<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
JUNE 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 July 31, 2000:
<TABLE>
<S> <C> <C>
Centex Corporation Common Stock 58,846,057 shares
3333 Holding Corporation Common Stock 1,000 shares
Centex Development Company, L.P. Class A Units of Limited Partnership Interest 32,260 units
Centex Development Company, L.P. Class C Units of Limited Partnership Interest 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
JUNE 30, 2000
CENTEX CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements 1
Condensed Consolidated Statements of Earnings
for the Three Months Ended June 30, 2000 2
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 2000 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 22
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
</TABLE>
i
<PAGE> 3
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Combining Financial Statements 24
Condensed Combining Statements of Operations
for the Three Months Ended June 30, 2000 25
Condensed Combining Balance Sheets 26
Condensed Combining Statements of Cash Flows
for the Three Months Ended June 30, 2000 27
Notes to Condensed Combining Financial Statements 28
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 33
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 36
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 37
SIGNATURES 38
</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. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's latest Annual Report on Form 10-K. In the opinion of
the Company, all adjustments necessary to present fairly the information in the
following condensed consolidated financial statements of the Company have been
included. The results of operations for such interim periods are not necessarily
indicative of the results for the full year.
-1-
<PAGE> 5
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(unaudited)
-----------------------------------
For the Three Months Ended June 30,
-----------------------------------
2000 1999
--------------- ----------------
REVENUES
Home Building
Conventional Homes $ 887,022 $ 754,611
Manufactured Homes 36,486 47,831
Investment Real Estate 3,481 3,807
Financial Services 95,909 116,887
Construction Products 100,325 97,180
Contracting and Construction Services 298,659 351,917
-------------- --------------
1,421,882 1,372,233
-------------- --------------
COSTS AND EXPENSES
Home Building
Conventional Homes 814,472 695,463
Manufactured Homes 36,583 46,636
Investment Real Estate (2,621) (2,352)
Financial Services 95,841 96,164
Construction Products 64,170 61,853
Contracting and Construction Services 292,155 346,362
Other, net (320) 1,847
Corporate General and Administrative 8,731 7,208
Interest Expense 21,766 11,828
Minority Interest 13,036 14,114
-------------- --------------
1,343,813 1,279,123
-------------- --------------
EARNINGS BEFORE INCOME TAXES 78,069 93,110
Income Taxes 29,864 34,674
-------------- --------------
NET EARNINGS $ 48,205 $ 58,436
============== ==============
EARNINGS PER SHARE
Basic $ 0.82 $ 0.98
============== ==============
Diluted $ 0.81 $ 0.95
============== ==============
AVERAGE SHARES OUTSTANDING
Basic 58,803,345 59,446,165
Common Share Equivalents
Options 651,220 1,763,126
Convertible Debenture 400,000 400,000
-------------- --------------
Diluted 59,854,565 61,609,291
============== ==============
CASH DIVIDENDS PER SHARE $ 0.04 $ 0.04
============== ==============
See notes to condensed consolidated financial statements.
-2-
<PAGE> 6
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------------------
Centex Corporation
and Subsidiaries
--------------------------------
June 30, March 31,
2000* 2000**
------------- -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 177,600 $ 139,563
Receivables -
Residential Mortgage Loans 807,392 409,697
Other 510,166 483,381
Inventories 2,110,378 1,954,037
Investments -
Centex Development Company, L.P. 74,614 65,550
Joint Ventures and Other 84,673 65,944
Unconsolidated Subsidiaries -- --
Property and Equipment, net 368,294 360,604
Other Assets -
Deferred Income Taxes 49,839 49,907
Goodwill, net 254,342 251,780
Mortgage Securitization Residual Interest 164,926 160,999
Deferred Charges and Other 122,426 97,278
------------- -------------
$ 4,724,650 $ 4,038,740
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 1,043,231 $ 1,125,807
Short-term Debt 747,968 562,235
Long-term Debt 1,273,650 751,160
Payables to Affiliates -- --
Minority Stockholders' Interest 147,738 129,352
Negative Goodwill 46,837 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
58,830,945 and 58,806,217 respectively 14,708 14,702
Capital in Excess of Par Value 288 --
Retained Earnings 1,451,748 1,405,895
Accumulated Other Comprehensive Loss (1,518) (1,248)
------------- -------------
Total Stockholders' Equity 1,465,226 1,419,349
------------- -------------
$ 4,724,650 $ 4,038,740
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
* Unaudited
** Condensed from audited financial statements.
-3-
<PAGE> 7
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------
Centex Corporation Financial Services
---------------------------- ---------------------------
June 30, March 31, June 30, March 31,
2000* 2000** 2000* 2000**
----------- ----------- ----------- -----------
<S> <C> <C> <C>
$ 149,264 $ 123,411 $ 28,336 $ 16,152
-- -- 807,392 409,697
426,555 418,810 83,611 64,571
2,098,231 1,945,899 12,147 8,138
74,614 65,550 -- --
84,673 65,944 -- --
244,908 267,177 -- --
327,216 319,255 41,078 41,349
18,796 24,018 31,043 25,889
236,253 233,059 18,089 18,721
-- -- 164,926 160,999
93,866 71,302 28,560 25,976
----------- ----------- ----------- -----------
$ 3,754,376 $ 3,534,425 $ 1,215,182 $ 771,492
=========== =========== =========== ===========
$ 968,281 $ 1,038,641 $ 74,950 $ 87,166
204,967 146,908 543,001 415,327
923,650 751,160 350,000 --
-- -- 41,783 64,246
145,415 127,530 2,323 1,822
46,837 50,837 -- --
-- -- -- --
14,708 14,702 1 1
288 -- 150,467 150,467
1,451,748 1,405,895 52,657 52,463
(1,518) (1,248) -- --
----------- ----------- ----------- -----------
1,465,226 1,419,349 203,125 202,931
----------- ----------- ----------- -----------
$ 3,754,376 $ 3,534,425 $ 1,215,182 $ 771,492
=========== =========== =========== ===========
</TABLE>
In the supplemental data presented above, "Centex Corporation" represents the
adding together 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.
-4-
<PAGE> 8
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
-----------------------------------
For the Three Months Ended June 30,
-----------------------------------
2000 1999
--------------- ----------------
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings $ 48,205 $ 58,436
Adjustments -
Depreciation and Amortization 13,447 10,416
Deferred Income Taxes 519 1,308
Equity in Earnings of Centex Development
Company, L.P. and Joint Ventures (313) (142)
Minority Interest, net of taxes 8,291 9,091
(Increase) Decrease in Receivables (26,785) 4,701
(Increase) Decrease in Residential Mortgage Loans (397,695) 33,074
Increase in Inventories (157,687) (149,772)
Decrease in Payables and Accruals (83,728) (50,668)
Increase in Other Assets (38,147) (29,713)
Other, net 10,095 (6,724)
-------------- --------------
(623,798) (119,993)
-------------- --------------
CASH FLOWS - INVESTING ACTIVITIES
(Increase) Decrease in Advances to Centex Development
Company, L.P. and Joint Ventures (26,134) 1,522
Increase in Property and Equipment, net (19,078) (18,453)
-------------- --------------
(45,212) (16,931)
-------------- --------------
CASH FLOWS - FINANCING ACTIVITIES
Increase (Decrease) in Debt -
Secured by Residential Mortgage Loans 477,674 (48,860)
Other 230,549 181,743
Retirement of Common Stock (784) (3,279)
Proceeds from Stock Option Exercises 1,078 3,838
Dividends Paid (2,352) (2,382)
-------------- --------------
706,165 131,060
-------------- --------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 882 (71)
-------------- --------------
NET INCREASE (DECREASE) IN CASH 38,037 (5,935)
CASH AT BEGINNING OF PERIOD 139,563 111,268
-------------- --------------
CASH AT END OF PERIOD $ 177,600 $ 105,333
============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE> 9
CENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Dollars in thousands)
(unaudited)
(A) A summary of comprehensive income for the three months ended June 30, 2000
is presented below:
<TABLE>
<S> <C>
Net Earnings $ 48,205
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments (270)
------------
Comprehensive Income $ 47,935
============
</TABLE>
(B) A summary of changes in stockholders' equity is presented below:
<TABLE>
<CAPTION>
Accumulated
Capital in Other
Preferred Common Excess of Par Retained Comprehensive
Stock Stock Value Earnings Loss Total
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 2000 $ -- $ 14,702 -- $ 1,405,895 $ (1,248) $ 1,419,349
Net Earnings -- -- -- 48,205 -- 48,205
Exercise of Stock Options -- 15 1,063 -- -- 1,078
Retirement of 35,400 Shares -- (9) (775) -- -- (784)
Cash Dividends -- -- -- (2,352) -- (2,352)
Foreign Currency
Translation Adjustments -- -- -- -- (270) (270)
------------- ------------- ------------- ------------- ------------- -------------
BALANCE, JUNE 30, 2000 $ -- $ 14,708 $ 288 $ 1,451,748 $ (1,518) $ 1,465,226
============= ============= ============= ============= ============= =============
</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.
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
-6-
<PAGE> 10
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, 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
June 30, 2000, 36,428 Class C Units had been issued in exchange for assets with
a fair market value of $36.4 million. These assets were recorded by the
Partnership at fair market value. The partnership agreement provides that
Centex, the Class A and Class C limited partner, is entitled to a cumulative
preferred return of 9% per annum on the average outstanding balance of its
Unrecovered Capital, defined as its capital contributions, adjusted for cash
distributions representing return of the capital contributions. Unrecovered
Capital as of June 30, 2000 totaled $69 million. Preference payments in arrears
at June 30, 2000 amounted to $16.4 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.
-7-
<PAGE> 11
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
------------------------------
JUNE 30, March 31,
2000 2000*
------------- -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 187,674 $ 197,877
Receivables 1,332,425 907,367
Inventories 2,517,321 2,343,682
Investments in Joint Ventures and Other 86,650 68,539
Property and Equipment, net 371,632 364,182
Other Assets 641,545 599,526
------------- -------------
$ 5,137,247 $ 4,481,173
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 1,152,774 $ 1,244,500
Short-term Debt 1,000,233 834,897
Long-term Debt 1,324,439 802,238
Minority Stockholders' Interest 147,738 129,352
Negative Goodwill 46,837 50,837
Stockholders' Equity 1,465,226 1,419,349
------------- -------------
$ 5,137,247 $ 4,481,173
============= =============
</TABLE>
* Condensed from audited financial statements
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 1,492,624 $ 1,447,764
Costs and Expenses 1,413,909 1,354,393
------------- -------------
Earnings Before Income Taxes 78,715 93,371
Income Taxes 30,510 34,935
------------- -------------
NET EARNINGS 48,205 58,436
Other Comprehensive Loss (270) (71)
------------- -------------
COMPREHENSIVE INCOME $ 47,935 $ 58,365
============= =============
</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.
-8-
<PAGE> 12
In order to ensure the future availability of land for home building, the
Company has made deposits totaling approximately $43 million as of June 30, 2000
for options to purchase undeveloped land and developed lots having a total
purchase price of approximately $1.2 billion. These options and commitments
expire at various dates through the year 2006. The Company has also committed to
purchase for approximately $0.5 million certain developed lots from the
Partnership and for approximately $3 million certain land and developed lots
from unrelated third parties.
(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.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Total Interest Incurred $ 33,874 $ 28,483
Less - Financial Services (12,108) (16,655)
------------- -------------
Interest Expense $ 21,766 $ 11,828
============= =============
</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 64.4% as of June 30, 2000 and March 31, 2000, and 61.5% as of June 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.
(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 $75 million) is included in the Investment Real
Estate segment.
-9-
<PAGE> 13
HOME BUILDING
CONVENTIONAL HOMES
Conventional Homes operations involve the purchase and development of land
or lots as well as the construction and sale of single-family homes. The
following table sets forth financial information relating to the Conventional
Homes operations.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
(Dollars in millions)
<S> <C> <C>
Revenues $ 887.0 $ 754.6
Cost of Sales (679.5) (581.3)
Selling, General & Administrative Expenses (135.0) (114.2)
------------- -------------
Operating Earnings $ 72.5 $ 59.1
============= =============
</TABLE>
MANUFACTURED HOMES
Manufactured Homes operations involve the manufacture of residential and
park model homes and the sale of these homes through a network of Company-owned
and independent dealers. The following table sets forth financial information
relating to the Manufactured Homes operations.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
(Dollars in millions)
<S> <C> <C>
Revenues $ 36.5 $ 47.8
Cost of Sales (29.3) (38.7)
Selling, General & Administrative Expenses (7.3) (7.9)
------------- -------------
Operating (Loss) Earnings (0.1) 1.2
Minority Interest -- (0.2)
------------- -------------
Net Operating (Loss) Earnings to Centex $ (0.1) $ 1.0
============= =============
</TABLE>
-10-
<PAGE> 14
INVESTMENT REAL ESTATE
Investment Real Estate operations involve the development of land
relating primarily to multi-family, industrial, office, retail and mixed-use
projects. The following table sets forth financial information relating to the
Investment Real Estate operations.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
(Dollars in millions)
<S> <C> <C>
Revenues $ 3.5 $ 3.8
Cost of Sales
(0.3) (0.2)
Selling, General & Administrative Expenses
(1.1) (1.4)
Negative Goodwill Amortization 4.0 4.0
------------- -------------
Operating Earnings $ 6.1 $ 6.2
============= =============
</TABLE>
Property sales related to Investment Real Estate's nominally valued
assets resulted in operating margins of $1.8 million for the first quarter of
fiscal 2001 and $3.0 million for the first quarter of fiscal 2000. As of June
30, 2000, the Investment Real Estate Group had approximately $40.3 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 table sets forth financial information relating to the Financial
Services operations.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
(Dollars in millions)
<S> <C> <C>
Revenues* $ 95.9 $ 116.9
Selling, General & Administrative Expenses (83.7) (79.5)
Interest Expense (12.1) (16.7)
------------- -------------
Operating Earnings $ 0.1 $ 20.7
============= =============
</TABLE>
* Financial Services revenues include interest income of $16.1 million
and $23.6 million for the three months ended June 30, 2000 and 1999,
respectively.
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
-11-
<PAGE> 15
approximate impact of this change for the first quarter of fiscal 2001 was to
reduce Home Equity's pre-tax earnings by $11.5 million 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 table sets forth financial information relating to the
Construction Products operations.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
(Dollars in millions)
<S> <C> <C>
Revenues $ 100.3 $ 97.2
Interest Income 1.7 0.5
Cost of Sales (64.2) (61.0)
Selling, General & Administrative Expenses (1.7) (1.3)
------------- -------------
Operating Earnings 36.1 35.4
Minority Interest (13.0) (13.9)
------------- -------------
Net Operating Earnings to Centex $ 23.1 $ 21.5
============= =============
</TABLE>
CONTRACTING AND CONSTRUCTION SERVICES
Contracting and Construction Services operations involve the
construction of buildings for both private and government interests, including
(among others) office, commercial and industrial buildings, hospitals, hotels,
museums, libraries, airport facilities and educational institutions.
The following table sets forth financial information relating to the
Contracting and Construction Services operation. As this segment generates
significant 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
June 30,
------------------------------
2000 1999
------------- -------------
(Dollars in millions)
<S> <C> <C>
Revenues $ 298.7 $ 351.9
Construction Contract Costs (279.2) (333.6)
Selling, General & Administrative Expenses (13.0) (12.8)
------------- -------------
Operating Income, as reported 6.5 5.5
Intercompany Interest Income* 2.3 2.2
------------- -------------
Total Economic Return $ 8.8 $ 7.7
============= =============
</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.
-12-
<PAGE> 16
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 table summarizes financial
information relating to the Corporate and Other, net segments.
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
(Dollars in millions)
<S> <C> <C>
Operating Earnings (Loss)-Other, net $ 0.3 $ (1.8)
============= =============
Corporate General and Administrative Expenses $ (8.7) $ (7.2)
============= =============
</TABLE>
(J) The computation of diluted earnings per share excludes anti-dilutive options
to purchase 6,182,000 common shares at an average price of $33.00 for the three
months ended June 30, 2000. The anti-dilutive options have expiration dates
ranging from September 2007 to May 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. The Company is in the
process of assessing the impact SFAS Nos. 133 and 138 will have on its financial
statements.
(L) Certain prior year balances have been reclassified to be consistent with the
June 30, 2000 presentation.
-13-
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Centex's consolidated revenues for the quarter were $1.42 billion, a 4%
increase over $1.37 billion for the same quarter last year. Earnings before
income taxes for the quarter were $78.1 million, 16% lower than $93.1 million
for the same quarter last year. Net earnings for the first quarter of fiscal
2001 were $48.2 million, an 18% decrease from net earnings of $58.4 million for
the first quarter of fiscal 2000.
HOME BUILDING
CONVENTIONAL HOMES
The following summarizes Conventional Homes' results for the quarter
ended June 30, 2000 compared to the quarter ended June 30, 1999 (dollars in
millions, except per unit data):
<TABLE>
<CAPTION>
-----------------------------------------------------------
For the Three Months Ended June 30,
-----------------------------------------------------------
2000 1999
----------------------- -----------------------
<S> <C> <C> <C> <C>
Conventional Homes Revenues $ 887.0 100.0% $ 754.6 100.0%
Cost of Sales (679.5) (76.6%) (581.3) (77.0%)
Selling, General & Administrative Expenses (135.0) (15.2%) (114.2) (15.2%)
--------- ----- --------- -----
Operating Earnings $ 72.5 8.2% $ 59.1 7.8%
========= ===== ========= =====
Units Closed 4,408 3,934
% Change 12.0% 31.9%
Unit Sales Price $ 196,314 $ 188,608
% Change 4.1% 2.3%
Operating Earnings Per Unit $ 16,459 $ 15,035
% Change 9.5% 10.2%
</TABLE>
Conventional Homes' revenues for the three months ended June 30, 2000
increased by $132.4 million from revenues for the corresponding period last
year. This increase resulted from a higher number of existing operating
neighborhoods, revenue attributable to the full effect of operations acquired
during fiscal 2000, and an increased average unit selling price compared to the
fiscal 2000 unit sales price.
Operating earnings for the three months ended June 30, 2000 were 8.2%
as a percentage of revenue and approximately $16,459 on a per unit basis
compared to the three months ended June 30, 1999, which had operating earnings
of 7.8% of revenue and approximately $15,035 on a per unit basis.
Home sales (orders) totaled 5,537 units during the three months ended
June 30, 2000 compared to 4,774 units during the same period a year ago. The
backlog of homes sold but not closed as of June 30, 2000 was 8,707 units, 14.4%
more than the 7,612 units for the same period a year ago.
-14-
<PAGE> 18
MANUFACTURED HOMES
The following summarizes Manufactured Homes' results for the quarter
ended June 30, 2000 compared to the quarter ended June 30, 1999 (dollars in
millions):
<TABLE>
<CAPTION>
----------------------------------------------------------
For the Three Months Ended June 30,
----------------------------------------------------------
2000 1999
----------------------- ----------------------
<S> <C> <C> <C> <C>
Manufactured Homes Revenues (Construction) $ 24.0 100.0% $ 34.8 100.0%
Cost of Sales (19.1) (79.7%) (28.2) (81.2%)
Selling, General & Administrative Expenses (3.4) (14.3%) (3.7) (10.6%)
---------- ----- --------- -----
1.5 6.0% 2.9 8.2%
---------- ----- --------- -----
Retail Sales Revenues 12.5 100.0% 13.0 100.0%
Cost of Sales (10.2) (81.7%) (10.5) (80.2%)
Selling, General & Administrative Expenses (3.0) (23.7%) (3.4) (26.1%)
---------- ----- --------- -----
(0.7) (5.4%) (0.9) (6.3%)
---------- ----- --------- -----
Construction and Retail Earnings 0.8 2.0
Goodwill Amortization (0.9) (0.8)
Minority Interest -- (0.2)
---------- ---------
Group Operating Earnings $ (0.1) $ 1.0
========== =========
Units Sold 1,226 1,784
</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 increasing interest rates, the
availability of financing, and corresponding reduced consumer demand,
Manufactured Housing's first quarter 2001 dealer sales and retail sales declined
from the corresponding fiscal 2000 amounts. In response, management has slowed
production and temporarily idled its New Mexico plant until the return of more
favorable market conditions.
INVESTMENT REAL ESTATE
The following summarizes Investment Real Estate's results for the
quarter ended June 30, 2000 compared to the quarter ended June 30, 1999 (dollars
in millions):
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
June 30,
-----------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 3.5 $ 3.8
============= =============
Operating Earnings $ 6.1 $ 6.2
============= =============
</TABLE>
For the quarter ended June 30, 2000, Centex's Investment Real Estate
operation, through which all investment property transactions are reported, had
operating earnings of $6.1 million, basically unchanged from $6.2 million for
the same quarter 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 $1.8 million
in the first quarter of fiscal 2001 and $3.0 million in the first
-15-
<PAGE> 19
quarter of fiscal 2000. As of June 30, 2000, the Investment Real Estate Group
has approximately $40.3 million of nominally valued assets which are expected to
be sold over the next three years.
Negative goodwill amortization was $4 million in the first quarter of
both fiscal 2001 and 2000.
FINANCIAL SERVICES
The following summarizes Financial Services' results for the quarter
ended June 30, 2000 compared to the quarter ended June 30, 1999 (dollars in
millions):
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
June 30,
-----------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 95.9 $ 116.9
============= =============
Operating Earnings $ 0.1 $ 20.7
============= =============
Origination Volume $ 2,412 $ 2,773
============= =============
Number of Loans Originated
CTX Mortgage Company ("CTX Mortgage")
Centex-built Homes ("Builder") 2,466 2,469
Non-Centex-built Homes ("Retail") 12,536 15,849
------------- -------------
15,002 18,318
Centex Home Equity Corporation ("Home Equity") 6,429 4,839
Centex Finance Company (closed during fiscal 2000) -- 168
------------- -------------
21,431 23,325
============= =============
</TABLE>
Financial Services' operating earnings for the quarter ended June 30,
2000 were $0.1 million compared to $20.7 million of operating earnings for the
quarter ended June 30, 1999. Financial Services' revenues for the first quarter
of fiscal 2001 were $95.9 million versus $116.9 million for the prior year's
first quarter. Gains on sales of mortgage loans receivable, a component of
Financial Services' revenues, decreased to $40.6 million for the quarter ended
June 30, 2000 from $66.3 million for the comparable quarter of the prior year.
This decline is primarily due to reduced mortgage origination volume in
Financial Services' CTX Mortgage Company ("CTX Mortgage") subsidiary as well as
the change, discussed below, in the method of accounting for securitizations
completed by Financial Services' Centex Home Equity Corporation ("Home Equity")
subsidiary.
CTX Mortgage's operating earnings totaled $5.2 million for the quarter
ended June 30, 2000, 70% less than earnings for the same quarter a year ago. The
decline in CTX Mortgage's operating earnings is primarily due to an increase in
interest rates compared to the first quarter 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. CTX Mortgage originations for the first quarter of
fiscal 2001 totaled 15,002, an 18% decrease from the 18,318 originations for the
first quarter of fiscal 2000. The per-loan profit for the quarter ended June 30,
2000 was $346, 63% lower than
-16-
<PAGE> 20
$936 per loan for the same quarter of last fiscal year. CTX Mortgage's total
mortgage applications for the first quarter of fiscal 2001 decreased 17% to
15,828 from 18,994 applications for the first quarter of fiscal 2000.
Home Equity reported an operating loss of $5.1 million for the quarter
ended June 30, 2000, compared to $4.6 million of operating earnings for the same
quarter last fiscal year. As discussed below, this decline primarily resulted
from accounting for the $350 million in securitizations completed during the
quarter ended June 30, 2000 as borrowings rather than as sales.
Home Equity's originations for the first quarter of fiscal year 2001
were 6,429, a 33% increase over the 4,839 originations for the first quarter of
fiscal 2000. Loan volume for the quarter was $395 million, a 24% improvement
over the same quarter last fiscal year, with loan volume being 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 37,653 for the quarter ended June 30, 2000, an increase of
31% over the 28,663 applications for the first quarter of last fiscal year.
As a consequence of increases in loan volume during the quarter ended
June 30, 2000, Home Equity completed $350 million in loan securitizations,
compared to $285 million of loan securitizations during the first quarter of
last fiscal 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 $5.1 million in the quarter ended
June 30, 2000, almost double the $2.6 million of service fee income realized
during first quarter of last fiscal year.
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
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 quarter of fiscal 2001 was to reduce Home Equity's
pre-tax earnings by $11.5 million 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 32% for the quarter ended June 30, 2000
to $16.1 million from $23.6 million for the same quarter of last fiscal year.
Interest expense for the quarter ended June 30, 2000 was $12.1 million, a 28%
decrease from $16.7 million for the same quarter last fiscal year. The decrease
in net interest income is the result of both reduced loan production and the
change in product mix noted above.
-17-
<PAGE> 21
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 which began in December 1999. 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 quarter
ended June 30, 2000 compared to the quarter ended June 30, 1999 (dollars in
millions):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 100.3 $ 97.2
Interest Income 1.7 0.5
Cost of Sales (64.2) (61.0)
Selling, General and Administrative Expenses (1.2) (1.0)
Goodwill Amortization (0.5) (0.3)
------------- -------------
Operating Earnings $ 36.1 $ 35.4
Minority Interest (13.0) (13.9)
------------- -------------
Net Operating Earnings to Centex $ 23.1 $ 21.5
============= =============
</TABLE>
Construction Products' revenues were $100.3 million for the quarter
this year, 3% higher than last year. For the current quarter, Construction
Products' pretax earnings, net of minority interest, were $23.1 million, an 8%
increase over the same quarter last year.
During the first quarter of 2001, unit prices for Construction
Products' gypsum wallboard products declined from the levels experienced in the
last half of fiscal 2000, although those prices are still at good levels. Market
demand for all of this business segments' products continues to be strong as of
June 30, 2000.
-18-
<PAGE> 22
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services' results
for the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999
(dollars in millions):
<TABLE>
<CAPTION>
-----------------------------
For the Three Months Ended
June 30,
-----------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 298.7 $ 351.9
============= =============
Operating Earnings $ 6.5 $ 5.5
============= =============
New Contracts Received $ 303 $ 567
============= =============
Backlog of Uncompleted Contracts $ 1,387 $ 1,152
============= =============
</TABLE>
Contracting and Construction Services' revenues for the quarter ended
June 30, 2000 were $298.7 million, a 15% decrease from revenues for the same
quarter last year. Operating earnings for the group improved 17% to $6.5 million
for the first quarter of fiscal 2001. This increase is 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 operation provided a positive
average net cash flow in excess of Centex's investment in the group of $96.8
million for the first quarter of fiscal 2001 and $116 million for the first
quarter of fiscal 2000.
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 2000, the Company had cash and cash equivalents of $177.6
million, including $130.0 million belonging to the Company's 64.4% owned
Construction Products subsidiary. The net cash used in or provided by the
operating, investing, and financing activities for the three months ended June
30, 2000 and 1999 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
NET CASH (USED IN) PROVIDED BY:
Operating activities $ (623,798) $ (119,993)
Investing activities (45,212) (16,931)
Financing activities 706,165 131,060
Effect of exchange rate changes on cash 882 (71)
------------- -------------
NET INCREASE (DECREASE) IN CASH $ 38,037 $ (5,935)
============= =============
</TABLE>
-19-
<PAGE> 23
For the first quarter 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
resultant units under construction during the year and 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.
Short-term debt as of June 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 corporate borrowings are generally
accomplished at prevailing market interest rates from uncommitted bank
facilities and the Company's commercial paper programs. In August, the Company
entered into a $600 million committed credit facility which serves as a backup
for bank and commercial paper borrowings. This new facility, which expires in
2005, replaces two similar facilities which were scheduled to terminate
beginning in fiscal 2001.
The Financial Services segment provides 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 is in the business of acquiring and then reselling mortgages 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 is required to purchase all loans
offered by CTX Mortgage that are eligible under the agreement. 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 $600 million of uncommitted credit facilities to
finance mortgages not sold to CHM.
Similarly, Home Equity has $325 million of committed and $100 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
June 30, 2000, Financial Services had borrowed $125 million under the facility;
$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 its mortgage loan portfolio.
Other than the forward commitments described above, certain interest rate swaps
and interest rate caps, 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 June 30, 2000, market risk associated with the swaps
mentioned above is considered minimal.
-20-
<PAGE> 24
Long-term debt outstanding as of June 30, 2000 was as follows (in thousands):
<TABLE>
<S> <C>
Centex Corporation:
Subordinated Debentures, 7.375%, due in 2006 $ 99,760
Subordinated Debentures, 8.75%, due in 2007 99,534
Medium-Term Note Programs, 6.64% to 7.42%, due through 2003 494,523
Senior Note Programs, 6.4% to 9.75%, due through 2006 213,767
Other Indebtedness, weighted-average 6.8%, due through 2027 16,066
----------
923,650
Financial Services:
Home Equity Loans Asset-backed Certificates, 6.60%
to 8.48%, due through 2031 350,000
----------
Centex Corporation and Subsidiaries $1,273,650
==========
</TABLE>
Maturities of long-term debt during the next five years (in thousands)
are: 2001, $797,072; 2002, $375,586; 2003, $79,988; 2004, $38,379; and 2005,
$26,823.
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
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. Financial Services results
are being affected by higher interest rates at CTX Mortgage Company, compared to
first quarter 2000 levels. The change at Financial Services' Home Equity unit in
its reporting of loan securitizations, which reduced operating earnings by $11.5
million or $.12 per share after tax for the first quarter of fiscal 2001, will
likely reduce operating earnings by an anticipated $42 million of operating
earnings or about $.45 per share after tax for the full year. Declining Gypsum
Wallboard prices are expected to impact 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
-21-
<PAGE> 25
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 debt. The Company utilizes
derivative instruments, including interest rate swaps and interest rate caps, 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, the interest rate caps and
interest rate swaps listed above, 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.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
Exhibit 27.1 - Financial Data Schedule
(2) Reports on Form 8-K
Current Report on Form 8-K of Centex Corporation dated May 1,
2000.
Current Report on Form 8-K of Centex Corporation dated June 14,
2000.
-22-
<PAGE> 26
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
August 11, 2000 /s/ Leldon E. Echols
---------------------------------------------
Leldon E. Echols
Executive Vice President and
Chief Financial Officer
(principal financial officer)
August 11, 2000 /s/ John S. Worth, Sr.
---------------------------------------------
John S. Worth, Sr.
Vice President and Controller
(chief accounting officer)
-23-
<PAGE> 27
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED COMBINING FINANCIAL STATEMENTS
ITEM 1.
The condensed combining financial statements include the accounts of
3333 Holding Corporation and subsidiary ("Holding") and Centex Development
Company, L.P. and subsidiaries (the "Partnership") (collectively the
"Companies"), and have been prepared by the Companies, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Companies believe that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed combining
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Companies' latest Annual Report on Form 10-K.
In the opinion of the Companies, all adjustments necessary to present fairly the
information in the following condensed financial statements of the Companies
have been included. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
-24-
<PAGE> 28
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 June 30,
----------------------------------------------------
2000
----------------------------------------------------
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES $ 71,117 $ 71,116 $ 1
COSTS AND EXPENSES 70,070 69,965 105
--------------- --------------- ---------------
EARNINGS (LOSS) BEFORE INCOME TAXES 1,047 1,151 (104)
INCOME TAXES 646 646 --
--------------- --------------- ---------------
NET EARNINGS (LOSS) $ 401 $ 505 $ (104)
=============== =============== ===============
NET EARNINGS ALLOCABLE TO LIMITED PARTNERS $ 505
===============
EARNINGS (LOSS) PER UNIT/SHARE $ 7.49 $ (104)
=============== ===============
WEIGHTED-AVERAGE UNITS/SHARES OUTSTANDING 67,356 1,000
<CAPTION>
----------------------------------------------------
For the Three Months Ended June 30,
----------------------------------------------------
1999
----------------------------------------------------
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES $ 78,669 $ 78,669 $ 150
COSTS AND EXPENSES 78,388 77,815 723
--------------- --------------- ---------------
EARNINGS (LOSS) BEFORE INCOME TAXES 281 854 (573)
INCOME TAXES 261 261 --
--------------- --------------- ---------------
NET EARNINGS (LOSS) $ 20 $ 593 $ (573)
=============== =============== ===============
NET EARNINGS ALLOCABLE TO LIMITED PARTNERS $ 593
===============
EARNINGS (LOSS) PER UNIT/SHARE $ 10.01 $ (573)
=============== ===============
WEIGHTED-AVERAGE UNITS/SHARES OUTSTANDING 59,270 1,000
</TABLE>
See notes to condensed combining financial statements.
-25-
<PAGE> 29
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
---------------------------------------------------
JUNE 30, 2000*
---------------------------------------------------
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
--------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Cash $ 10,074 $ 10,073 $ 1
Accounts Receivable 13,494 14,671 3
Notes Receivable 1,373 1,373 --
Inventories 341,594 340,098 1,496
Investments -
Commercial Properties, net 61,397 61,397 --
Real Estate Joint Ventures 1,977 1,977 --
Affiliate -- -- 1,716
Property and Equipment, net 3,338 3,251 87
Other Assets -
Goodwill, net 31,107 31,107 --
Deferred Charges and Other 14,405 14,230 175
--------------- --------------- ---------------
$ 478,759 $ 478,177 $ 3,478
=============== =============== ===============
LIABILITIES, STOCKHOLDERS' EQUITY
AND PARTNERS' CAPITAL
Accounts Payable and Accrued Liabilities $ 105,043 $ 101,256 $ 5,541
Notes Payable 303,054 303,054 --
--------------- --------------- ---------------
Total Liabilities 408,097 404,310 5,541
--------------- --------------- ---------------
Stockholders' Equity and Partners' Capital 70,662 73,867 (2,063)
--------------- --------------- ---------------
$ 478,759 $ 478,177 $ 3,478
=============== =============== ===============
<CAPTION>
---------------------------------------------------
March 31, 2000**
---------------------------------------------------
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
--------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Cash $ 58,314 $ 58,298 $ 16
Accounts Receivable 13,077 17,948 6
Notes Receivable 3,131 3,131 --
Inventories 329,941 328,928 1,013
Investments -
Commercial Properties, net 61,420 61,420 --
Real Estate Joint Ventures 2,595 2,595 --
Affiliate -- -- 1,716
Property and Equipment, net 3,578 3,481 97
Other Assets -
Goodwill, net 30,727 30,727 --
Deferred Charges and Other 8,835 8,660 175
--------------- --------------- ---------------
$ 511,618 $ 515,188 $ 3,023
=============== =============== ===============
LIABILITIES, STOCKHOLDERS' EQUITY
AND PARTNERS' CAPITAL
Accounts Payable and Accrued Liabilities $ 118,693 $ 119,162 $ 4,982
Notes Payable 323,740 323,740 --
--------------- --------------- ---------------
Total Liabilities 442,433 442,902 4,982
--------------- --------------- ---------------
Stockholders' Equity and Partners' Capital 69,185 72,286 (1,959)
--------------- --------------- ---------------
$ 511,618 $ 515,188 $ 3,023
=============== =============== ===============
</TABLE>
* Unaudited.
** Condensed from audited financial statements.
See notes to condensed combining financial statements.
-26-
<PAGE> 30
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 Three Months Ended June 30,
------------------------------------------------
2000
------------------------------------------------
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $ 401 $ 505 $ (104)
Adjustments:
Depreciation and Amortization 997 987 10
Equity in Earnings from Joint Ventures (67) (67) --
(Increase) Decrease in Receivables (2,825) (2,828) 3
Decrease in Notes Receivable 1,758 1,758 --
Increase (Decrease) in Inventories (22,376) (21,893) (483)
Increase in Commercial Properties (406) (406) --
(Increase) Decrease in Other Assets (8,155) (8,155) --
(Decrease) Increase in Payables
and Accruals (6,858) (7,417) 559
------------- ------------- -------------
(37,531) (37,516) (15)
------------- ------------- -------------
CASH FLOWS - INVESTING ACTIVITIES
Decrease (Increase) in Advances to
Joint Venture and Investment in
Affiliate 685 685 --
Property and Equipment Additions, net (23) (23) --
------------- ------------- -------------
662 662 --
------------- ------------- -------------
CASH FLOWS - FINANCING ACTIVITIES
(Decrease) Increase in Notes Payable (9,150) (9,150) --
------------- ------------- -------------
(9,150) (9,150) --
------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (2,221) (2,221) --
------------- ------------- -------------
NET (DECREASE) INCREASE IN CASH (48,240) (48,225) (15)
CASH AT BEGINNING OF PERIOD 58,314 58,298 16
------------- ------------- -------------
CASH AT END OF PERIOD $ 10,074 $ 10,073 $ 1
============= ============= =============
SUPPLEMENTAL DISCLOSURES:
Increase in Notes Payable
Related to an Acquisition $ -- $ -- $ --
Issuance of Class C Units in
Exchange for Assets $ 1,346 $ 1,346 $ --
<CAPTION>
------------------------------------------------
For the Three Months Ended June 30,
------------------------------------------------
1999
------------------------------------------------
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $ 20 $ 593 $ (573)
Adjustments:
Depreciation and Amortization 808 797 11
Equity in Earnings from Joint Ventures -- -- --
(Increase) Decrease in Receivables (4,500) (2,904) (1,596)
Decrease in Notes Receivable 7 7 --
Increase (Decrease) in Inventories 25,327 25,403 (76)
Increase in Commercial Properties (28,724) (28,724) --
(Increase) Decrease in Other Assets 425 450 (25)
(Decrease) Increase in Payables
and Accruals (3,923) (6,652) 2,751
------------- ------------- -------------
(10,560) (11,030) 492
------------- ------------- -------------
CASH FLOWS - INVESTING ACTIVITIES
Decrease (Increase) in Advances to
Joint Venture and Investment in
Affiliate 30 30 (22)
Property and Equipment Additions, net 89 88 1
------------- ------------- -------------
119 118 (21)
------------- ------------- -------------
CASH FLOWS - FINANCING ACTIVITIES
(Decrease) Increase in Notes Payable 13,568 14,071 (503)
------------- ------------- -------------
13,568 14,071 (503)
------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (59) (59) --
------------- ------------- -------------
NET (DECREASE) INCREASE IN CASH 3,068 3,100 (32)
CASH AT BEGINNING OF PERIOD 364 331 33
------------- ------------- -------------
CASH AT END OF PERIOD $ 3,432 $ 3,431 $ 1
============= ============= =============
SUPPLEMENTAL DISCLOSURES:
Increase in Notes Payable
Related to an Acquisition $ 248,339 $ 248,339 $ --
Issuance of Class C Units in
Exchange for Assets $ 2,151 $ 2,151 $ --
</TABLE>
See notes to condensed combining financial statements.
-27-
<PAGE> 31
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINING FINANCIAL STATEMENTS
JUNE 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, 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.
-28-
<PAGE> 32
The Partnership sells lots to Centex Homes pursuant to certain purchase
and sale agreements. Revenues from these sales were zero and $3.1 million for
the three months ended June 30, 2000 and 1999, respectively. Gains associated
with these sales were zero and $108,000 for the three months ended June 30, 2000
and 1999, respectively.
(C) A summary of comprehensive income for the three months ended June 30, 2000
is presented below (dollars in thousands):
<TABLE>
<S> <C>
Net Earnings $ 401
Accumulated Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments (270)
----------
Comprehensive Income (Loss) $ 131
==========
</TABLE>
(D) A summary of changes in stockholders' equity and partners' capital is
presented below (dollars in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 2000
-----------------------------------------------------------------------------------------------
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 1,346 -- -- 1,346 -- -- --
Net Earnings 401 -- -- 505 -- -- (104)
Accumulated Other
Comprehensive Income (Loss):
Foreign Currency
Translation Adjustments (270) -- -- (270) -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 2000 $ 70,662 $ 500 $ 1,142 $ 72,225 $ 1 $ 800 $ (2,864)
============ ============ ============ ============ ============ ============ ============
</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 June 2000 quarter, 1,346 Class C Units
were issued in exchange for assets with a fair market value of $1.3 million to
Centex Homes, the Partnership's sole limited partner.
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
-29-
<PAGE> 33
basis for preference accruals. Unrecovered Capital for Class A and Class C
limited partners aggregated approximately $69 million as of June 30, 2000 and as
of that date preference payments in arrears totaled $16.4 million. No preference
payments were made during the quarter.
(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 time period between April 15, 1999 and March 31, 2001,
Fairclough's operations will be carried out subject to certain guidelines that
were negotiated with the seller. After March 31, 2001, CDC-UK will redeem, for a
nominal value, the preference shares.
The purchase of Fairclough has been accounted for using the purchase
method of accounting, pursuant to which the total cost of the acquisition has
been allocated to the tangible and intangible assets acquired and liabilities
assumed based upon their estimated fair values. The allocation of the purchase
price is as follows (dollars in thousands):
<TABLE>
<S> <C>
Inventories, Property and Equipment, and Other $ 270,450
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.
-30-
<PAGE> 34
INTERNATIONAL HOME BUILDING
The following table sets forth financial information relating to the
International Homebuilding operations (dollars in thousands):
<TABLE>
<CAPTION>
--------------------------------
For the Three Months Ended
June 30,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Revenues $ 64,172 $ 69,527
Costs and Expenses (55,321) (61,096)
Selling, General & Administrative Expenses (5,660) (5,165)
Interest (2,536) (3,005)
-------------- --------------
Operating Earnings $ 655 $ 261
============== ==============
</TABLE>
DOMESTIC HOMEBUILDING
The following table sets forth financial information relating to the
Domestic Homebuilding operations (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 3,446 $ 3,403
Cost of Sales (3,020) (2,933)
Selling, General & Administrative Expenses (422) (380)
------------- -------------
Operating Earnings $ 4 $ 90
============= =============
</TABLE>
COMMERCIAL DEVELOPMENT
The following table sets forth financial information relating to the
Commercial Development operations (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Sales Revenues $ -- $ 442
Rental Income 2,380 644
Cost of Sales -- (288)
Selling, General & Administrative Expenses (1,481) (332)
Interest (1,007) (291)
------------- -------------
Operating (Loss) Earnings $ (108) $ 175
============= =============
</TABLE>
-31-
<PAGE> 35
MULTI-FAMILY DEVELOPMENT
The following table sets forth financial information relating to the
Multi-Family operation (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Other Revenues $ 1,004 $ --
Selling, General & Administrative Expenses (476) (535)
Interest -- (12)
------------- -------------
Operating Earnings (Loss) $ 528 $ (547)
============= =============
</TABLE>
LAND SALES
The following table sets forth financial information relating to the
Land Sales operations (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Sales Revenues $ -- $ 4,653
Other Revenues 115 --
Cost of Sales -- (4,247)
Selling, General & Administrative Expenses (146) (104)
------------- -------------
Operating (Loss) Earnings $ (31) $ 302
============= =============
</TABLE>
(G) Certain prior year balances have been reclassified to be consistent with the
June 30, 2000 presentation.
-32-
<PAGE> 36
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
On a combined basis, the Companies reported revenues for the quarter
ended June 30, 2000 of $71.1 million compared to $78.7 million for the quarter
ended June 30, 1999. Net earnings for the current quarter were $401,000 compared
to $20,000 for the same period last year. The significant decrease in revenues
for the quarter ended June 30, 2000 compared to the same period last year
primarily resulted from decreased sales revenue in the Companies' Land Sales and
International Homebuilding business segments. Net earnings for the quarter
exceeded last year's comparable results due primarily to operating results of
the Companies' Multi-Family Development segment.
INTERNATIONAL HOME BUILDING
The following summarizes International Home Building's results for the
three months ended June 30, 2000, compared to the same period for the prior year
(dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 64,172 $ 69,527
Costs and Expenses (55,321) (61,096)
Selling, General & Administrative Expenses (5,660) (5,165)
Interest (2,536) (3,005)
------------- -------------
Operating Earnings $ 655 $ 261
============= =============
</TABLE>
For the three months ended June 30, 2000, Fairclough closed on the sale
of 300 single family homes compared to 409 for same period last year. The
preferred distribution to the seller totaled $2.5 million. 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, it has
a nominal residual interest value which 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.
-33-
<PAGE> 37
DOMESTIC HOME BUILDING
The following summarizes Domestic Home Building's results for the three
months ended June 30, 2000 compared to the same period for the prior year
(dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Revenues $ 3,446 $ 3,403
Cost of Sales (3,020) (2,933)
Selling, General & Administrative Expenses (422) (380)
------------- -------------
Operating Earnings $ 4 $ 90
============= =============
Units Closed 17 11
============= =============
Gross Margin Per Unit $ 25 $ 43
============= =============
</TABLE>
During the three months ended June 30, 2000 and 1999, revenues resulted
from sales of single-family homes in New Jersey.
COMMERCIAL DEVELOPMENT
The following summarizes Commercial Development's results for the
quarter ended June 30, 2000 compared to the same period for the prior year
(dollars and square feet in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Sales Revenues $ -- $ 442
Rental Income 2,380 644
Cost of Sales -- (288)
Selling, General & Administrative Expenses (1,481) (332)
Interest (1,007) (291)
------------- -------------
Operating (Loss) Earnings $ (108) $ 175
============= =============
Operating Square Feet 1,043 490
============= =============
</TABLE>
-34-
<PAGE> 38
During the quarter ended June 30, 2000, construction was completed on
67,000 square feet of office and industrial space. At June 30, 2000, the Company
owned, either directly or through interests in joint ventures, 1,043,000 square
feet of office and industrial buildings in California, Texas, Florida, North
Carolina and Massachusetts. This space consists of twelve properties ranging in
size from 11,000 square feet to 218,000 square feet. As of June 30, 2000, the
occupancy level ranged from 28% to 100%, with an average occupancy level of 85%.
The rental income from these properties increased during the quarter as compared
to the same period last year due to the addition of 550,000 square feet of
operating properties. Sales revenues for the quarter ended June 30, 1999
consisted of the sale of land in Texas.
MULTI-FAMILY DEVELOPMENT
The following summarizes Multi-Family Development's ("Multi-Family")
results for the quarter ended June 30, 2000 compared to the same period for the
prior year (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Other Revenues - Joint Venture Earnings $ 1,004 $ --
Selling, General & Administrative Expenses (476) (535)
Interest -- (12)
------------- -------------
Operating Earnings (Loss) $ 528 $ (547)
============= =============
</TABLE>
During the quarter ended June 30, 2000, Multi-Family closed on the sale
of a 182-unit apartment complex in College Station, Texas.
LAND SALES
The following summarizes Land Sales' results for the three months ended
June 30, 2000 compared to the same period for the prior year (dollars in
thousands):
<TABLE>
<CAPTION>
------------------------------
For the Three Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Sales Revenues $ -- $ 4,653
Other Revenues 115 --
Cost of Sales -- (4,247)
Selling, General & Administrative Expenses (146) (104)
------------- -------------
Operating (Loss) Earnings $ (31) $ 302
============= =============
</TABLE>
-35-
<PAGE> 39
Other Revenues included $47,000 of earnings in joint ventures and
$67,000 in interest income. Sales for the quarter ended June 30, 1999 comprised
lot sales to Centex Homes in Naples, Florida totaling $3.1 million plus the sale
of 5 acres of commercial property in The Colony, Texas.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended June 30, 2000, 1,346 Class C Preferred
Partnership Units were issued in exchange for assets with a fair market value of
$1.3 million. Also during the quarter ended June 30, 2000, the Companies drew
$6.0 million on existing project loans.
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.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this report on Form 10-Q contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may be
identified by the context of the statement and generally arise when the
Companies are discussing their beliefs, estimates or expectations. These
statements are not guarantees of future performance and involve a number of
risks and uncertainties. Actual results and outcomes may differ materially from
what is expressed or forecast in such forward-looking statements. The principal
risks and uncertainties that may affect the Companies' actual performance and
results of operations include the following: general economic conditions and
interest rates; the cyclical and seasonal nature of the Companies' businesses;
changes in property taxes; changes in federal income tax laws; governmental
regulation; changes in governmental and public policy; changes in economic
conditions specific to any one or more of the Companies' markets and businesses;
competition; availability of raw materials; and unexpected operations
difficulties. Other risks and uncertainties may also affect the outcome of the
Companies' actual performance and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 ended March 31,
2000.
-36-
<PAGE> 40
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(6) Exhibits
Exhibit 27.2 - Financial Data Schedule
Exhibit 27.3 - Financial Data Schedule
(2) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the
quarter ended June 30, 2000.
All other items required under Part II are omitted because they are not
applicable.
-37-
<PAGE> 41
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
August 11, 2000 /s/ Stephen M. Weinberg
--------------------------------------------------
Stephen M. Weinberg
Director and President
(principal executive officer)
August 11, 2000 /s/ Todd D. Newman
--------------------------------------------------
Todd D. Newman
Senior Vice President, Chief Financial Officer and
Treasurer
(principal financial officer and
chief accounting officer)
-38-
<PAGE> 42
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
August 11, 2000 /s/ Stephen M. Weinberg
---------------------------------------------------
Stephen M. Weinberg
Director and President
(principal executive officer)
August 11, 2000 /s/ Todd D. Newman
---------------------------------------------------
Todd D. Newman
Senior Vice President, Chief Financial Officer and
Treasurer
(principal financial officer and
chief accounting officer)
-39-
<PAGE> 43
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
27.1 Financial Data Schedule - Centex Corporation
27.2 Financial Data Schedule - 3333 Holding Corporation
27.3 Financial Data Schedule - Centex Development Company, L.P.
</TABLE>
