California, Texas, Florida, North Carolina and
Massachusetts. This space consists of thirteen properties ranging in size from
11,000 square feet to 218,000 square feet. As of September 30, 2000, the
occupancy level ranged from 35% to 100%, with an average occupancy level of 86%.
The rental income from these properties increased during the three and six
months ended September 30, 2000, compared to the same period last year due to
the addition of 386,000 square feet of operating properties. Sales revenues for
the three and six months ended September 30, 1999 consisted of the sale of land
in Texas and California.
-46-
<PAGE> 50
MULTI-FAMILY DEVELOPMENT
The following summarizes Multi-Family Development's ("Multi-Family")
results for the three and six months ended September 30, 2000, compared to the
three and six months ended September 30, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 4 $ 17,154
Cost of Sales -- (17,049)
Selling, General & Administrative Expenses (555) (495)
Interest -- (3)
------------ ------------
Operating Loss $ (551) $ (393)
============ ============
</TABLE>
<TABLE>
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 1,008 $ 17,154
Cost of Sales -- (17,049)
Selling, General & Administrative Expenses (1,031) (1,030)
Interest -- (15)
------------ ------------
Operating Loss $ (23) $ (940)
============ ============
</TABLE>
During the six months ended September 30, 2000, a Multi-Family joint
venture closed on the sale of a 182-unit apartment complex in College Station,
Texas.
-47-
<PAGE> 51
LAND SALES
The following summarizes Land Sales' results for the three and six
months ended September 30, 2000, compared to the three and six months ended
September 30, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales Revenues $ -- $ 1,222
Other Revenues 144 105
Cost of Sales -- (1,157)
Selling, General & Administrative Expenses (163) (146)
------------ ------------
Operating (Loss) Earnings $ (19) $ 24
============ ============
<CAPTION>
------------------------------
For the Six Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
Sales Revenues $ -- $ 5,746
Other Revenues 259 234
Cost of Sales -- (5,404)
Selling, General & Administrative Expenses (310) (250)
------------ ------------
Operating (Loss) Earnings $ (51) $ 326
============ ============
</TABLE>
Other Revenues for the three and six months ended September 30, 2000
included $98,000 and $145,000 of earnings in joint ventures, respectively, and
$46,000 and $114,000 in interest income, respectively. Sales for the three
months ended September 30, 1999 comprised lot sales to Centex Homes in Texas and
Florida totaling $1.2 million. Sales for the six months ended September 30, 1999
comprised lot sales to Centex Homes in Florida and Texas totaling $4.3 million,
plus the sale of 5 acres of commercial property in Texas.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended September 30, 2000, 3,327 Class C Preferred
Partnership Units were issued in exchange for assets with a fair market value of
$3.3 million. Also during the six months ended September 30, 2000, the Companies
drew $15.9 million on existing project loans and closed on a permanent loan in
the amount of $3.7 million.
Development operations are not anticipated to provide a significant
source of earnings or liquidity for the Companies for the next 12 to 18 months.
As a result, the revenues, earnings and liquidity of the Companies will continue
to be largely dependent on the sale of single-family homes, land sales, and the
sale or permanent financing of development projects. The Companies believe that
the cash flows from these sources will be sufficient to provide the necessary
funding for current and future needs.
-48-
<PAGE> 52
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' business;
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
There have been no material changes in the Companies' market risk from
March 31, 2000. For more information regarding the Companies' market risk, refer
to the Companies' Annual Report on Form 10-K for the fiscal year March 31, 2000.
-49-
<PAGE> 53
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 27, 2000, 3333 Holding Corporation held its Annual Meeting of
Stockholders. At the Annual Meeting, Josiah O. Low, III, David M. Sherer,
Stephen M. Weinberg, and Roger O. West were elected as directors to serve for a
one year term until the 2001 Annual Meeting. Voting results for these nominees
are summarized as follows:
<TABLE>
<CAPTION>
Number of Shares
-------------------------------
For Withheld
----------- --------------
<S> <C> <C>
Josiah O. Low, III 798 3
David M. Sherer 798 3
Stephen M. Weinberg 798 3
Roger O. West 798 3
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
27.2 Financial Data Schedule
27.3 Financial Data Schedule
(2) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter ended
September 30, 2000.
-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 13, 2000 /s/ Stephen M. Weinberg
-----------------------------------------
Stephen M. Weinberg
Director and President
(principal executive officer)
November 13, 2000 /s/ Todd D. Newman
-----------------------------------------
Todd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(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 13, 2000 /s/ Stephen M. Weinberg
--------------------------------------
Stephen M. Weinberg
Director and President
(principal executive officer)
November 13, 2000 /s/ Todd D. Newman
--------------------------------------
Todd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial officer and
chief accounting officer)
-52-
<PAGE> 56
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.1 Centex Corporation Amended and Restated 1987 Stock Option
Plan
10.2 Third Amended and Restated 1998 Centex Corporation Employee
Non-Qualified Stock Option Plan
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
</TABLE>
