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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
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COMMISSION FILE NO. 1-6776 COMMISSION FILE NOS. 1-9624 AND 1-9625, RESPECTIVELY
CENTEX CORPORATION 3333 HOLDING CORPORATION AND
CENTEX DEVELOPMENT COMPANY, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
NEVADA NEVADA AND DELAWARE, RESPECTIVELY
(STATE OF INCORPORATION) (STATES OF INCORPORATION OR ORGANIZATION)
75-0778259 75-2178860 AND 75-2168471, RESPECTIVELY
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NOS.)
2728 N. HARWOOD, DALLAS, TEXAS 75201 2728 N. HARWOOD, DALLAS, TEXAS 75201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE)
(214) 981-5000 (214) 981-6770
(REGISTRANT'S TELEPHONE NUMBER) (REGISTRANTS' TELEPHONE NUMBER)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH NAME OF EACH
EXCHANGE ON WHICH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED TITLE OF EACH CLASS REGISTERED
-------------------- ---------------- ------------------- -----------------
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CENTEX CORPORATION 3333 HOLDING CORPORATION
COMMON STOCK NEW YORK STOCK EXCHANGE COMMON STOCK NEW YORK STOCK EXCHANGE
($.25 PAR VALUE) ($.01 PAR VALUE)
THE LONDON STOCK EXCHANGE THE LONDON STOCK EXCHANGE
LIMITED LIMITED
CENTEX DEVELOPMENT COMPANY, L.P.
WARRANTS TO PURCHASE NEW YORK STOCK EXCHANGE
CLASS B UNITS OF
LIMITED PARTNERSHIP THE LONDON STOCK EXCHANGE
INTEREST EXPIRING LIMITED
NOVEMBER 30, 2007
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether each registrant: (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that each such
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to Form 10-K. X
---
The aggregate market value of the tandem traded Centex Corporation common
stock, 3333 Holding Corporation common stock and Centex Development Company,
L.P. warrants to purchase Class B units of limited partnership interest held by
non-affiliates of the registrants on May 19, 2000 was approximately $1.3
billion.
Indicate the number of shares of each of the registrants' classes of
common stock (or other similar equity securities) outstanding as of the close
of business on May 19, 2000:
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Centex Corporation Common Stock 58,815,670 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 35,082 units
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in Parts
A.III and B.III of this Report:
(a) Proxy statements for the annual meetings of stockholders of Centex
Corporation and 3333 Holding Corporation held on July 27, 2000.
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JOINT ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
CENTEX CORPORATION AND SUBSIDIARIES
AND
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
JOINT EXPLANATORY STATEMENT
On November 30, 1987, Centex Corporation ("Centex" or the "Company")
distributed as a dividend (the "Distribution") to its stockholders (through a
nominee, the "Nominee") all of the issued and outstanding shares of the common
stock, par value $.01 per share ("Holding Common Stock"), of 3333 Holding
Corporation, a Nevada corporation ("Holding"), and 900 warrants (the
"Stockholder Warrants") to purchase Class B Units of limited partnership
interest in Centex Development Company, L.P., a Delaware limited partnership
(the "Partnership"). Pursuant to an agreement with the Nominee (the "Nominee
Agreement"), the Nominee is the recordholder of the Stockholder Warrants and
1,000 shares of Holding Common Stock, which constitute all of the issued and
outstanding capital stock of Holding, on behalf of and for the benefit of
persons who are from time to time the holders of the common stock, par value
$.25 per share ("Centex Common Stock"), of Centex ("Centex Stockholders"). Each
Centex Stockholder owns a beneficial interest in that portion of the 1,000
shares of Holding Common Stock and the Stockholder Warrants that the total
number of shares of Centex Common Stock held by such stockholder bears to the
total number of shares of Centex Common Stock outstanding from time to time.
This beneficial interest is not represented by a separate certificate or
receipt. Instead, each Centex Stockholder's beneficial interest in such pro
rata portion of the shares of Holding Common Stock and the Stockholder Warrants
is represented by the certificate or certificates evidencing such Centex
Stockholder's Centex Common Stock, and is currently tradeable only in tandem
with, and as a part of, each such Centex Stockholder's Centex Common Stock. The
tandem securities are listed and traded on the New York Stock Exchange and The
London Stock Exchange Limited and are registered with the Securities and
Exchange Commission (the "Commission") separately under Section 12(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Holding and
the Partnership were each organized in 1987 in connection with the
distribution. 3333 Development Corporation, a wholly-owned subsidiary of
Holding ("Development"), holds a 1% interest in, and is the sole general
partner of, the Partnership. Centex indirectly owns 100% of the Class A Units
and 100% of the Class C Units of limited partnership interest in the
Partnership, which units are collectively convertible into 20% of the Class B
Units of limited partnership in the Partnership. Please refer to the ownership
chart on page 2.
At present, Centex, Holding and the Partnership have elected to
satisfy their respective periodic reporting obligations under the Exchange Act,
and the rules and regulations promulgated thereunder, by preparing and filing
joint periodic reports. PART A of this Annual Report on Form 10-K for the
fiscal year ended March 31, 2000 (the "Report") relates to Centex and its
subsidiaries. PART B of this Report relates to Holding (and its subsidiary,
Development) and to the Partnership and its subsidiaries.
This Report should be read in conjunction with the proxy statements of
Centex and Holding in connection with their respective 2000 annual meetings of
stockholders, the Annual Report to Stockholders of Centex for the fiscal year
ended March 31, 2000 (the "Centex 2000 Annual Report") and the Annual Report to
Stockholders of Holding and the Partnership for the fiscal year ended March 31,
2000 (the "Holding/Partnership 2000 Annual Report"). For a complete
understanding of the tandem traded securities, PART A and PART B of this Report
should be read in combination.
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Information concerning the earnings and financial condition of the three
companies, on an aggregate basis, is included in Note (G) of the Notes to
Consolidated Financial Statements of Centex Corporation and subsidiaries on
pages 58-60 of this Report.
For a description of this ownership chart, please see the Joint Explanatory
Statement on the previous page.
OWNERSHIP CHART
[GRAPH]
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TABLE OF CONTENTS
FORM 10-K
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PAGE
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JOINT EXPLANATORY STATEMENT.................................................................. 1
PART A. CENTEX CORPORATION AND SUBSIDIARIES
PART I
Item 1. Business....................................................................... 5
Item 2. Properties..................................................................... 23
Item 3. Legal Proceedings.............................................................. 24
Item 4. Submission of Matters to a Vote of Security Holders............................ 24
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters................................................................. 25
Item 6. Selected Financial Data........................................................ 26
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.................................................... 27
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .................... 39
Item 8. Financial Statements and Supplementary Data.................................... 41
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................... 68
PART III
Item 10. Directors and Executive Officers of the Registrant............................. 68
Item 11. Executive Compensation......................................................... 68
Item 12. Security Ownership of Certain Beneficial Owners and Management................. 68
Item 13. Certain Relationships and Related Transactions................................. 68
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 69
SIGNATURES................................................................................... 70
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TABLE OF CONTENTS (CONTINUED)
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PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PART I
PAGE
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Item 1. Business....................................................................... 71
Item 2. Properties..................................................................... 76
Item 3. Legal Proceedings.............................................................. 78
Item 4. Submission of Matters to a Vote of Security Holders............................ 78
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder
Matters................................................................. 79
Item 6. Selected Financial Data........................................................ 81
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 82
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .................... 87
Item 8. Financial Statements and Supplementary Data.................................... 88
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................... 107
PART III
Item 10. Directors and Executive Officers of the Registrants............................ 107
Item 11. Executive Compensation......................................................... 110
Item 12. Security Ownership of Certain Beneficial Owners and Management................. 112
Item 13. Certain Relationships and Related Transactions................................. 115
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 118
SIGNATURES................................................................................... 119,120
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INDICES TO EXHIBITS
CENTEX CORPORATION AND SUBSIDIARIES.......................................................... 121
3333 HOLDING CORPORATION AND SUBSIDIARY...................................................... 124
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES............................................ 126
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PART A.
CENTEX CORPORATION AND SUBSIDIARIES
PREFATORY STATEMENT
PART A of this Report (pages 5 through 70) includes information
relating to Centex Corporation and subsidiaries ("Centex" or the "Company"),
File No. 1-6776. See Joint Explanatory Statement on page 1 of this Report.
References to Centex or the Company in this Report include Centex and its
subsidiaries unless the context otherwise states. PART B of this Report (pages
71 through 120) includes information relating separately to 3333 Holding
Corporation ("Holding") and its subsidiary, 3333 Development Corporation
("Development"), and to Centex Development Company, L.P. and subsidiaries
("Partnership").
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Centex is incorporated in the state of Nevada. The Company's common
stock, par value $.25 per share ("Centex Common Stock"), began trading publicly
in 1969. As of May 19, 2000, 58,815,670 shares of Centex Common Stock, which are
traded on the New York Stock Exchange ("NYSE") and The London Stock Exchange
Limited, were outstanding.
Since its founding in 1950 as a Dallas, Texas-based residential and
commercial construction company, Centex has evolved into a multi-industry
company. Centex currently operates in five principal business segments: Home
Building, Investment Real Estate, Financial Services, Construction Products, and
Contracting and Construction Services. A brief overview of each segment is
provided below and a more detailed discussion of each segment is provided later
in this section.
Centex's Home Building business has expanded to include both
conventional homes and manufactured homes. Centex is one of the nation's largest
home builders. Centex's Conventional Homes operations currently involve the
construction and sale of single-family homes, town homes, and low-rise
condominiums and also includes the purchase and development of land. Centex has
participated in the conventional home building business since 1950. Centex
entered the Manufactured Homes business in fiscal 1997 when Centex Real Estate
Corporation ("Real Estate") acquired approximately 80% of the predecessor of
Cavco Industries, LLC. During the fourth quarter of fiscal 2000 the Company
acquired the remaining 20% of minority interest in Cavco. As used herein,
"Cavco" refers to the manufactured housing group of the Company, which includes
the manufacture of residential and park model homes and their sale through
company-owned retail outlets and a network of independent dealers.
Centex's Investment Real Estate operations involve the acquisition,
development and sale of land, and the development of industrial, office, retail
and mixed-use projects.
Centex's Financial Services operations involve the financing of
conventional homes, home equity and sub-prime lending and the sale of title
insurance and various other insurance coverages. These activities
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include mortgage origination and other related services for homes sold by Centex
subsidiaries and third parties. Centex has been in the mortgage banking business
since 1973.
Centex's involvement in the Construction Products business started in
1963 when it began construction of its first cement plant. Since that time, this
segment has expanded to include additional cement production and distribution
and the production, distribution and sale of gypsum wallboard, readymix concrete
and aggregates. During the quarter ended June 30, 1994, Centex Construction
Products, Inc. ("Construction Products") completed an initial public offering of
51% of its stock and began trading on the NYSE under the symbol "CXP." Primarily
as a result of Construction Products' repurchase of its own stock during the
quarter ended June 30, 1996, Centex's ownership interest increased to more than
50%. Primarily due to additional stock repurchases by Construction Products,
Centex's ownership interest has increased to 64.4% as of March 31, 2000.
Accordingly, Construction Products' fiscal 2000, 1999, and 1998 financial
results have been consolidated with those of Centex.
Centex entered the Contracting and Construction Services business in
1966 by acquiring a Dallas-based contractor that had been in business since
1936. Additional significant construction companies were acquired in 1978, 1982,
1987, and 1990. Centex currently ranks among the nation's largest general
building contractors. The Company's contracting and construction activities
involve the construction of buildings for both private and government interests,
including office, commercial and industrial buildings, hospitals, hotels,
museums, libraries, airport facilities and educational institutions.
In fiscal 1988, Centex established Centex Development Company, L.P.
Please refer to PART B of this Report for a discussion of the business of the
Partnership.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Note (J) of the Notes to Consolidated Financial Statements of Centex on
pages 61-64 of this Report contains additional information about the Company's
business segments for the fiscal years ended March 31, 2000, 1999 and 1998
("fiscal 2000," "fiscal 1999," and "fiscal 1998," respectively).
NARRATIVE DESCRIPTION OF BUSINESS
HOME BUILDING
CONVENTIONAL HOMES
Centex Homes, Centex's conventional home building operation, is
primarily involved in the purchase and development of land or lots and the
construction and sale of single-family homes, town homes, and low-rise
condominiums. Centex Homes currently operates in 439 neighborhoods in 77
different markets. Centex Homes is one of the leading U.S. builders of
single-family detached homes, as measured by the number of units sold and closed
in a calendar year. Centex Homes is also the only company to rank among the
nation's top 10 home builders for each of the past 32 years according to
Professional Builder magazine. Centex Homes sells to both first-time and move-up
buyers. Approximately 89% of the houses Centex Homes sells are single-family
detached homes and the remainder are town homes and low-rise condominiums.
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Markets
Centex Homes follows a strategy of reducing exposure to local market
volatility by spreading operations across geographically and economically
diverse markets. Centex Homes currently builds in 77 market areas in 20 states
and in Washington, D. C. The markets are listed below by geographic areas.
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WEST California -
Vallejo/Fairfield/Napa Visalia/Tulare/Porterville
Oakland Riverside/San Bernardino
Kings County Orange County
Sacramento Los Angeles/Long Beach
Bakersfield Ventura
Fresno San Diego
San Luis Obispo
Nevada - Oregon-
Reno Portland/Vancouver
Las Vegas Salem
Washington State - Eugene
Seattle/Bellevue/Everett
Tacoma
MIDWEST Ohio -
Akron Hamilton/Middletown
Canton/Massillon Toledo
Cincinnati Youngstown/Warren
Cleveland/Lorain/Elyria Mansfield
Columbus Steubenville/Weirton
Dayton/Springfield
Chicago, Illinois Colorado -
Minneapolis/St. Paul, Minnesota Denver
Indianapolis, Indiana Boulder/Longmont
EAST North Carolina - Virginia -
Charlotte/Gastonia/Rock Hill Richmond/Petersburg
Raleigh/Durham/Chapel Hill Norfolk/Virginia Beach/Newport
Wilmington Washington, D.C.
South Carolina - New Jersey -
Columbia Trenton
Greenville/Spartanburg/Anderson Middlesex/Somerset/Hunterdon
Charleston/N. Charleston Monmouth/Ocean
Hilton Head Nashville, Tennessee
Myrtle Beach Atlanta, Georgia
Philadelphia, Pennsylvania
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SOUTHEAST Florida -
Jacksonville Naples
Daytona Beach Ft. Myers/Cape Coral
Tampa/St. Petersburg/Clearwater West Palm Beach/Boca Raton
Sarasota/Bradenton Melbourne/Titusville
Orlando Ft. Lauderdale
Lakeland/Winter Haven Miami
Ft. Pierce Punta Gorda
SOUTHWEST Texas -
Dallas San Antonio
Ft. Worth/Arlington Galveston
Houston Killeen/Temple
Austin/San Marcos
Arizona - Albuquerque, New Mexico
Phoenix/Mesa
Prescott
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In fiscal 2000, Centex Homes closed 18,904 houses, including
first-time, move-up and, in some markets, custom homes ranging in price from
approximately $37,000 to about $1.3 million with the average sale price being
approximately $191,568.
Centex Homes' policy has been to acquire land with the intent to
complete the sale of housing units within approximately 24 to 36 months from the
date of acquisition. Generally this involves acquiring land that is properly
zoned and is either ready for development or, to some degree, already developed.
Wayne Homes, which was acquired in fiscal 1999, builds single-family
homes in the "build-on-owner's lot" market segment. 765 units were closed in
fiscal 2000. Wayne Homes currently operates in Ohio and Indiana, and has plans
to expand into other states.
Centex Homes has acquired a substantial amount of its finished and
partially improved lots and land under option agreements that are exercised over
specified time periods, or in certain cases, as the lots are needed. The
purchase of finished lots generally allows Centex Homes to shorten the lead time
to commence construction and reduces the risks of unforeseen improvement costs
and volatile market conditions.
Summarized below by geographic area are Centex Homes' home closings,
sales (orders) backlog and sales (orders) for the five fiscal years ended March
31.
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For the Years Ended March 31,
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2000 1999 1998 1997 1996
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CLOSINGS (IN UNITS):
West 3,917 3,060 2,964 2,955 2,347
Midwest 3,089 2,062 1,147 1,337 1,276
East 4,134 3,309 2,650 2,875 2,804
Southeast 3,066 2,582 2,400 2,334 2,241
Southwest 4,698 3,779 3,257 3,606 3,302
------- ------- ------- ------- -------
18,904 14,792 12,418 13,107 11,970
======= ======= ======= ======= =======
AVERAGE SALES
PRICE (IN 000'S) $ 192 $ 186 $ 183 $ 172 $ 164
======= ======= ======= ======= =======
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For the Years Ended March 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
----- ----- ----- ----- -----
SALES (ORDERS) BACKLOG, AT THE END OF PERIOD (IN UNITS):
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West 1,099 921 991 968 980
Midwest 1,628 1,355 433 441 652
East 1,519 1,392 963 861 1,121
Southeast 1,582 1,500 1,136 919 1,106
Southwest 1,751 1,624 1,393 1,119 1,674
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7,579 6,792 4,916 4,308 5,533
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For the Years Ended March 31,
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2000 1999 1998 1997 1996
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SALES (ORDERS) (IN UNITS):
West 3,966 2,990 2,987 2,943 2,724
Midwest 3,207 2,515 1,139 1,126 1,486
East 4,261 3,466 2,752 2,615 3,007
Southeast 3,148 2,950 2,617 2,147 2,455
Southwest 4,825 4,010 3,531 3,051 3,844
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19,407 15,931 13,026 11,882 13,516
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Competition and Other Factors
The conventional housing industry is essentially a "local" business and
is highly competitive. Centex Homes competes in each of its market areas with
numerous other homebuilders. Centex Homes' operations account for approximately
1% of the total housing starts in the United States. The main competitive
factors affecting Centex Homes' operations are location, price, cost of
providing mortgage financing for customers, construction costs, design and
quality of homes, marketing expertise, availability of land and reputation.
Management believes that Centex Homes competes effectively by maintaining
geographic diversity, being responsive to the specific demands of each market
and managing the operations at a local level.
The home building industry is cyclical and is particularly affected by
changes in local economic conditions and in long-term and short-term interest
rates and, to a lesser extent, changes in property taxes and energy costs,
federal income tax laws, federal mortgage financing programs and various
demographic factors. The political and economic environments affect both the
demand for housing constructed and subsequent cost of financing. Unexpected
climatic conditions, such as unusually heavy or prolonged rain or snow, may
affect operations in certain areas.
The housing industry is subject to extensive and complex regulations.
Centex Homes and its subcontractors must comply with various federal, state and
local laws and regulations including worker health and safety, zoning, building,
advertising, consumer credit rules and regulations and the extensive and
changing federal, state and local laws, regulations and ordinances governing the
protection of the environment ("Environmental Laws"), including the protection
of endangered species. Centex Homes is also subject to other rules and
regulations in connection with its manufacturing and sales activities, including
requirements as to incorporated building materials and building designs. All of
the foregoing regulatory requirements are applicable to all home building
companies, and to date, compliance with the foregoing requirements has not had a
material impact on Centex Homes. Centex Homes believes that it is in material
compliance with these requirements.
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Centex purchases materials, services and land from numerous sources and
believes that it can deal effectively with any problems it may experience
relating to the supply or availability of materials, services, and land.
MANUFACTURED HOMES
Cavco operations include the manufacture of residential and park model
homes and the sale thereof through company-owned retail outlets and a network of
independent dealers. The Company entered the manufactured homes industry in
fiscal 1997, when Real Estate acquired approximately 80% of the predecessor of
Cavco Industries, LLC for a total of $74.3 million. During fiscal 1998, Cavco
purchased substantially all of the assets of AAA Homes, Inc., Arizona's largest
retailer of manufactured homes, marking Cavco's entry into the retailing of
manufactured homes. During the fourth quarter of fiscal 2000, the Company
acquired the remaining 20% minority interest in Cavco.
Markets
Cavco is the largest producer of manufactured homes in Arizona and New
Mexico and is the nation's largest producer of park model homes, having built
5,686 manufactured housing units during fiscal 2000. Cavco currently operates
five manufacturing plants: three in the Phoenix area, one in Belen, New Mexico,
which opened in August 1997, and one in central Texas, which opened in January
1999.
Cavco sells its manufactured homes through company-owned retail outlets
and a network of independent dealers. As of March 31, 2000, Cavco had its
products in approximately 276 outlets in 13 states, Canada and Japan, of which
there were approximately 121 in Arizona, 54 in New Mexico, 31 in Texas, 23 in
Colorado, 20 in California, 12 in Utah, 3 in Nevada, 2 each in Washington,
Wyoming, Idaho, and Oregon, and 1 each in Oklahoma, Arkansas, Japan, and Canada.
Twenty-three of these outlets are company-owned, 13 of which sell Cavco's
product exclusively: 10 in Arizona, 9 in Texas, 3 in New Mexico, and 1 in
Colorado. In addition, Cavco is selling its products exclusively at its first
manufactured home community development in New Mexico. Many of Cavco's
independent dealers operate more than one retail outlet. Most of Cavco's
independent dealers sell competing products, although from time to time Cavco
also may enter into exclusive agreements with certain dealers. The independent
dealers set their own retail prices of Cavco's manufactured homes.
Cavco's dealers finance their purchase of manufactured homes through
floor plan financing arrangements with third-party lenders. Generally, Cavco
receives a commitment from the dealer's lender for each order, which is
earmarked for the home ordered, identified by its serial number. Cavco then
manufactures the home and ships it at the dealer's expense. Payment is due from
the lender upon the dealer's notice of delivery and acceptance of the product.
The length of time it takes to manufacture and ship a home after an order is
placed varies according to Cavco's backlog.
Cavco is contingently liable under terms of repurchase agreements with
the lenders that provide dealer floor plan financing arrangements. These
arrangements, which are customary in the industry, provide for the repurchase of
the manufacturer's products in the event that the dealer defaults on payments.
The risk of loss is spread over numerous dealers and financing institutions and
is further offset by the resale value of repurchased units. Cavco has not
incurred any significant losses from these arrangements since its inception.
Cavco extends a limited warranty to original retail purchasers of its
manufactured homes. Cavco warrants structural and nonstructural components for
12 months. Its warranty does not extend to installation, setup or appliances.
Appliances are warranted by their original manufacturer.
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Cavco's backlog of orders for manufactured homes was approximately
$1.9 million (86 units) as of March 31, 2000 and $13.4 million (526 units) as
of March 31, 1999. Cavco currently requires two to three weeks, on average, to
fill an order. Cavco anticipates that the entire backlog at March 31, 2000 will
be filled during fiscal 2001.
Competition and Other Factors
Cavco estimates that there are seven other manufacturers competing for
a significant share of the Arizona and New Mexico areas. Cavco believes that its
business (based on total sales) represents an approximate 32% share of the
Arizona area, 14% share of the New Mexico area and smaller shares of market
areas in other states in which it does business. Cavco believes the principal
factors affecting competition in the manufactured housing market are price,
design, product quality and reliability, distribution network, retail financing,
and brand recognition.
Cavco has not experienced any material difficulty in purchasing its raw
materials or component parts. Cavco buys wood, wood products, aluminum, steel,
tires, hardware, windows and doors from manufacturers and distributors located
primarily in California, Texas, and Arizona. Approximately 39% of the unit cost
of Cavco's manufactured homes is attributable to raw wood products. The majority
of the other component parts purchased for its homes are third-party
manufactured components.
The Company believes that compliance with federal, state and local
environmental laws will not have a material adverse effect on its capital
expenditures, earnings or competitive position.
INVESTMENT REAL ESTATE
The Investment Real Estate Group is involved in the acquisition,
development and sale of land, and the development of industrial, retail,
mixed-use, and apartment complexes.
In fiscal 1996, the Company acquired certain equity interests in Vista
Properties, Inc. ("Vista") which owned a real estate portfolio of properties
located in seven states in which the Company has significant operations. Vista's
real property portfolio generally consisted of land zoned, planned or developed
for single- and multi-family residential, office, retail, industrial and other
commercial uses. During fiscal 1997, Real Estate completed a business
combination transaction and reorganization with Vista whereby Centex's Home
Building assets and operations were contributed to Vista, and Vista changed its
name to Centex Real Estate Corporation. As a result of the combination, Centex's
investment real estate portfolio 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 recorded as a result of the
business combination is being amortized to earnings over the estimated period
over which the land will be developed, sold or realized.
As of March 31, 2000, the Investment Real Estate Group's property
portfolio consisted of land located in eight states: Texas, New Jersey, Florida,
North Carolina, California, Tennessee, Virginia, and Colorado. The Company has
major conventional homes operations in most markets where Investment Real Estate
owns substantial property.
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The land held, by state, at March 31, 2000 is set forth in the
following table:
<TABLE>
<CAPTION>
State Acres Zoning
---------------- ------ ----------------------------------------
<S> <C> <C>
Texas 704 Industrial, Office, Retail & Residential
New Jersey 345 Industrial, Office & Residential
California 177 Industrial, Office & Residential
North Carolina 165 Industrial, Office & Residential
Florida 69 Industrial, Office, Retail & Residential
Virginia 48 Residential
Tennessee 42 Residential
Colorado 3 Residential
-----
1,553
=====
</TABLE>
At March 31, 2000, the Investment Real Estate Group also owned either
directly, through interests in joint ventures, or through its ownership of a
limited partner interest in the Partnership, two multi-family communities
totaling 572 units located in Grand Prairie and College Station, Texas, as well
as 1,166,000 square feet of industrial, office, and retail buildings in
California, Arizona, Texas, Florida, North Carolina, and Massachusetts. During
fiscal 2000, the Partnership began construction on a 382-unit apartment
community in St. Petersburg, Florida and 500,000 combined square feet of
industrial and office space in Florida, California, Texas, and North Carolina.
All of the projects under construction at March 31, 2000 are scheduled for
completion during fiscal 2001. Many of the areas targeted for development
include land owned by the Company or its affiliates.
FINANCIAL SERVICES
Financial Services operations involve the financing of conventional
homes, home equity and sub-prime lending and the sale of title insurance and
various other insurance coverages. These activities include mortgage origination
and other related services for homes sold by Centex subsidiaries and other third
parties.
Conforming Mortgage Banking
CTX Mortgage Company ("CTX Mortgage") was established in 1973 to
provide mortgage financing for homes built by Centex Homes. The opening of CTX
Mortgage offices in Centex Homes' housing markets has enabled it to provide
mortgage financing for an average of 72% of the homes built by Centex Homes
("Builder Loans") over the past five years. However, in fiscal 2000 this capture
rate fell to 61% of Centex Homes' sales, principally because of Centex Homes'
expansion into geographic markets where CTX Mortgage had not yet established
operations.
In 1985, CTX Mortgage expanded its operations to include third-party
loans ("Retail Loans") that are not associated with the sale of homes built by
Centex. At March 31, 2000 CTX Mortgage had 221 offices located in 37 states. The
offices vary in size depending on loan volume in each locality.
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The unit breakdown of Builder and Retail Loans for CTX Mortgage for the
five years ended March 31, 2000 are set forth in the following table:
<TABLE>
<CAPTION>
For the Years Ended March 31,
----------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
LOAN TYPES:
Builder 10,958 9,882 8,748 9,483 8,440
Retail 49,404 66,496 44,096 33,579 32,706
------ ------ ------ ------ ------
60,362 76,378 52,844 43,062 41,146
====== ====== ====== ====== ======
ORIGINATION VOLUME (IN BILLIONS) $ 8.1 $ 10.1 $ 6.7 $ 5.2 $ 4.9
PERCENT OF CENTEX CLOSINGS FINANCED 61% 70% 75% 77% 75%
</TABLE>
CTX Mortgage provides mortgage origination and other mortgage-related
services for the Federal Housing Administration ("FHA"), Department of Veterans'
Affairs ("VA") and conventional loans on homes built and sold by the Company or
by others, as well as resale homes. CTX Mortgage's loans are generally
first-lien mortgages secured by one- to four-family residences. A majority of
the conventional loans qualify for inclusion in guaranteed programs sponsored by
Fannie Mae or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Such
loans are known in the industry as "conforming" loans. The remainder of the
loans are either pre-approved and individually underwritten by CTX Mortgage or
private investors who subsequently purchase the loans on a whole loan basis or
are funded by private investors who pay a broker fee to CTX Mortgage for
referring a loan.
CTX Mortgage's principal sources of income are from loan origination
fees, revenues from sale of servicing rights, positive carry (discussed below)
and marketing gains and losses. Generally, CTX Mortgage sells its right to
service the mortgage loans to various loan servicing companies, and therefore
retains no mortgage servicing rights. CTX Mortgage enters into various financial
agreements, in the normal course of business, in order to manage the exposure to
changing interest rates as a result of having issued loan commitments to its
customers at a specified price and period. By selling the mortgages for future
delivery at a specified price, the interest rate risk is mitigated.
CTX Mortgage borrows money at short-term rates to fund its mortgage
loans. During the 30- to 60-day period between the closing of a loan and
delivery of the loan to the purchaser, CTX Mortgage earns the interest accrued
on the mortgage, which is normally a higher interest rate than the rate paid on
the short-term loans used to fund the mortgage during this 30- to 60-day
holding period. This positive spread between the long-term interest rate earned
and the short-term interest rate paid is referred to as "positive carry," and
generally represents an important source of income.
CTX Mortgage also participates in joint-venture agreements with
third-party home builders to provide mortgage originations for their homes. At
March 31, 2000, CTX Mortgage had 32 of these agreements, operating in 55 offices
in 12 states.
In December 1999, CTX Mortgage entered into a revolving sales agreement
under which an unaffiliated buyer, Centex Home Mortgage, LLC ("CHM"), a special
purpose entity, committed to purchase, at CTX Mortgage's option, mortgage loans
originated by CTX Mortgage on a daily basis, up to CHM's asset limit of $1.5
billion. Under the terms of the sales agreement, CTX Mortgage is the sole
manager of CHM and, in that capacity, arranges for the sale of such loans into
the secondary market. For a subservicing fee,
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<PAGE> 15
CTX Mortgage also acts as servicer of these mortgage loans for CHM until CHM
sells the loans. At March 31, 2000, CTX Mortgage was servicing approximately
$704 million of mortgage loans owned by CHM.
Home Equity and Sub-Prime Lending
Centex Credit Corporation, a Nevada corporation doing business as
Centex Home Equity Corporation ("Home Equity"), is a Fannie Mae approved
sub-prime mortgage lender formed in fiscal 1995 and engaged in the origination
of primarily nonconforming home equity loans. The sub-prime lending market
comprises borrowers whose financing needs are not being met by traditional
mortgage lenders for a variety of reasons including credit histories that may
limit such borrower's access to credit or the borrower's need for specialized
loan products. Since its inception, Home Equity has focused on lending to
individuals who have substantial equity in their homes but have impaired or
limited credit histories. Home Equity's mortgage loans to these borrowers are
made for such purposes as debt consolidation, refinancing, home improvement or
educational expenses. Substantially all of Home Equity's mortgage loans are
secured by first or second mortgage liens on one- to four-family residences, and
have amortization schedules ranging from 5 to 30 years.
At March 31, 2000, Home Equity had 138 offices doing business in 48
states. Home Equity originates home equity loans through four major origination
sources: 1) retail branch network, 2) broker referral network, 3) referrals from
its affiliated conforming mortgage company, CTX Mortgage, and 4) Home Equity's
direct sales unit, which sources loans through telemarketing and direct mail
efforts.
The following table summarizes origination statistics for the five
years ended March 31, 2000.
<TABLE>
<CAPTION>
For the Years Ended March 31,
-------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
LOANS 20,568 15,582 7,982 4,100 450
ORIGINATION VOLUME (IN BILLIONS) $ 1.3 $ 1.0 $ 0.5 $ 0.2 $.03
</TABLE>
Home Equity began servicing loans in fiscal 1997. The servicing fees
paid for sub-prime loans are significantly higher than for conforming loans.
Servicing encompasses, among other activities, the following processes: billing,
collection of payments when due, movement of cash to the payment clearing bank
accounts, investor reporting, customer help, reconveyance, recovery of
delinquent installments, instituting foreclosure, and liquidation of the
underlying collateral. As of March 31, 2000, Home Equity was servicing a
portfolio of approximately $2.1 billion.
Commencing in October 1997, a majority of Home Equity's volume has been
accumulated for securitizations in which Home Equity retains the residual
interest as well as the servicing rights to the securitized loans. The remainder
of the loans are sold to investors on a whole-loan sale basis. In February 1998,
Home Equity completed its first securitization of $175 million of sub-prime home
equity mortgage loans. Subsequently, Home Equity has completed additional
securitizations totaling $890 million in fiscal 1999 and $1.3 billion in fiscal
2000.
Home Equity's securitizations entered into prior to March 31, 2000 had
legal and economic structures that caused such securitizations to be accounted
for as sales, and the resulting gains on such sales were reported in operating
results during the period in which the securitization closed. Home Equity will
change the legal and economic structure of securitizations that will occur
subsequent to March 31, 2000, which will require that such future
securitizations be accounted for as borrowings.
14
<PAGE> 16
Home Equity's principal sources of income are from gains on
securitizations and whole loan sales, loan origination fees, revenues from the
sale of servicing rights, positive carry, and servicing fees.
Other Financial Services Operations
At the beginning of fiscal 2000, Centex's Title operations were located
principally in Texas, Florida, Virginia, and Maryland. During fiscal 2000 the
Company acquired Benefit Land Title Company and Benefit Land Title Insurance
Company which expanded the Company's title insurance operations into California.
Through Westwood Insurance, a multi-line insurance broker acquired during fiscal
1999, homeowners and hazard insurance is marketed to customers of Centex Homes
and approximately 228 other home builders in 45 states. Westwood also writes
coverage for certain commercial customers.
Centex Financial Services, Inc. ("CFS"), the parent of all companies
within the Financial Services Group, acquired a controlling interest in
substantially all of the assets of Advanced Financial Technology, Inc.
("Adfitech") and Loan Processing Technologies, Inc. ("Loan Processing") in
fiscal 1997 and of Adfinet, Inc. ("Adfinet") in fiscal 1998, all of which are
headquartered in Oklahoma City, Oklahoma. During fiscal 1999, CFS acquired the
minority interest in these three operations. Adfitech is a provider of mortgage
quality control services. Loan Processing owns and operates an automated
mortgage processing system and Adfinet provides the mortgage industry with
regulations and guidelines in an electronic format. These acquisitions expanded
the products and services that the Financial Services Group offers to the
mortgage industry.
Competition and Other Factors
The mortgage banking industry in the United States is highly
competitive. CTX Mortgage competes with other mortgage banking companies as well
as financial institutions to supply mortgage financing at attractive rates to
purchasers of Centex homes as well as to the general public. Home Equity
competes with other sub-prime lenders as well as financial institutions to
supply sub-prime financing at attractive rates. The Title and Insurance
operations compete with numerous other providers of title and insurance products
to purchasers of Centex homes and as well as to the general public. During
fiscal 2000, Financial Services continued to operate in a very competitive
environment.
Other Legal Considerations
The Financial Services operations are subject to extensive state and
federal regulations as well as the rules and regulations of, and examinations
by, Fannie Mae, Freddie Mac, FHA, VA, Department of Housing and Urban
Development ("HUD"), Government National Mortgage Association ("GNMA") and state
regulatory authorities with respect to originating, processing, underwriting,
making, selling, securitizing and servicing loans. In addition, there are other
federal and state statutes and regulations affecting such activities. These
rules and regulations, among other things, impose licensing obligations on
Financial Services, specify standards for origination procedures, establish
eligibility criteria for mortgage loans, provide for inspection and appraisals
of properties, regulate payment features and, in some cases, fix maximum
interest rates, fees and loan amounts. The Financial Services operations are
required to maintain specified net worth levels and submit annual audited
financial statements to HUD, VA, FNMA, FHLMC and GNMA and certain state
regulators. As an approved FHA mortgagee, CTX Mortgage is subject to examination
by the Federal Housing Commissioner at all times to ensure compliance with FHA
regulations, policies and procedures. Among other federal and state consumer
credit laws, mortgage origination and servicing activities are subject to the
Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting
Act, the Federal Truth-In-Lending Act, the Real Estate Settlement Procedures
Act, the Riegle Community Development and Regulatory Improvement Act, the Home
Ownership and Equity Protection Act, and the regulations
15
<PAGE> 17
promulgated under such statutes. These statutes prohibit discrimination and
unlawful kickbacks and referral fees and require the disclosure of certain
information to borrowers concerning credit and settlement costs. Many of these
regulatory requirements are designed to protect the interest of consumers,
while others protect the owners or insurers of mortgage loans. Failure to
comply with these requirements can lead to loss of approved status, demands for
indemnification or loan repurchases from investors, class action lawsuits by
borrowers, administrative enforcement actions and, in some cases, rescission or
voiding of the loan by the consumer.
CONSTRUCTION PRODUCTS
Construction Products' operations include the manufacture, production,
distribution and sale of cement (a basic construction material which is the
essential binding ingredient in concrete), gypsum wallboard, readymix concrete
and aggregates (sand and gravel).
During the quarter ended June 30, 1994, Construction Products completed
an initial public offering of 51% of its stock and began trading on the NYSE
under the symbol "CXP." Primarily as a result of Construction Products'
repurchase of its own stock during fiscal 2000, 1999, 1998, and 1997, Centex's
ownership increased to 51.4% as of March 31, 1997, and to 64.4% as of March 31,
2000. Accordingly, Construction Products' financial statements for the years
ended March 31, 2000, 1999, and 1998 have been consolidated with those of
Centex. References to Construction Products include its subsidiaries unless the
context states otherwise.
CEMENT
Construction Products operates cement plants near Buda, Texas; LaSalle,
Illinois; Fernley, Nevada; and Laramie, Wyoming. The plants in Buda and LaSalle
are owned by separate joint ventures in which Construction Products has a 50%
interest. The kiln start-up dates of the cement plants were as follows: Buda,
Texas, 1978 (expanded 1983); LaSalle, Illinois, 1974; Fernley, Nevada (2 kilns),
1964 and 1969 and Laramie, Wyoming (2 kilns), 1988 and 1996. All four of the
cement plants are fuel-efficient dry process plants.
Construction Products' net cement production, excluding the joint
venture partners' 50% interest in the Buda and LaSalle plants, totaled
approximately 2.0 million tons in both fiscal 2000 and 1999. Total net cement
sales were 2.3 million tons in fiscal 2000 and 2.2 million tons in fiscal 1999,
as all four cement plants sold the entire product they produced. During the past
three years, Construction Products purchased cement from others to be resold. In
fiscal 2000, 12.2% of the cement sold by Construction Products was acquired from
outside sources, compared to 6.9% in fiscal 1999.
Raw Materials and Fuel Supplies
The principal raw material used in the production of portland cement is
calcium carbonate in the form of limestone. Limestone is obtained principally
through the mining and extraction operations conducted at quarries owned or
leased by Construction Products or joint ventures and located in close proximity
to the plants. Other raw materials used in substantially smaller quantities than
limestone are sand, clay, iron ore and gypsum, which are either obtained from
reserves owned or leased by Construction Products or joint ventures or are
purchased from outside suppliers and are readily available. Construction
Products' management believes that the estimated recoverable limestone reserves
owned or leased by it or its joint ventures will permit each of its plants to
operate at its present production capacity for at least 30 years or, in the case
of the Fernley plant, at least 15 years. Construction Products' management
expects that additional limestone
16
<PAGE> 18
reserves for its Fernley plant will be available when needed on an economically
feasible basis, although they may be more distant and more expensive to
transport than existing reserves.
The cement plants use coal and coke as their primary fuel, but are
equipped to burn natural gas as an alternative. Hazardous waste-derived fuels
have not been used in the plants. The Buda and LaSalle plants have been
permitted to burn scrap tires as a partial fuel alternative. Electric power is
also a major cost component in the manufacture of cement. Construction Products
has sought to diminish overall power costs by adopting interruptible power
supply agreements which may expose the plants to some production interruptions
during periods of power curtailment.
Sales and Distribution
The principal geographic markets for Construction Products' cement are
Texas and western Louisiana (serviced by the Buda, Texas plant); Illinois and
southern Wisconsin (serviced by the LaSalle, Illinois plant); Nevada (except Las
Vegas) and northern California (serviced by the Fernley, Nevada plant); and
Wyoming, Utah, northern Colorado, western Nebraska and eastern Nevada (serviced
by the Laramie, Wyoming plant).
Distribution of cement is generally made by common carriers, customer
pickup and, to a lesser extent, by trucks owned and operated by Construction
Products. In addition, cement is transported principally by rail to storage and
distribution terminals located in Roanoke (in the Dallas-Ft.Worth area), Waco,
Corpus Christi, Houston and Orange, Texas; Hartland, Wisconsin; Sacramento,
California; Denver, Colorado; Salt Lake City, Utah; Rock Springs, Wyoming and
North Platte, Nebraska, from which further distribution occurs.
Cement produced by the cement plants is sold primarily to readymix
concrete producers and paving contractors. No single customer accounted for as
much as 10% of total cement sales during fiscal 2000.
Competition and Other Factors
The cement business is extremely competitive. In every geographic area
in which Construction Products sells cement, one or more other domestic
producers compete for the available business. In addition, foreign companies
compete in most sales areas by importing cement into the United States. The
number of principal competitors of the Buda, LaSalle, Fernley and Laramie plants
are six, six, six and four, respectively, operating in these geographic areas.
Construction Products competes by operating efficient cement plants,
merchandising a high quality product and providing good service and competitive
pricing. Cement is also sold from terminals to expand each cement plant's
selling area.
GYPSUM WALLBOARD
Construction Products owns and operates three gypsum wallboard
manufacturing facilities, two located in Albuquerque and nearby Bernalillo, New
Mexico and one located in Gypsum, Colorado (near Vail). In February 1997,
Construction Products purchased a company that owned the gypsum wallboard plant
and accompanying electric power cogeneration facility in Gypsum, Colorado. The
plant originally commenced production in early 1990 and had been operated by an
independent producer until its acquisition by Construction Products. Expansions
of the Albuquerque and Colorado plants totaling $10.8 million in fiscal 2000 and
$24.2 million in fiscal 1999 were made as part of upgrade projects.
Construction Products mines and extracts gypsum and then manufactures
gypsum wallboard by first pulverizing quarried gypsum, then placing it in a
calciner for conversion into plaster. The plaster is mixed with various
chemicals and water to produce a mixture known as slurry, which is inserted
between two
17
<PAGE> 19
continuous sheets of recycled paperboard on a high-speed production line and
allowed to harden. The resulting sheets of gypsum wallboard are then cut to
appropriate lengths, dried and bundled for sale.
Raw Materials and Fuel Supplies
Construction Products mines and extracts gypsum rock, the principal raw
material used in the manufacture of wallboard, from mines and quarries owned,
leased or subject to claims owned by Construction Products and located near its
plants. The New Mexico and Colorado mines and quarries are estimated to contain
approximately 50 million tons and 21 million tons of proven and probable gypsum
reserves, respectively. Based on its current production capacity, Construction
Products' management estimates that the life of its existing gypsum rock
reserves is approximately 80 years in New Mexico and 35 years in Colorado.
Paper used in manufacturing gypsum wallboard is purchased by
Construction Products from third-party suppliers. Approximately 90% of
Construction Products' paper requirements are under two evergreen paper
contracts, with both contracts having a twelve-month notice provision for
termination. The remainder of Construction Products' paper requirements is
purchased on the open market from various suppliers. Centex does not believe
that the loss of any one supplier would have a material adverse effect on its
business.
Construction Products' wallboard plants use large quantities of natural
gas and electrical power. Power for the Gypsum, Colorado plant is supplied by
the cogeneration power facility that was acquired along with the gypsum
wallboard plant.
Sales and Distribution
The principal sources of demand for gypsum wallboard are residential
and non-residential construction, repair and remodeling. While the gypsum
wallboard industry remains highly cyclical, recent growth in the repair and
remodeling segment, together with certain trends in new residential and
commercial construction activity, have partially mitigated the impact of
fluctuations on overall levels of new construction.
Construction Products sells wallboard to numerous building materials
dealers, wallboard specialty distributors, home center chains and other
customers located throughout the United States. One customer with multiple
shipping locations accounted for approximately 11% of Construction Products'
total gypsum wallboard sales during fiscal 2000. However, Centex does not
believe that the loss of that customer would have a material adverse effect on
Construction Products and its subsidiaries taken as a whole.
Although wallboard is distributed principally in regional areas,
Construction Products and certain other producers have the ability to ship
wallboard by rail outside their usual regional distribution area to take
advantage of other regional increases in demand. Construction Products' rail
distribution capabilities permit it to reach customers in all states west of the
Mississippi River and many eastern states. In addition, in order to facilitate
distribution in certain strategic areas, Construction Products maintains a
distribution center in Albuquerque, New Mexico and four reload yards in Florida,
Alabama and Illinois.
Competition and Other Factors
There are 11 principal manufacturers of wallboard operating a total of
82 plants. Centex estimates that the three largest producers, none of which is
Construction Products, account for approximately 80% of wallboard sales in the
United States. Competition among wallboard producers is primarily on a regional
basis, with local producers benefiting from lower transportation costs and, to a
lesser extent, on a national
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<PAGE> 20
basis. Because of the commodity nature of the product, competition is based
principally on price and, to a lesser extent, on product quality and customer
service.
READYMIX CONCRETE AND AGGREGATES
Construction Products' readymix concrete and aggregates operations are
located in and around Austin, Texas and northern California. The 10,000-acre
aggregates deposit in northern California contains an estimated two billion tons
of reserves. Construction Products is engaged in negotiations with state and
federal government agencies over issues of title to a portion of its principal
aggregate deposit in northern California. Even if the negotiations are
unsuccessful in resolving adverse claims, the undisputed portion of Construction
Products' California aggregate deposit contains sufficient reserves to serve
Construction Products' needs. Construction Products sells aggregates from this
deposit in the Sacramento, California area and in nearby counties. No single
customer accounted for as much as 10% of Construction Products' concrete and
aggregates sales during fiscal 2000. Competition among concrete producers within
Construction Products' northern California and Austin markets is strong.
Construction Products' competitors include five small and four large concrete
producers in the northern California area and five large and four small concrete
producers in the Austin area.
ENVIRONMENTAL MATTERS
The construction products industry, including the operations of
Construction Products, is regulated by federal, state and local laws and
regulations pertaining to several areas including human health and safety and
environmental compliance (collectively, "Environmental Laws"). The Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), as
amended by the Superfund Amendments and Reauthorization Act of 1986, as well as
analogous laws in certain states, create joint and several liability for the
cost of cleaning up or correcting releases to the environment of designated
hazardous substances. Among those who may be held jointly and severally liable
are those who generated the waste, those who arranged for disposal, those who
owned or operated the disposal site or facility at the time of disposal, and
current owners. In general, this liability is imposed in a series of
governmental proceedings initiated by the identification of a site for initial
listing as a "Superfund site" on the National Priorities List or a similar state
list and the identification of potentially responsible parties who may be liable
for cleanup costs. None of Construction Products' sites are listed as a
"Superfund site."
Construction Products' operations are also potentially affected by the
Resource Conservation and Recovery Act ("RCRA"), which is the primary federal
statute governing the management of solid waste and which includes stringent
regulation of solid waste that is considered hazardous waste. Such operations
generate non-hazardous solid waste, which may include cement kiln dust ("CKD").
Because of a RCRA exemption, known as the Bevill Amendment, CKD generated in
Construction Products' operations is currently not considered a hazardous waste
under RCRA, pending completion of a study and recommendations to Congress by the
U.S. Environmental Protection Agency ("U.S. EPA"). Nevertheless, CKD is still
considered a solid waste and is regulated primarily under state environmental
laws and regulations. The U.S. EPA completed its review of CKD and has decided
to promulgate regulations to govern the handling and disposal of CKD, which will
supersede the Bevill Amendment. The Bevill Amendment will remain in effect until
those regulations are in place.
In the past, Construction Products collected and stored CKD on-site at
its cement plants. Construction Products continues to store such CKD at its
Illinois, Nevada and Wyoming cement plants and at a former plant site in Corpus
Christi, Texas, which is no longer in operation. Currently, substantially all
CKD related to present operations at all cement facilities is recycled. When the
U.S. EPA removes the CKD exemption and develops particular CKD management
standards in the future, Construction Products might
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<PAGE> 21
be required to incur significant costs in connection with its CKD. CKD that
comes in contact with water might produce a leachate with an alkalinity high
enough to be classified as hazardous and might also leach certain hazardous
trace metals therein.
Construction Products' cement kilns utilize coal, natural gas, minimal
amounts of self-generated waste oil, and scrap tires as fuel in the Illinois and
Texas plants.
Another issue of potential significance is global warming and the
international accord on carbon dioxide stabilization/reduction. Carbon dioxide
is a greenhouse gas many scientists and others believe contributes to a warming
of the earth's atmosphere. In December 1997, the United Nations held an
international convention in Kyoto, Japan to take further international action to
ensure greenhouse gas stabilization and/or reduction after the turn of the
century. The conference agreed to a protocol to the United Nations Framework
Convention on Climate Change originally adopted in May 1992. The protocol
establishes quantified emission reduction commitments for certain developed
countries, including the United States, and certain countries that are
undergoing the process of transition to a market economy. These reductions are
to be obtained by the years 2008-2012. This protocol was made available for
signature by member countries starting in the spring of 1998. The protocol will
require Senate ratification and enactment of implementing legislation before it
becomes effective in the United States.
The consequences of greenhouse gas reduction measures for cement
producers are potentially significant because carbon dioxide is generated from
combustion of fuels such as coal and coke in order to generate the high
temperatures necessary to manufacture cement clinker (which is then ground with
gypsum to make cement). In addition, carbon dioxide is generated in the
calcining of limestone to make cement clinker. Any imposition of raw material or
production limitations or fuel-use or carbon taxes could have a significant
impact on the cement manufacturing industry. It will not be possible to
determine the impact on Construction Products until governmental requirements
are defined and/or it is determined whether emission offsets and/or credits are
obtainable, and whether alternative cementitious products or alternative fuel
can be substituted.
Another RCRA concern in the cement industry involves the historical
disposal of refractory brick containing chromium. Such refractory brick was
formerly widely used in the cement industry to line cement kilns. Construction
Products currently crushes spent refractory brick and uses it as raw feed, but
such brick does not contain chromium.
The Clean Air Act Amendments of 1990 (the "Amendments") provided
comprehensive federal regulation of all sources of air pollution and established
a new federal operating permit and fee program for virtually all manufacturing
operations. The Amendments will likely result in increased capital and
operational expenses for Construction Products in the future, the amounts of
which are not presently determinable. Construction Products has submitted
detailed permit applications and will pay increased recurring permit fees. In
addition, the U.S. EPA is developing regulations for toxic air pollutants under
these Amendments for a broad spectrum of industrial sectors, including portland
cement manufacturing. The U.S. EPA has indicated that the new maximum available
control technology standards could require significant reduction of air
pollutants below existing levels prevalent in the industry. Management has no
reason to believe, however, that these new standards would place Construction
Products at a competitive disadvantage.
Management believes that Construction Products' current procedures and
practices in its operations, including those for handling and managing
materials, are consistent with industry standards. Nevertheless, because of the
complexity of operations and compliance with Environmental Laws, there can be no
assurance that past or future operations will not result in operational errors,
violations, remediation or other liabilities or claims. Moreover, Construction
Products cannot predict what Environmental Laws will be enacted,
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<PAGE> 22
adopted or amended in the future or how they will be administered or
interpreted. Compliance with more stringent Environmental Laws, as well as
potentially more vigorous enforcement policies of regulatory agencies or
stricter interpretation of existing Environmental Laws, could necessitate
significant capital outlays.
With respect to some of Construction Products' quarries used for the
extraction of raw materials for its cement and gypsum operations and for the
mining of aggregates for its aggregates operations, Construction Products is
obligated under certain of its permits and certain regulations to engage in
reclamation of land within the quarries upon completion of extraction and
mining. Construction Products generally accrues the reclamation costs for a
specific quarry over the life of the quarry.
CONTRACTING AND CONSTRUCTION SERVICES
Centex's contracting and construction services work is performed
through its construction group nationwide. Centex Construction Group's
subsidiaries rank together as one of the largest building contractors in the
country as well as one of the largest U.S.-owned construction groups. The
Construction Group is made up of four firms with various geographic locations
and project niches. Healthcare facility construction has represented nearly
one-fourth of the Group's business mix during recent years. New contracts for
the group for fiscal 2000 totaled $1.651 billion versus $1.128 billion for
fiscal 1999. The backlog of uncompleted contracts at March 31, 2000 was $1.382
billion, compared to $937 million at March 31, 1999. The Group's principal
subsidiaries are as follows:
CENTEX CONSTRUCTION COMPANY, INC. - This entity, which emerged from the
combination of Centex Bateson Construction Company, Inc. and
Centex-Simpson Construction Company, Inc., has operational offices in
Dallas, Texas and in Fairfax, Virginia. This company pursues negotiated
work in its regional market areas in addition to competitively bid
projects nationwide.
CENTEX-RODGERS CONSTRUCTION COMPANY - This nationwide healthcare
construction specialist is headquartered in Nashville, Tennessee, with
operational offices in Pasadena, California; Detroit, Michigan; and
West Palm Beach, Florida.
CENTEX-ROONEY CONSTRUCTION CO., INC. - This Ft. Lauderdale-based
subsidiary performs all types of work, principally within the state of
Florida having operational offices in Miami, Orlando, Tampa,
Tallahassee, Jacksonville, Ft. Myers and West Palm Beach.
CENTEX FORCUM LANNOM, INC. - This company, which focuses on industrial
client construction projects, is located in Dyersburg, Tennessee and
operates in Tennessee and surrounding states with additional marketing
offices in Memphis, Tennessee and Lexington, Kentucky.
As a general contractor or construction manager, the Construction Group
provides supervisory personnel for the construction of all facilities. In
addition, the Construction Group may perform varying amounts of the actual
construction work on a project, but will generally hire subcontractors to
perform the majority of the work.
Construction contracts are primarily entered into under two formats:
competitively bid or negotiated jobs. In a competitively bid format, the
Construction Group will bid a fixed amount for which it will agree to construct
the project based on an evaluation of detailed plans and specifications. In a
negotiated job, the contractor bids a fee (fixed or percentage) over the cost of
the project and, in many instances, agrees that the final cost will not exceed a
designated amount. Such contracts may include a provision whereby the owner will
pay a part of any savings from the guaranteed amount to the contractor.
Historically, the majority of the
21
<PAGE> 23
Construction Group's projects have been in the higher risk competitively bid
jobs. Recent years have seen a shift to higher-margin private negotiated
projects from the competitively bid public projects. At March 31, 2000,
approximately 85% of the outstanding projects were negotiated. The Construction
Group's projects include hospitals, hotels, office buildings, correctional
facilities, schools, shopping centers, airports, parking garages, sport
stadiums, military facilities, post offices, and convention and performing arts
centers.
Competition and Other Factors
The construction industry is very competitive, and the Construction
Group competes with numerous other companies. With respect to competitively bid
projects and negotiated healthcare work, the Construction Group generally
competes throughout the United States and with local, regional and national
contractors, depending upon the nature of the project. For negotiated projects
other than healthcare, the Construction Group competes primarily in the general
geographical area where the entity is located and with other local, regional and
national contractors. The Construction Group solicits new projects by attending
project bid meetings, by meeting with builders and owners and through existing
customers. The Construction Group competes successfully on the basis of its
reputation, financial strength, knowledge and understanding of its clients'
needs.
The Construction Group's operations are affected by federal, state and
local laws and regulations relating to worker health and safety as well as
Environmental Laws. With respect to health and safety matters, the Company
believes that the Construction Group has taken appropriate precautions to
protect employees and others from workplace hazards. Current Environmental Laws
may require the Construction Group's operating subsidiaries to work in concert
with project owners to acquire the necessary permits or other authorizations for
certain activities, including the construction of projects located in or near
wetland areas. The Construction Group's operations are also affected by
Environmental Laws regulating the use and disposal of hazardous materials
encountered during demolition operations.
The Company believes that the Contracting and Construction Services
Group's current procedures and practices are consistent with industry standards
and its compliance with the health and safety laws and Environmental Laws does
not constitute a material burden or expense for the Company.
The Company's Contracting and Construction Services operations obtain
materials and services from numerous sources. The Company believes that its
construction companies can deal effectively with any problems they may
experience in the supply of materials and services.
22
<PAGE> 24
EMPLOYEES
The following table presents the breakdown of employees in each line of
business as of March 31, 2000:
<TABLE>
Line of Business Employees
---------------- ---------
<S> <C>
Home Building -
Conventional Homes 3,957
Manufactured Homes 1,413
Investment Real Estate 47
Financial Services 4,203
Construction Products 1,190
Contracting and Construction Services 1,496
Other Operations 942
Corporate 120
-------
13,368
=======
</TABLE>
The 120 Corporate employees are employed by Centex Corporation; all
others are employees of the Company's various subsidiaries.
ITEM 2. PROPERTIES
Centex Homes owns property in Carrollton, Texas, a suburb of Dallas.
This property consists of office and warehouse buildings situated on
approximately 17 acres.
Cavco operations consist of five facilities. Cavco owns a facility in
Belen, New Mexico, as well as a facility in Seguin, Texas. The remaining three
facilities, which are all located in Phoenix, are leased.
Financial Services owns a 20-acre parcel of land in Edmond, Oklahoma.
Loan Processing, Adfinet, and Adfitech occupy offices located on approximately 6
acres of the parcel; the remaining 14 acres are being held for future
development or sale. Financial Services also owns two low-rise office buildings
situated on approximately 10 acres of land in Dallas, Texas, in which Home
Equity conducts certain operations.
Construction Products operates cement plants, quarries and related
facilities at Buda, Texas; LaSalle, Illinois; Fernley, Nevada; and Laramie,
Wyoming. Construction Products owns the Fernley and Laramie facilities and the
Buda and LaSalle plants are each owned by separate joint ventures in which
Construction Products has a 50% interest. Construction Products owns its
principal aggregate plants and quarries, which are located near Austin, Texas
and Marysville, California. In addition, Construction Products owns gypsum
wallboard plants in Albuquerque and nearby Bernalillo, New Mexico and Gypsum,
Colorado.
Construction Group owns land in Dallas, Texas, on which an office
building is located, and in Nashville, Tennessee, a site for equipment storage.
A wholly-owned subsidiary of the Company owns property in Round Rock,
Texas; League City, Texas; and Amarillo, Texas. All are for assisted-living care
facilities.
Except for encumbrances on Cavco's Belen, New Mexico facility which is
not material to the Company, none of the Company's facilities described above
are pledged as security on its debts.
23
<PAGE> 25
See "Item 1. Business" on pages 5-23 of this Report for additional
information relating to the Company's properties.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of its business, the Company and/or its
subsidiaries are named as defendants in certain suits filed in various state and
federal courts. Management believes that none of the litigation matters in which
the Company or any subsidiary is involved would have a material adverse effect
on the consolidated financial condition or operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF CENTEX (SEE ITEM 10 OF PART III)
The following is an alphabetical listing of the Company's executive
officers, as such term is defined under the rules and regulations of the
Securities and Exchange Commission. The Company and/or one or more subsidiaries
of the Company have employed all of these executive officers for at least the
past five years. All of these executive officers were elected by the Board of
Directors of the Company at its Annual Meeting on July 22, 1999, to serve until
the next Annual Meeting of Directors or until their respective successors are
duly elected and qualified. There is no family relationship between any of these
officers.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH CENTEX
--------------------------------------- ------ ----------------------------------------------------------------
<S> <C> <C>
Timothy R. Eller 51 Executive Vice President of Centex Corporation since July 1998.
Chairman of the Board and Chief Executive Officer of Centex
Real Estate Corporation (Chairman of the Board since April
1998; Chief Executive Officer of Centex Real Estate
Corporation since July 1991; President and Chief Operating
Officer of Centex Real Estate Corporation from January 1990 to
March 1998; Executive Vice President from July 1987 to January
1990)
Laurence E. Hirsch 54 Chairman of the Board and Chief Executive Officer of Centex
Corporation (Chairman of the Board since July 1991; Chief
Executive Officer since July 1988; President from March 1985
until July 1991)
David W. Quinn 58 Vice Chairman of the Board and Chief Financial Officer of
Centex Corporation (Vice Chairman of the Board since May
1996; Chief Financial Officer since February 1987; Executive
Vice President from February 1987 until May 1996)
</TABLE>
24
<PAGE> 26
<TABLE>
<S> <C> <C>
Raymond G. Smerge 56 Executive Vice President, Chief Legal Officer, General Counsel
and Secretary of Centex Corporation (Executive Vice President
since July 1997; Chief Legal Officer since September 1985;
General Counsel and Secretary since April 1993; Vice President
from September 1985 to July 1997)
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 2000 Year Ended March 31, 1999
---------------------------------- ------------------------------------
PRICE Price
-------------------- ----------------------
HIGH LOW DIVIDENDS High Low Dividends
--------- -------- --------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
QUARTER
First $42 7/8 $31 5/8 $.04 $40 7/8 $33 $.04
Second $39 5/8 $26 3/8 $.04 $44 3/8 $33 $.04
Third $30 13/16 $22 3/8 $.04 $45 3/4 $26 $.04
Fourth $24 9/16 $17 1/2 $.04 $45 3/4 $30 1/4 $.04
</TABLE>
The common stock of Centex Corporation is traded on the New York Stock Exchange
(ticker symbol CTX) and London Stock Exchange Limited. The approximate number of
record holders of the common stock of Centex Corporation at May 19, 2000 was
3,295.
On November 30, 1987, Centex Corporation distributed as a dividend to its
stockholders securities relating to Centex Development Company, L P. (see Note G
on pages 58-60 of this Report). Since this distribution, such securities have
traded in tandem with, and as a part of, the common stock of Centex Corporation.
Amounts represent cash dividends per share paid by Centex Corporation on the
common stock of Centex Corporation. 3333 Holding Corporation has paid no
dividends on its common stock since its incorporation.
DEBT SECURITIES
See Note (D) of the notes to the Consolidated Financial Statements of
Centex Corporation and Subsidiaries on pages 53-54 of this Report.
25
<PAGE> 27
ITEM 6. SELECTED FINANCIAL DATA
SUMMARY OF SELECTED FINANCIAL DATA
(Unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(Dollars in thousands, except per share data) For the Years Ended March 31,
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 5,956,366 $ 5,154,840 $ 3,975,450 $ 3,784,991 $ 3,102,987
Net Earnings $ 257,132 $ 231,962 $ 144,806 $ 106,563 $ 53,365
Total Assets $ 4,038,740 $ 4,334,746 $ 3,416,219 $ 2,678,829 $ 2,336,966
Total Long-term Debt, Consolidated $ 751,160 $ 284,299 $ 237,715 $ 236,769 $ 321,002
Total Debt, Consolidated $ 1,313,395 $ 1,910,899 $ 1,390,588 $ 864,287 $ 983,269
Total Debt (with Financial Services
reflected on the equity method) $ 898,068 $ 587,955 $ 311,538 $ 283,769 $ 408,253
Deferred Income Tax (Asset) Liability $ (49,907) $ (49,107) $ (147,607) $ (197,413) $ 16,620
Debt as a Percentage of Capitalization (A)
Total Debt, Consolidated 45.1% 57.6% 53.1% 44.5% 57.1%
Total Debt (with Financial Services
reflected on the equity method) 36.0% 29.5% 20.3% 20.9% 35.6%
Stockholders' Equity $ 1,419,349 $ 1,197,639 $ 991,172 $ 835,777 $ 722,836
Net Earnings as a Percentage of
Beginning Stockholders' Equity 21.5% 23.4% 17.3% 14.7% 8.0%
Per Common Share
Earnings Per Share - Basic
$ 4.34 $ 3.90 $ 2.45 $ 1.86 $ .94
Earnings Per Share - Diluted $ 4.22 $ 3.75 $ 2.36 $ 1.80 $ .91
Cash Dividends $ .16 $ .16 $ .135 $ .10 $ .10
Book Value Based on Shares Outstanding
at Year End $ 24.14 $ 20.17 $ 16.65 $ 14.40 $ 12.72
Stock Prices
High $42 7/8 $ 45 3/4 $ 40 3/4 $ 20 7/8 $ 17 13/16
Low $17 1/2 $ 26 $ 16 3/4 $ 12 15/16 $ 11 3/4
</TABLE>
On November 30, 1987, Centex Corporation distributed as a dividend to its
stockholders securities relating to Centex Development Company, L. P. (See Note
G on pages 58-60 of this Report). Since this distribution, such securities have
traded in tandem with, and as a part of, the common stock of Centex Corporation.
(A) Capitalization is composed of Total Debt, Deferred Income Tax Liability,
Negative Goodwill, Minority Interest and Stockholders' Equity.
26
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999
Centex reported consolidated revenues of $6.0 billion for fiscal year
ended March 31, 2000, 16% above $5.2 billion for fiscal year ended March 31,
1999. Earnings before income taxes were $416.9 million, 12% more than $373.3
million for last year. Net earnings for fiscal 2000 reached $257.1 million, a
historical high and an 11% improvement over net earnings of $232.0 million in
fiscal 1999. Earnings per share for fiscal year 2000 were $4.34 and $4.22 for
Basic and Diluted, respectively, compared to $3.90 and $3.75 for the prior year.
HOME BUILDING
CONVENTIONAL HOMES
The following summarizes Conventional Homes' results for the two-year
period ended March 31, 2000 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
------------------------------------------------------------
For the Years Ended March 31,
------------------------------------------------------------
2000 1999
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 3,686.8 100.0% $ 2,819.4 100.0%
Cost of Sales (2,852.3) (77.3%) (2,194.7) (77.8%)
Selling, General & Administrative (511.3) (13.9%) (382.5) (13.6%)
---------- ---------- ---------- ----------
Operating Earnings $ 323.2 8.8% $ 242.2 8.6%
========== ========== ========== ==========
Units Closed 18,904 14,792
Unit Sales Price $ 191,568 $ 185,668
% Change 3.2% 1.3%
Operating Earnings per Unit $ 17,098 $ 16,375
% Change 4.4% 19.2%
Backlog Units 7,579 6,792
% Change 12% 38.2%
</TABLE>
Operating earnings for fiscal 2000 were higher as a percentage of
revenues and on a per unit basis in comparison to fiscal 1999 as a result of the
division's continued focus on improving operating margins. Moderate interest
rates during most of the year, a strong economy and a reduction in direct
construction costs as a percent of revenue are some of the major factors that
impacted the operating results of the Conventional Homes operation. Margin
improvement initiatives include, among others, engineering the homes to reduce
the material and labor cost components, designing the product around consumer
preferences and the adoption of special purchasing and land development
programs.
The increase in sales price of approximately $5,900 is primarily due to
increased sales in California, Georgia, and South Carolina and to the
acquisition of Calton Homes, Inc, which markets higher-priced homes. The opening
of new markets with recent acquisitions also had a positive impact on the
increase in number of units sold.
MANUFACTURED HOMES
Cavco operates three manufactured home plants in the Phoenix area, a
plant near Albuquerque, New Mexico, and a plant in central Texas, which opened
in fiscal 1999. During fiscal 1998, Cavco added retail distribution capabilities
when it purchased substantially all of the assets of AAA Homes, Inc., Arizona's
27
<PAGE> 29
largest manufactured homes retailer. In fiscal 1999, Cavco purchased a
manufactured home retailer in central Texas.
The following summarizes Manufactured Homes' results for the two-year
period ended March 31, 2000 (dollars in millions):
<TABLE>
<CAPTION>
-------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------
2000 1999
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues (Construction) $ 121.0 100.0% $ 137.7 100.0%
Cost of Sales (94.1) (77.7%) (108.2) (78.6%)
Selling, General & Administrative Expenses (13.9) (11.5%) (13.5) (9.8%)
---------- ---------- ---------- ----------
$ 13.0 10.8% $ 16.0 11.6%
---------- ---------- ---------- ----------
Retail Sales Revenues $ 62.5 100.0% $ 40.8 100.0%
Cost of Sales (49.6) (79.4%) (30.0) (73.4%)
Selling, General & Administrative Expenses (14.2) (22.6%) (10.7) (26.3%)
---------- ---------- ---------- ----------
$ (1.3) (2.0%) $ 0.1 0.3%
---------- ========== ---------- ==========
Construction and Retail Earnings $ 11.7 $ 16.1
Goodwill Amortization (3.4) (3.3)
Minority Interest Expense (1.0) (2.5)
---------- ----------
Group Operating Earnings $ 7.3 $ 10.3
========== ==========
Units Sold 5,950 6,440
</TABLE>
Total revenues for Manufactured Homes increased 3% or $5 million in
fiscal 2000 versus fiscal 1999. Construction revenues decreased 12% or $16.7
million primarily due to product mix changes and an increase in intercompany
sales which are eliminated. For fiscal 2000, intercompany sales to company owned
retail sales centers represented 28% of gross construction revenues versus 16%
in fiscal 1999. Retail sales revenues increased 53% or $21.7 million primarily
due to the full year operations of 13 retail sales centers opened in fiscal 1999
and the opening of one new retail sales center in fiscal 2000.
INVESTMENT REAL ESTATE
The following summarizes Investment Real Estate's results for the
two-year period ended March 31, 2000 (dollars in millions):
<TABLE>
<CAPTION>
-------------------------------------
For the Years Ended March 31,
-------------------------------------
2000 1999
-------------------------------------
<S> <C> <C>
Revenues $ 30.9 $ 33.7
============== ==============
Operating Earnings $ 30.1 $ 29.4
============== ==============
</TABLE>
Fiscal 2000 operating earnings from Investment Real Estate totaled
$30.1 million compared to $29.4 million in the prior year period. The timing of
land sales is uncertain and can vary significantly from period to period.
Property sales related to Investment Real Estate's nominally-valued assets (see
Note (H) on page 60 of this Report) contributed operating margins of $19.6
million in fiscal 2000 and $16.4 million in fiscal 1999. As of March 31, 2000,
the Investment Real Estate Group has approximately $57 million nominally-valued
assets which are expected to be sold over the next four years.
Negative goodwill amortization was $16 million in both fiscal 2000 and
1999.
28
<PAGE> 30
FINANCIAL SERVICES
The Financial Services segment consists primarily of home financing,
home equity and sub-prime lending and the sale of title and other insurance
coverages. The following summarizes Financial Services results for the two-year
period ended March 31, 2000 (dollars in millions):
<TABLE>
<CAPTION>
------------------------------
For the Years Ended March 31,
------------------------------
2000 1999
------------------------------
<S> <C> <C>
Revenues $ 430.6 $ 436.3
========== ==========
Operating Earnings $ 32.5 $ 92.3
========== ==========
Origination Volume $ 9,491.2 $ 11,112.5
========== ==========
Number of Loans Originated
CTX Mortgage Company -
Centex-built Homes (Builder) 10,958 9,882
Non-Centex-built Homes (Retail) 49,404 66,496
---------- ----------
60,362 76,378
Centex Home Equity Corporation 20,568 15,582
Centex Finance Company 681 818
---------- ----------
81,611 92,778
========== ==========
</TABLE>
Financial Services' revenues for fiscal 2000 declined by $5.7 million
from the prior year. Revenue increases from higher loan origination volume at
Financial Services' Home Equity unit were more than offset by lower revenues at
CTX Mortgage, primarily due to a decline in refinancing activity, and by a
charge to revenues related to a change in discount rate assumptions by Home
Equity. As a result, Financial Services' operating earnings for fiscal 2000 were
$32.5 million, 65% lower than the $92.3 million of operating earnings for fiscal
1999.
Financial Services' revenues include the gain on sale of mortgage loans
receivable which decreased $4.5 million, or 2%, to $249.6 million for fiscal
2000 from $254.1 million for the prior fiscal year. This decrease is due
primarily to a charge related to the increase in the discount rate from 12% to
15% which reduced the carrying value of Home Equity's residual interests. Before
this charge, the expansion of Financial Services' product lines and an increase
in securitization activity, partially offset by decreased loan origination
volume, resulted in an increase in gains on sales of mortgage loans of
approximately $11.5 million.
CTX Mortgage's operating earnings declined significantly in fiscal
2000. The decline in CTX Mortgage's operating earnings is primarily due to the
decrease in refinancing activity as a result of increasing interest rates, and
to the delay in balancing operations costs with reduced production levels. CTX
Mortgage originations for fiscal 2000 were 60,362, a 21% decrease from 76,378
originations for the prior year. The per loan profit for fiscal 2000 was $562,
50% lower than $1,118 per loan for the prior year. CTX Mortgage's total mortgage
applications for fiscal 2000 decreased 24% to 59,094 from 78,126 applications
for the prior year.
Home Equity's reported operating earnings for fiscal 2000, after the
change related to the increase in discount rate from 12% to 15%, were lower by
approximately 72% compared to fiscal 1999. Originations for fiscal year 2000
were 20,568, a 32% increase over the 15,582 originated for last fiscal year.
Loan volume for fiscal year 2000 was $1.3 billion, a 29% improvement over the
prior year. Loan volume for fiscal year 2000 was favorably impacted by the
opening of new operating locations plus generally increased activity.
Home Equity's sub-prime applications totaled 127,450 for fiscal 2000,
an increase of 54% over the 82,803 applications for last fiscal year. Per loan
profit before the adjustment to income from securitizations, discussed below,
was $911 for fiscal 2000 compared to $620 for last fiscal year. The increase is
primarily
29
<PAGE> 31
related to earnings from the servicing operation partially offset by the
absorption of costs related to the expansion of the branch network.
As a consequence of increases in loan volume, during fiscal year 2000
Home Equity completed $1.3 billion in securitizations compared to $890 million
in securitizations for the last fiscal year. As a result of the securitization
process, Home Equity sells the loans but retains a residual interest in the
securitization instrument as well as the servicing rights associated with these
loans. Home Equity is the long-term servicer of these loans. Service fee income
related to this long-term servicing was $14.5 million in fiscal 2000 versus $4.5
million for the prior fiscal year.
Home Equity's securitizations entered into prior to March 31, 2000 were
accounted for as sales, and the resulting gains on such sales were reported as
revenues during the fiscal year in which the securitizations closed. Home Equity
will change the legal and economic structure for securitizations subsequent to
March 31, 2000, such that future securitizations will be accounted for as
borrowings. The Company has concluded that the long-term benefits of this change
significantly outweigh the short-term benefit of higher earnings under the
previously used sales treatment. 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. Rather, the change will only
affect the timing of profit recognition.
As a result of increased current and projected interest rates, Home
Equity increased the discount rate used to value future cash flows in the
valuation of historical securitizations from 12% to 15%. The discount rate
increase resulted in a $16 million reduction in Home Equity's earnings during
the fourth quarter of fiscal 2000.
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 14% for fiscal 2000 to $83.4 million from
$97.0 million for the prior fiscal year. Interest expense for fiscal 2000 was
$61.7 million, a 20% decrease from $76.9 million for the prior year. The
decrease in net interest income is the result of both reduced loan production
and transition costs relating to initiation of the mortgage loan sales
arrangement with Centex Home Mortgage LLC ("CHM"), a non-affiliated limited
liability company.
Through the third quarter of fiscal year 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. During December 1999, CTX Mortgage began to sell the majority of its
mortgage loans to CHM. 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.
Centex Finance Company, the manufactured homes finance unit, was
discontinued during fiscal 2000, and had an operating loss of approximately $4.2
million in the full year compared to a $2.8 million loss for fiscal 1999.
Financial Services' other sources of income include, among other
things, loan origination fees, title policy fees and insurance commissions,
mortgage loan broker fees, and fees for mortgage loan quality control and
processing services.
30
<PAGE> 32
CONSTRUCTION PRODUCTS
The following summarizes Construction Products' results for the
two-year period ended March 31, 2000 (dollars in millions):
<TABLE>
<CAPTION>
-------------------------------
For the Years Ended March 31,
-------------------------------
2000 1999
-------------------------------
<S> <C> <C>
Revenues $ 418.7 $ 336.1
Interest Income 3.7 3.0
Cost of Sales and Expenses (247.4) (213.6)
Selling, Goodwill & Administrative Expenses (4.7) (4.4)
Goodwill Amortization (1.6) (0.8)
---------- ----------
Operating Earnings 168.7 120.3
Minority Interest (63.8) (51.1)
---------- ----------
Net Operating Earnings to Centex $ 104.9 $ 69.2
========== ==========
</TABLE>
Construction Products' revenues were 25% higher than the same period
last year. For the current year, Construction Products' operating earnings, net
of minority interest, represented a 52% improvement over results for the same
period a year ago.
Construction Products' record operating earnings resulted from improved
results in each of its businesses. Pricing and sales volume improved for every
product, particularly pricing for gypsum wallboard, which rose by 25% compared
to the prior year.
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services' results
for the two-year period ended March 31, 2000 (dollars in millions):
<TABLE>
<CAPTION>
------------------------------
For the Years Ended March 31,
------------------------------
2000 1999
------------------------------
<S> <C> <C>
Revenues $ 1,205.8 $ 1,350.8
========== ==========
Operating Earnings $ 23.5 $ 15.2
========== ==========
New Contracts Received $ 1,650.9 $ 1,128.0
========== ==========
Backlog of Uncompleted Contracts $ 1,382.0 $ 936.8
========== ==========
</TABLE>
Contracting and Construction Services' revenues for fiscal 2000 were
11% less than last year's revenues. Operating earnings for the group improved in
fiscal 2000 as a 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 annual net cash flow in excess of Centex's investment in the group of
$102.2 million in fiscal 2000 and $88.9 million in fiscal 1999.
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Centex reported consolidated revenues of $5.2 billion for fiscal 1999,
30% above $4.0 billion for fiscal 1998. Earnings before income taxes were $373.3
million, 61% more than $231.6 million for fiscal 1998. Net earnings for fiscal
1999 reached $232 million, a 60% improvement over net earnings of $144.8 million
for the prior year. Earnings per share for fiscal year 1999 were $3.90 and $3.75
for basic and diluted, respectively, compared to $2.45 and $2.36 for the prior
year.
31
<PAGE> 33
HOME BUILDING
CONVENTIONAL HOMES
The following summarizes Conventional Homes' results for the two-year
period ended March 31, 1999 (dollars in millions, except per unit data):
<TABLE>
<CAPTION>
----------------------------------------------------------------
For the Years Ended March 31,
----------------------------------------------------------------
1999 1998
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 2,819.4 100.0% $ 2,312.0 100.0%
Cost of Sales (2,194.7) (77.8%) (1,839.8) (79.6%)
Selling, General & Administrative (382.5) (13.6%) (301.7) (13.0%)
----------- ---------- ----------- ----------
Operating Earnings $ 242.2 8.6% $ 170.5 7.4%
=========== ========== =========== ==========
Units Closed 14,792 12,418
Unit Sales Price $ 185,668 $ 183,321
% Change 1.3% 6.4%
Operating Earnings per Unit $ 16,375 $ 13,733
% Change 19.2% 25.0%
Backlog Units 6,792 4,916
% Change 38.2% 14.1%
</TABLE>
Operating earnings for fiscal 1999 were higher as a percentage of
revenues and on a per unit basis compared to fiscal 1998 as a result of the
division's continued focus on improving operating margins as well as an increase
in units closed. The increase in sales price of approximately $2,300 was
primarily a result of increased sales in the California market. The opening of
new markets with new acquisitions also had a positive impact on the increase in
number of units sold and the average sales price. During fiscal 1999, the
division continued to focus on margin improvement and began an emphasis on
top-line growth.
Conventional Homes reported 14,792 closings for fiscal 1999, 19% more
than fiscal 1998 closings. Home orders improved 22% to 15,931 units from 13,026
units in fiscal 1998 even though slightly fewer neighborhoods were operating in
fiscal 1999.
MANUFACTURED HOMES
During March 1997, Centex Real Estate Corporation acquired
approximately 80% of Cavco Industries' operations. Its successor, Cavco
Industries, LLC operates three manufactured homes facilities in the Phoenix
area, a plant near Albuquerque, New Mexico, and a Central Texas plant which
opened in fiscal 1999.
32
<PAGE> 34
The following summarizes Manufactured Homes' results for the two-year
period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
For the Years Ended March 31,
----------------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues (Construction) $ 137.7 100.0% $ 140.6 100.0%
Cost of Sales (108.2) (78.6%) (113.7) (80.9%)
Selling, General & Administrative (13.5) (9.8%) (13.2) (9.4%)
---------- ---------- ---------- ----------
$ 16.0 11.6% $ 13.7 9.7%
---------- ---------- ---------- ----------
Retail Sales Revenues $ 40.8 100.0% $ -- --%
Cost of Sales (30.0) (73.4%) -- --%
Selling, General & Administrative (10.7) (26.3%) -- --%
---------- ---------- ---------- ----------
$ 0.1 0.3% $ -- --%
---------- ---------- ---------- ----------
Construction and Retail Earnings $ 16.1 $ 13.7
Goodwill Amortization (3.3) (2.3)
Minority Interest (2.5) (2.7)
---------- ----------
Group Operating Earnings $ 10.3 $ 8.7
========== ==========
Units Sold 6,440 5,751
</TABLE>
INVESTMENT REAL ESTATE
The following summarizes Investment Real Estate's results for the
two-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
--------------------------------------
For the Years Ended March 31,
--------------------------------------
1999 1998
--------------------------------------
<S> <C> <C>
Revenues $ 33.7 $ 25.4
=============== ===============
Operating Earnings $ 29.4 $ 28.2
=============== ===============
</TABLE>
Fiscal 1999 operating earnings from Investment Real Estate improved 4%
to $29.4 million from $28.2 million for fiscal 1998. Property sales related to
Investment Real Estate's nominally valued real estate resulted in operating
margins of $16.4 million in fiscal 1999 and $13.7 million in fiscal 1998.
Negative goodwill amortization was $16 million in both fiscal 1999 and
1998.
33
<PAGE> 35
FINANCIAL SERVICES
The Financial Services segment consists primarily of home financing,
home equity and sub-prime lending and the sale of title and other insurance
coverages. The following summarizes Financial Services' results for the two-year
period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
------------------------------
For the Years Ended March 31,
------------------------------
1999 1998
------------------------------
<S> <C> <C>
Revenues $ 436.3 $ 246.3
========== ==========
Operating Earnings $ 92.3 $ 31.4
========== ==========
Origination Volume $ 11,112.5 $ 7,182.0
========== ==========
Number of Loans Originated
CTX Mortgage Company -
Centex-built Homes (Builder) 9,882 8,748
Non-Centex-built Homes (Retail) 66,496 44,096
---------- ----------
76,378 52,844
Centex Home Equity Corporation 15,582 7,982
Centex Finance Company 818 23
---------- ----------
92,778 60,849
========== ==========
</TABLE>
Financial Services' operating earnings for fiscal 1999 were $92.3
million, 194% higher than fiscal 1998 operating earnings of $31.4 million.
CTX Mortgage originations for fiscal 1999 increased 45% compared to
fiscal 1998. The per loan margin for fiscal 1999 was $1,118, 49% higher than
$748 per loan in fiscal 1998. CTX Mortgage's total mortgage applications for
fiscal 1999 increased 33% to 78,126 from 58,835 applications reported for fiscal
1998.
During fiscal year 1999, Centex continued to expand Home Equity's
sub-prime mortgage business, resulting in a 95% increase in loan originations.
Home Equity generated 82,803 sub-prime loan applications for fiscal 1999, an
increase of 196% over fiscal 1998. During fiscal 1999, Home Equity completed
four securitizations totaling $890 million compared to one issue of $175 million
in fiscal 1998. Home Equity is the long-term servicer of the loans in these
securitizations. Service fee income related to long-term servicing was $4.5
million in fiscal 1999 and $0.2 million in fiscal 1998.
Centex Finance Company, the manufactured homes finance operation,
completed its second year of operations in which originations increased to 818
loans compared to 23 loans in fiscal 1998. Start-up costs for this operation
were $2.8 million for fiscal 1999.
Revenues include the gain on sale of mortgage loan receivables which
increased to $254.1 million in fiscal 1999 from $135.8 million in fiscal 1998.
This increase was attributed to the expansion of Financial Services' product
lines, the increased origination volume, and the favorable interest rate
environment which resulted in a significant volume of refinanced mortgages. The
gain on sale of mortgage loans receivable includes the gain recorded upon the
completion of securitizations, gain on sale of servicing, and whole loan sales.
In the normal course of its activities, Financial Services carries
inventories of loans pending sale or securitization and earns a positive spread
between the interest earned on those loans and its cost of financing those
loans. Financial Services' sales and securitization volume increased
significantly, contributing to an increase in the average level of loans held in
inventory pending sale or securitization. Interest income increased $39.1
million or 67.6% to $97 million in fiscal 1999. Interest expense increased $32
million or
34
<PAGE> 36
71.3% to $76.9 million in fiscal 1999. As a result, positive carry increased to
$20.1 million in fiscal 1999 compared to $13.0 million in fiscal 1998.
Financial Services' other sources of income include, among other
things, loan origination fees, title policy fees and insurance commissions,
mortgage loan broker fees, and fees for mortgage loan quality control and
processing services. These other income sources increased $32.7 million or 62.1%
in fiscal 1999 over fiscal 1998 due primarily to the fiscal 1999 increase in
mortgage loan volume.
CONSTRUCTION PRODUCTS
The following summarizes Construction Products' results for the
two-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
-------------------------------
For the Years Ended March 31,
-------------------------------
1999 1998
-------------------------------
<S> <C> <C>
Revenues $ 336.1 $ 297.3
Interest Income 3.0 1.8
Cost of Sales and Expenses (213.6) (207.0)
Selling, General & Administrative Expenses (4.4) (3.8)
Goodwill Amortization (.8) --
---------- ----------
Operating Earnings $ 120.3 $ 88.3
Minority Interest (51.1) (40.6)
---------- ----------
Net of Operating Earnings to Centex $ 69.2 $ 47.7
========== ==========
</TABLE>
Construction Products' revenues were $336.1 million for fiscal 1999,
13% above fiscal 1998 revenues of $297.3 million. For fiscal 1999, the
Company's share of Construction Products' pretax earnings, net of minority
interest, was $69.2 million, a 45% increase over $47.7 million for fiscal 1998.
Record results in fiscal 1999 were attributable to higher product sales
pricing, increased operating efficiency and continued strong product demand.
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services' results
for the two-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
-------------------------------
For the Years Ended March 31,
-------------------------------
1999 1998
-------------------------------
<S> <C> <C>
Revenues $ 1,350.8 $ 953.8
========== ==========
Operating Earnings $ 15.2 $ 7.2
========== ==========
New Contracts Received $ 1,128.0 $ 999.4
========== ==========
Backlog of Uncompleted Contracts $ 936.8 $ 1,159.6
========== ==========
</TABLE>
Contracting and Construction Services' revenues for fiscal 1999 were
$1.4 billion, 42% more than fiscal 1998 revenues. Operating earnings for the
group improved in fiscal 1999 as a result of a continued 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 annual net cash flow in excess of Centex's investment in the
group of $88.9 million in fiscal 1999 and $60.3 million in fiscal 1998.
35
<PAGE> 37
FINANCIAL CONDITION AND LIQUIDITY
At March 31, 2000, the Company had cash and cash equivalents of $139.6
million, compared to $111.3 million at the end of fiscal 1999. Included in these
cash balances are $96.2 million and $49.6 million belonging to Construction
Products for fiscal 2000 and fiscal 1999, respectively. These funds are not
available for use by other segments. The net cash provided by or used in the
operating, investing, and financing activities for the years ended March 31,
2000, 1999 and 1998 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
------------------------------------------------
For the Years Ended March 31,
------------------------------------------------
2000 1999 1998
------------------------------------------------
<S> <C> <C> <C>
NET CASH PROVIDED BY (USED IN):
Operating activities $ 859,753 $ (254,148) $ (440,215)
Investing activities (192,528) (227,716) (29,679)
Financing activities (638,834) 494,816 536,890
Effect of exchange rate changes
on cash (96) -- --
------------ ------------ ------------
Net increase in cash $ 28,295 $ 12,952 $ 66,996
============ ============ ============
</TABLE>
For the fiscal year ended March 31, 2000, cash was provided by a
decreased investment in mortgage loans offset partially by an increase in
housing inventories. The decrease in mortgage loans is a result of a decrease in
refinancing activity as well as the timing of loan sales and securitizations.
The increase in housing inventories relates to the addition of new neighborhoods
and acquisitions. Cash was used to fund acquisitions (primarily in the Home
Building segment) and to fund additions to property and equipment (primarily for
new production capacity within the Construction Products segment). Funds were
used in financing activities principally to reduce mortgage loan secured debt,
partially offset by new debt raised primarily to fund the increased homebuilding
activity.
Short-term debt as of March 31, 2000 was $562.2 million, which included
$415.3 million of debt applicable to the Financial Services operation. The
majority of the Financial Services debt is collateralized by residential
mortgage loans. Most of the Company's other unsecured borrowings are
accomplished at prevailing market interest rates through short-term bank
borrowings and from the Company's commercial paper programs. The Company
maintains $660 million of committed credit facilities which serve as a back-up
for bank and commercial paper borrowings. Under the terms of the agreement on
one of these facilities, $170 million may be borrowed directly by CTX Mortgage.
The weighted average interest rate of short-term indebtedness outstanding during
fiscal 2000 was 5.7%. The weighted average interest rate of balances outstanding
at March 31, 2000 was 6.6%.
The Financial Services segment provides most of its own short-term
financing 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 $200 million of secured committed mortgage
warehouse facilities and $665 million of uncommitted credit facilities to
finance mortgages not sold to CHM.
36
<PAGE> 38
Similarly, CHEC has $225 million (increased to $325 million in April
2000) of committed and $100 million of uncommitted secured mortgage warehouse
facilities and $60 million of uncommitted unsecured lines of credit to finance
sub-prime mortgages held until securitization.
The Company is exposed to market risks related to fluctuations in
interest rates on mortgage loans receivable, residual interest in mortgage
securitizations, and debt. The Company utilizes forward sale commitments to
mitigate the risk associated with the majority of its mortgage loan portfolio.
Other than the forward commitments described above, certain interest rate swaps,
interest rate caps and treasury lock agreements 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, 1999.
Long-term debt outstanding as of March 31, 2000 was as follows
(dollars in thousands):
<TABLE>
<S> <C>
Subordinated Debentures, 7.375%, due in 2005 $ 99,747
Subordinated Debentures, 8.75%, due in 2007 99,521
Medium-term Note Programs, 6.4% to 6.89%, due through 2003 539,439
Other Indebtedness, weighted-average 6.44%, due through 2027 12,453
------------
$ 751,160
============
</TABLE>
Maturities of long-term debt during the next five years (in thousands)
are: 2001, $331,248; 2002, $194,789; 2003, $20,135; 2004, $205; and 2005, $215.
The Company believes it has adequate resources and sufficient credit
facilities to satisfy its current needs and to provide for future growth.
STOCK REPURCHASE PROGRAM
Since April 1999, the Company has repurchased a total of 1,831,600
shares of common stock under its stock option-related repurchase program. The
Company plans to continue to repurchase shares under this program.
YEAR 2000 COMPLIANCE
Beginning in fiscal 1997, the Company began to evaluate and implement
changes to its systems in order to ensure Year 2000 compliance. As a result of
this process, the Company and its subsidiaries tested all critical systems
during calendar year 1999 and repaired, upgraded and/or replaced those found to
be not Year 2000 compliant. The cost of replacing, upgrading or otherwise
changing non-compliant systems was not material to the Company as a whole, or to
the Company's individual subsidiaries. The Company used internally generated
cash to fund the correction of all non-compliant systems. The Company's Year
2000 compliance program included the hiring of a third-party consultant, the
surveying of material vendors and suppliers and the completion of a contingency
plan.
As a result of the attention that the Company paid to addressing its
Year 2000 readiness, there has not been, to date, any adverse impact on the
Company's operations or financial condition or the operations or financial
condition of any of its individual subsidiaries as a result of any Year 2000
compliance issues. In addition, the Company is not aware of any Year 2000
problems experienced by any of its vendors, subcontractors or other third
parties. If any such third parties were affected by Year 2000 compliance issues,
the compliance issues have not caused, to date, any adverse effects on the
Company's operations or financial condition, or the operations or financial
condition of any of its individual subsidiaries.
Although the Company has not been affected to date by Year 2000
compliance issues, Year 2000 issues could arise subsequent to the date of this
Report. The Company believes that such circumstances are
37
<PAGE> 39
highly unlikely to occur and that, even if they were to occur, it is highly
unlikely that the Company's financial condition or the operations and financial
condition of its subsidiaries would be materially adversely affected.
Nevertheless, the Company intends to continue to monitor Year 2000 related
issues and immediately address any effects that may arise as a result.
YEAR 2000 FORWARD-LOOKING STATEMENTS
Certain statements in this section, other than historical information,
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the context of the statement and generally arise when the
Company is discussing its beliefs, estimates or expectations. These statements
involve risks and uncertainties relative to the Company's ability to assess and
remediate any Year 2000 compliance issues, the ability of third parties to
correct material non-compliant systems, and the Company's assessment of the
Year 2000 issue's impact on its financial results and operations.
OTHER DEVELOPMENTS AND OUTLOOK
Thus far, rising interest rates have had minimal impact on home sales,
which continue to be strong. However, the escalating rates are expected to
continue to negatively impact the Company's Financial Services results and these
results will also be affected by the change in CHEC's method of accounting to
the "Portfolio Method."
Contracting and Construction Services and Centex Construction Products
are positioned to record excellent performances during the current fiscal year.
Despite interest rate concerns, Centex believes that it should have another
excellent year in fiscal 2001.
-------------------------------------------------------------------------------
FORWARD LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Annual Report on Form 10-K
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the context of the statement and generally arise when the
Company is discussing its beliefs, 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.
38
<PAGE> 40
ITEM 7A. 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, mortgage loans receivable, and
residual interest in mortgage securitizations. The following analysis provides a
framework to understand the Company's sensitivity to hypothetical changes in
interest rates as of March 31, 2000.
The Company utilizes derivative instruments, including interest rate
swaps and interest rate caps, in conjunction with its overall strategy to manage
the amount of debt outstanding that is subject to changes in interest rates.
Amounts to be paid or received under interest rate swap or cap agreements are
recognized as adjustments to interest expense. As of March 31, 2000, $370
million of the Company's variable rate senior debt outstanding was subject to
interest rate caps or was swapped into a fixed rate of interest.
The Company's Financial Services segment originates, sells, and
securitizes conforming and nonconforming "A" mortgages and sub-prime first and
second mortgages and home equity loans. Beginning in December 1999,
substantially all conforming, Jumbo "A," and GNMA-eligible mortgages are sold to
Centex Home Mortgage, LLC ("CHM") at or near the date on which the loans are
funded. The Company is party to a swap with Bank of America which pays the
required distribution to CHM certificate holders and interest due to CHM debt
holders. The Financial Services segment maintains the forward sales of CTX
Mortgage's mortgages to hedge the risk of reductions in value of mortgages sold
to CHM or maintained under secured financing agreements. This offsets most of
the Company's risk as the counterparty to the swap supporting the payment
requirements of CHM. CTX Mortgage, acting as manager of CHM, delivers mortgages
held by CHM to third party purchasers generally within 60 days of origination.
Due to the high degree of liquidity in the "A" mortgage market and the frequency
of loan sales and securitizations, the use of forward sales is an effective
hedge against changes in market value which result from changes in interest
rates.
CTX Mortgage uses forward sale commitments to hedge most of the market
risk associated with mortgages either sold to CHM or financed with secured
credit facilities which fund mortgage inventory in anticipation of transfer and
sale.
Home Equity uses treasury lock agreements and interest rate swaps to
hedge the market risk associated with carrying the inventory of sub-prime
mortgages held for sale and securitization. Home Equity will generally hold
mortgages in anticipation of securitization for up to 120 days.
Home Equity retains the residual interest in its securitized pools of
mortgages. As of March 31, 2000, the mortgage securitization residual interest
("MSRI") was $161 million. The Company continually monitors the fair value of
the MSRI and reviews the factors expected to influence the future conditional
(or constant) prepayment rate ("CPR"), discount rates, and credit losses. In
developing assumptions regarding expected future CPR, the Company considers a
variety of factors, many of which are interrelated. These factors include
historical performance, origination channels, characteristics of borrowers
(e.g., credit quality and loan-to-value relationships), and market factors that
influence competition. If changes in assumptions regarding future CPR, discount
rates, or credit losses are necessary, the MSRI fair value is adjusted
accordingly.
The Company utilizes both short-term and long-term debt in its
financing strategy. For fixed rate debt, changes in interest rates generally
affect the fair market value of the debt instrument, but not the Company's
earnings or cash flows. Conversely, for variable rate debt, changes in interest
rates generally do not impact the fair market value of the debt instrument, but
do affect the Company's future earnings and cash flows. The Company does not
have an obligation to prepay any of its fixed rate debt prior to maturity, and
as a result, interest rate risk and changes in fair market value should not have
a significant impact on the fixed rate debt until the Company is required to
refinance such debt.
39
<PAGE> 41
As of March 31, 2000, short-term debt was $562 million, of which $415
million was applicable to the Financial Services operations. The majority of the
Financial Services debt is collateralized by residential mortgage loans. The
Company borrows on a short-term basis from banks under committed lines, which
bear interest at the prevailing market rates. The weighted-average interest rate
on borrowings outstanding at March 31, 2000 was 6.6%.
The maturities of Long-term debt outstanding at March 31, 2000 were as
follows (in thousands):
<TABLE>
<CAPTION>
MATURITIES THROUGH MARCH 31,
---------------------------------------------------------------------------
2001 2002 2003 2004 2005
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fixed Rate Debt $ 4,091 $ 1,797 $ 15,037 $ 80 $ 80
Average Interest Rate 7.76% 7.64% 6.4% 7.0% 7.0%
Variable Rate Hedged Debt(1) $ 176,941 $ 192,652 $ -- $ -- $ --
Average Interest Rate 6.25% 6.95% 0.00% 0.00% 0.00%
Variable Rate Debt $ 150,216 $ 340 $ 5,098 $ 125 $ 135
Average Interest Rate 6.65% 4.10% 6.74% 4.10% 4.10%
</TABLE>
<TABLE>
<CAPTION>
MATURITIES
THROUGH
MARCH 31,
------------
Thereafter Total Fair Value
------------ ------------ ------------
<S> <C> <C> <C>
Fixed Rate Debt $ 199,268 $ 220,353 $ 201,914
Average Interest Rate 8.06% 7.81%
Variable Rate Hedged Debt(1) $ -- $ 369,593 $ 369,963
Average Interest Rate 0.00% 6.62%
Variable Rate Debt $ 5,300 $ 161,214 $ 161,214
Average Interest Rate 5.45% 6.61%
</TABLE>
(1) These variable rate notes are fixed rate instruments as a result of a hedge
using interest rate caps or interest rate swaps.
The Financial Services segment arranges most of its own short-term
borrowings through separate facilities that require only limited support from
Centex Corporation. During the third quarter of fiscal 2000, CTX Mortgage
entered into a revolving sales agreement under which CHM, an unaffiliated
special purpose entity, committed to purchase from CTX Mortgage at any one time
up to $1.5 billion of home mortgages. Under the terms of this sale agreement
with CHM, CTX Mortgage is the sole manager of CHM and, in that capacity,
arranges for the sale of such loans into the secondary market. For a
subservicing fee, CTX Mortgage also acts as servicer of these mortgage loans for
CHM until CHM sells the loans. At March 31, 2000 CTX Mortgage was servicing
approximately $704 million of mortgage loans owned by CHM.
Home Equity finances its inventory of mortgage loans through $225
million (increased to $325 in April 2000) in commitments from bank sponsored
commercial paper conduit facilities, $100 million in uncommitted secured lines
of credit, and through $60 million of uncommitted unsecured lines of credit.
The Company believes that its overall balance sheet structure has
repricing and cash flow characteristics that mitigate the impact of interest
rate movements.
40
<PAGE> 42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL INFORMATION
<TABLE>
<S> <C>
CENTEX CORPORATION AND SUBSIDIARIES
Consolidated Revenues and Operating Earnings by Line of Business 42
Statements of Consolidated Earnings 43
Consolidated Balance Sheets 44
Statements of Consolidated Cash Flows 46
Statements of Consolidated Stockholders' Equity 47
Notes to Consolidated Financial Statements 48
Report of Independent Public Accountants 66
Quarterly Results 67
</TABLE>
41
<PAGE> 43
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED REVENUES AND OPERATING EARNINGS BY LINE OF BUSINESS
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
For the Years Ended March 31,
--------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Home Building
Conventional Homes $ 3,686,844 $ 2,819,442 $ 2,312,045 $ 2,299,592 $ 1,989,929
62% 55% 58% 61% 64%
Manufactured Homes 183,526 178,556 140,621 -- --
3% 3% 4% --% --%
Investment Real Estate 30,928 33,694 25,403 9,032 --
1% 1% 1% --% --%
Financial Services 430,611 436,299 246,278 168,722 129,546
7% 8% 6% 5% 4%
Construction Products(A) 418,695 336,073 297,322 239,380 --
7% 7% 7% 6% --%
Contracting and Construction Services 1,205,762 1,350,776 953,781 1,068,265 983,512
20% 26% 24% 28% 32%
------------ ------------ ------------ ------------ ------------
$ 5,956,366 $ 5,154,840 $ 3,975,450 $ 3,784,991 $ 3,102,987
============ ============ ============ ============ ============
100% 100% 100% 100% 100%
OPERATING EARNINGS
Home Building
Conventional Homes $ 323,220 $ 242,223 $ 170,531 $ 144,043 $ 106,695
63% 55% 60% 67% 74%
Manufactured Homes, net(B) 7,329 10,253 8,741 -- --
1% 2% 3% --% --%
Investment Real Estate 30,122 29,420 28,231 17,896 --
6% 7% 10% 8% --%
Financial Services 32,474 92,309 31,371 24,410 17,155
6% 21% 11% 12% 12%
Construction Products, net(A)(B) 104,853 69,189 47,746 32,716 25,628
20% 16% 17% 15% 18%
Contracting and Construction Services 23,471 15,209 7,152 (2,183) (4,995)
5% 3% 2% (1%) (3%)
Other, net (4,749) (15,624) (7,621) (2,260) (866)
(1%) (4%) (3%) (1%) (1%)
------------ ------------ ------------ ------------ ------------
OPERATING EARNINGS 516,720 442,979 286,151 214,622 143,617
100% 100% 100% 100% 100%
Corporate General and Administrative 33,015 28,104 21,261 16,817 14,969
Interest 66,844 41,581 33,256 34,062 40,862
------------ ------------ ------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES $ 416,861 $ 373,294 $ 231,634 $ 163,743 $ 87,786
============ ============ ============ ============ ============
</TABLE>
Applicable segment operating expenses have been deducted from lines of
business operating earnings.
(A) As a result of Centex Construction Products, Inc.'s ("Construction
Products") repurchases of its own stock during the June 30, 1996 quarter,
Centex's ownership interest in Construction Products increased to more than
50% (64.4% as of March 31, 2000). Accordingly, beginning with the quarter
ended June 30, 1996, Construction Products' financial results have been
consolidated with those of Centex and are reflected in Centex's revenues
and operating earnings. In order to facilitate comparisons between years,
Construction Products' operating earnings have been reflected net of
minority interest. Had Construction Products' revenues been consolidated
for the year ended March 31, 1996, Centex's consolidated revenues for that
year would have increased by $222,594.
(B) Operating earnings for Manufactured Homes and Construction Products are
reflected in this summary net of their respective minority interests.
Minority interests for Manufactured Homes was $1,014 and $2,492 in 2000 and
1999, respectively. Minority interest for Construction Products was
$63,758, $51,121, $40,587, $31,690 and $26,676 for 2000, 1999, 1998, 1997
and 1996, respectively.
42
<PAGE> 44
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
------------------------------------------
For the Years Ended March 31,
------------------------------------------
2000 1999 1998
------------------------------------------
<S> <C> <C> <C>
REVENUES
Home Building
Conventional Homes $ 3,686,844 $ 2,819,442 $ 2,312,045
Manufactured Homes 183,526 178,556 140,621
Investment Real Estate 30,928 33,694 25,403
Financial Services 430,611 436,299 246,278
Construction Products 418,695 336,073 297,322
Contracting and Construction Services 1,205,762 1,350,776 953,781
------------ ------------ ------------
5,956,366 5,154,840 3,975,450
------------ ------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes $ 3,363,624 $ 2,577,219 $ 2,141,514
Manufactured Homes 175,183 165,811 129,202
Investment Real Estate 806 4,274 (2,828)
Financial Services 398,137 343,990 214,907
Construction Products 250,084 215,763 208,989
Contracting and Construction Services 1,182,291 1,335,567 946,629
Other, net 4,749 15,624 7,439
Corporate General and Administrative 33,015 28,104 21,261
Interest 66,844 41,581 33,256
Minority Interest 64,772 53,613 43,447
------------ ------------ ------------
5,539,505 4,781,546 3,743,816
------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES 416,861 373,294 231,634
Income Taxes 159,729 141,332 86,828
------------ ------------ ------------
NET EARNINGS $ 257,132 $ 231,962 $ 144,806
============ ============ ============
EARNINGS PER SHARE
Basic $ 4.34 $ 3.90 $ 2.45
============ ============ ============
Diluted $ 4.22 $ 3.75 $ 2.36
============ ============ ============
AVERAGE SHARES OUTSTANDING
Basic 59,308,158 59,488,701 59,007,158
Common Share Equivalents
Options 1,220,822 1,965,116 1,857,785
Convertible Debenture 400,000 400,000 400,000
------------ ------------ ------------
Diluted 60,928,980 61,853,817 61,264,943
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
43
<PAGE> 45
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------
Centex Corporation and
Subsidiaries
----------------------------
March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 139,563 $ 111,268
Receivables -
Residential Mortgage Loans 409,697 1,395,616
Construction Contracts 206,519 232,779
Trade, including Notes of $28,502 and $29,458 276,862 226,999
Inventories -
Housing Projects 1,811,695 1,412,788
Land Held for Development and Sale 75,875 74,081
Construction Products 38,582 33,030
Other 27,885 13,920
Investments -
Centex Development Company, L.P. 65,550 63,207
Joint Ventures and Other 65,944 48,594
Unconsolidated Subsidiaries -- --
Property and Equipment, net 360,604 313,655
Other Assets -
Deferred Income Taxes 49,907 49,107
Goodwill, net 251,780 222,162
Mortgage Securitization Residual Interest 160,999 80,152
Deferred Charges and Other 97,278 57,388
------------ ------------
$ 4,038,740 $ 4,334,746
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 1,125,807 1,018,650
Short-term Debt 562,235 1,626,600
Long-term Debt 751,160 284,299
Payables to Affiliates -- --
Minority Stockholders' Interest 129,352 140,721
Negative Goodwill 50,837 66,837
Stockholders' Equity -
Preferred Stock, Authorized 5,000,000 Shares, None Issued -- --
Common Stock, $.25 Par Value; Authorized 100,000,000 Shares;
Issued and Outstanding 58,806,217 and 59,388,350 Shares 14,702 14,847
Capital in Excess of Par Value -- 20,822
Retained Earnings 1,405,895 1,161,970
Accumulated Other Comprehensive Loss (1,248) --
------------ ------------
Total Stockholders' Equity 1,419,349 1,197,639
------------ ------------
$ 4,038,740 $ 4,334,746
============ ============
</TABLE>
See notes to consolidated financial statements.
44
<PAGE> 46
CENTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Centex Corporation Financial Services
----------------------------------- ----------------------------------
March 31, March 31,
----------------------------------- ----------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C>
$ 123,411 $ 72,279 $ 16,152 $ 38,989
-- -- 409,697 1,395,616
206,519 232,779 -- --
212,291 171,264 64,571 55,735
1,811,695 1,412,788 -- --
75,875 74,081 -- --
38,582 33,030 -- --
19,747 13,920 8,138 --
65,550 63,207 -- --
65,944 48,594 -- --
267,177 221,744 -- --
319,255 285,891 41,349 27,764
24,018 40,541 25,889 8,566
233,059 206,595 18,721 15,567
-- -- 160,999 80,152
71,302 40,962 25,976 16,426
------------ ------------ ------------ ------------
$ 3,534,425 $ 2,917,675 $ 771,492 $ 1,638,815
============ ============ ============ ============
$ 1,038,641 $ 926,377 $ 87,166 $ 92,273
146,908 303,656 415,327 1,322,944
751,160 284,299 -- --
-- -- 64,246 102,652
127,530 138,867 1,822 1,854
50,837 66,837 -- --
-- -- -- --
14,702 14,847 1 1
-- 20,822 150,467 75,944
1,405,895 1,161,970 52,463 43,147
(1,248) -- -- --
------------ ------------ ------------ ------------
1,419,349 1,197,639 202,931 119,092
------------ ------------ ------------ ------------
$ 3,534,425 $ 2,917,675 $ 771,492 $ 1,638,815
============ ============ ============ ============
</TABLE>
In the supplemental data presented above, "Centex Corporation" represents the
adding together of all subsidiaries other than those included in Financial
Services as described in Note B to the consolidated financial statements.
Transactions between Centex Corporation and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries balance sheets.
45
<PAGE> 47
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------
For the Years Ended March 31,
------------------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings $ 257,132 $ 231,962 $ 144,806
Adjustments -
Depreciation, Depletion and Amortization 48,971 36,172 25,638
Deferred Income Taxes (Benefit) Provision (5,600) 96,462 59,181
Equity in Earnings of Centex Development Company,
L.P. and Joint Ventures (946) (125) (3,796)
Minority Interest, net of taxes 41,564 35,112 28,836
Increase in Receivables (21,236) (66,897) (36,163)
Decrease (Increase) in Residential Mortgage Loans 984,687 (204,166) (558,793)
Increase in Inventories (343,430) (426,301) (70,337)
Increase in Payables and Accruals 90,894 205,671 61,456
Increase in Other Assets, net (139,350) (115,179) (72,445)
Other, net (52,933) (46,859) (18,598)
------------ ------------ ------------
859,753 (254,148) (440,215)
------------ ------------ ------------
CASH FLOWS - INVESTING ACTIVITIES
(Increase) Decrease in Investment in and Advances to
Centex Development Company, L.P. and Joint Ventures (15,482) (51,147) 7,195
Acquisitions -
Home Building Operations (74,119) (124,116) --
Other (15,161) -- --
Property and Equipment Additions, net (87,766) (52,453) (36,874)
------------ ------------ ------------
(192,528) (227,716) (29,679)
------------ ------------ ------------
CASH FLOWS - FINANCING ACTIVITIES
(Decrease) Increase in Debt -
Secured by Residential Mortgage Loans (907,617) 243,894 498,532
Other 302,957 276,417 27,769
Proceeds from Stock Option Exercises 19,613 9,482 18,583
Retirement of Common Stock (44,301) (25,457) --
Dividends Paid (9,486) (9,520) (7,994)
------------ ------------ ------------
(638,834) 494,816 536,890
------------ ------------ ------------
Effect of Exchange Rate Changes on Cash (96) -- --
------------ ------------ ------------
NET INCREASE IN CASH 28,295 12,952 66,996
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 111,268 98,316 31,320
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 139,563 $ 111,268 $ 98,316
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
46
<PAGE> 48
CENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Accumulated
Capital In Other
Preferred Common Excess Of Retained Comprehensive
Stock Stock Par Value Earnings Loss Total
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1997 $ -- $ 14,508 $ 18,553 $ 802,716 $ -- $ 835,777
Exercise of Stock Options -- 375 18,208 -- -- 18,583
Net Earnings -- -- -- 144,806 -- 144,806
Cash Dividends -- -- -- (7,994) -- (7,994)
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1998 -- 14,883 36,761 939,528 -- 991,172
Exercise of Stock Options -- 143 9,339 -- -- 9,482
Retirement of 714,800 Shares -- (179) (25,278) -- -- (25,457)
Net Earnings -- -- -- 231,962 -- 231,962
Cash Dividends -- -- -- (9,520) -- (9,520)
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1999 -- 14,847 20,822 1,161,970 -- 1,197,639
EXERCISE OF STOCK OPTIONS -- 313 19,300 -- -- 19,613
RETIREMENT OF 1,831,600 SHARES -- (458) (40,122) (3,721) -- (44,301)
NET EARNINGS -- -- -- 257,132 -- 257,132
ACCUMULATED OTHER
COMPREHENSIVE LOSS:
UNREALIZED LOSS ON
INVESTMENTS -- -- -- -- (1,152) (1,152)
FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS -- -- -- -- (96) (96)
------------
COMPREHENSIVE INCOME 255,884
CASH DIVIDENDS -- -- -- (9,486) -- (9,486)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 2000 $ -- $ 14,702 $ -- $ 1,405,895 $ (1,248) $ 1,419,349
============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
47
<PAGE> 49
CENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(A) OTHER COMPREHENSIVE INCOME
Comprehensive income is summarized below:
<TABLE>
<CAPTION>
-----------------------------------------------
For the Years Ended March 31,
-----------------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net Earnings $ 257,132 $ 231,962 $ 144,806
Other Comprehensive Loss:
Unrealized Loss on Investments (1,152) -- --
Foreign Currency Translation Adjustments (96) -- --
------------ ------------ ------------
Comprehensive Income $ 255,884 $ 231,962 $ 144,806
============ ============ ============
</TABLE>
Comprehensive income consists of net income, foreign currency
translation adjustments, and mark to market adjustments to securities available
for sale held by the Company's 64.4% owned subsidiary, Centex Construction
Products, Inc.
(B) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Centex
Corporation and subsidiaries ("Centex" or the "Company") after the elimination
of all significant intercompany balances and transactions.
Balance sheet data is presented in the following categories:
o Centex Corporation and Subsidiaries. This represents the adding
together of Centex Corporation, Financial Services and all of their
consolidated subsidiaries. The effects of transactions among related
companies within the consolidated group have been eliminated.
o Centex Corporation. This information is presented as supplemental
information and represents the adding together of all subsidiaries
other than those included in Financial Services, which are presented
on an equity basis of accounting.
o Financial Services. This information is presented as supplemental
information and represents Centex Financial Services and
subsidiaries.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
48
<PAGE> 50
REVENUE RECOGNITION
Revenues from Home Building projects and Investment Real Estate are
recognized when homes and properties are sold and title passes. Earnings from
the sale of mortgage servicing rights and from loan origination fees are
recognized when the related loan is sold and delivered to a third-party
purchaser.
Long-term construction contract revenues are recognized on the
percentage-of-completion method based on the costs incurred relative to total
estimated costs. Full provision is made for any anticipated losses. Billings
for long-term construction contracts are rendered monthly, including the amount
of retainage withheld by the customer until contract completion. As a general
contractor, the Company withholds similar retainages from each subcontractor.
Retainages of $57 million included in construction contracts receivable and $65
million included in accounts payable at March 31, 2000 are generally receivable
and payable within one year.
Claims are recognized as revenue only after management has determined
that the collection is probable and the amount can be reliably estimated.
Claims of $3.7 million, $2.1 million and $0.5 million are included in revenues
for the years ended March 31, 2000, 1999 and 1998, respectively.
Notes receivable at March 31, 2000 are collectible primarily over five
years with $17.9 million being due within one year. The weighted-average
interest rate at March 31, 2000 was 5.7%.
INVENTORY, CAPITALIZATION AND SEGMENT EXPENSES
Housing projects and land held for development and sale are stated at
the lower of cost (including direct construction costs and capitalized interest
and real estate taxes) or fair value less cost to sell. The capitalized costs,
other than interest, are included in Home Building and Investment Real Estate
costs and expenses in the Statement of Consolidated Earnings when related
revenues are recognized. Interest costs relieved from inventories are included
as interest expense. The Company reviews the recoverability of its Home
Building inventories on an individual project basis in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of."
Construction Products inventories are stated at the lower of average
cost (including applicable material, labor and plant overhead) or market.
General operating expenses associated with each segment of business
are expensed when incurred and are included in the appropriate segment of
business.
INVESTMENTS
From time to time the Company sells certain real estate assets to
Centex Development Company, L.P. in exchange for cash or additional Class C
partnership Units. The assets are sold at their estimated fair market value at
the time of sale using available market information including data from recent
sales, brokers and appraisals. The Company records any excess of the sales
price over book value as deferred income. The Company recognizes the deferred
income when the properties are subsequently sold by Centex Development Company,
L.P. See Note (G) for additional information regarding Centex Development
Company, L.P.
The Company is a participant in certain joint ventures with interests
ranging from 20% to 50%. The investments in these joint ventures are carried on
the equity method in the consolidated financial statements except for Centex
Construction Products, Inc.'s ("Construction Products") 50% joint venture
interests in its cement plants in Illinois and Texas. Construction Products has
proportionately consolidated its pro rata
49
<PAGE> 51
interest in the revenues, expenses, assets and liabilities of those extractive
industry ventures. The earnings or losses of the Company's other joint ventures
are not significant and are included in the appropriate segment of business
revenues.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and
improvements are capitalized and depreciated. Repairs and maintenance are
expensed as incurred. Depreciation is provided on a straight-line basis over
the estimated useful lives of depreciable assets. Costs and accumulated
depreciation applicable to assets retired or sold are eliminated from the
accounts and any resulting gains or losses are recognized at such time.
GOODWILL AND NEGATIVE GOODWILL
Goodwill represents the excess of purchase price over net assets of
businesses acquired. Goodwill is amortized over various periods between 6 years
and 40 years. The Company monitors its goodwill and other intangibles to
determine whether any impairment of these assets has occurred. In making such
determination, the Company evaluates the performance, on an undiscounted basis,
of the underlying businesses which gave rise to such amount. In case of
impairment, the recorded costs would be written down to fair value on a
discounted basis. Goodwill amortization totaled $14.2 million in fiscal 2000,
$10.5 million in fiscal 1999 and $5.8 million in fiscal 1998.
Negative goodwill arose in conjunction with Centex's Home Building
subsidiary's fiscal 1997 combination transaction with Vista Properties, Inc.
Negative goodwill is being amortized to earnings as a reduction of costs and
expenses ($16 million annually) over the seven-year estimated period during
which Vista's land will be developed and/or sold.
EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted-average
number of shares of common stock outstanding. Diluted earnings per share is
computed based upon the basic weighted-average number of shares plus the
dilution of the stock options and the convertible debenture.
The computation of diluted earnings per share excludes anti-dilutive
options to purchase 3,843,000 common shares at an average price of $37.25 for
the year ended March 31, 2000. All anti-dilutive options have expiration dates
ranging from September 2007 to October 2009.
RESIDENTIAL MORTGAGE LOANS RECEIVABLE
Residential mortgage loans of $409.7 million at March 31, 2000 were
stated at the lower of cost or market. Market is determined by forward sale
commitments, current investor yield requirements and current securitization
market conditions, adjusted for deferred hedging gains or losses. Substantially
all of the mortgage loans are delivered to third-party purchasers and/or
subject to securitization within three months after year end, and are subject
to hedge instruments during the time they are held in inventory. Appropriate
bad debt reserves have been provided for those mortgage loans that the Company
intends to retain in its loan portfolio.
MORTGAGE LOAN SALES AND SERVICING AGREEMENT
In December 1999, the Company's CTX Mortgage Company subsidiary ("CTX
Mortgage") entered into a revolving sales agreement, under which an
unaffiliated buyer, Centex Home Mortgage, LLC, a special purpose entity
("CHM"), committed to purchase, at CTX Mortgage's option, mortgage loans
originated by
50
<PAGE> 52
CTX Mortgage on a daily basis, up to CHM's asset limit of $1.5 billion. Under
the terms of the agreement with CHM, CTX Mortgage is the sole manager of CHM
and, in that capacity, arranges for the sale of such loans into the secondary
market. For a subservicing fee, CTX Mortgage also acts as servicer of these
mortgage loans for CHM until CHM sells the loans. At March 31, 2000 CTX
Mortgage was servicing approximately $704 million of mortgage loans owned by
CHM.
MORTGAGE SECURITIZATION RESIDUAL INTEREST
The Company's Centex Home Equity Corporation ("Home Equity" or "CHEC")
uses mortgage securitizations to finance its mortgage loan portfolio.
Securitizations entered into prior to March 31, 2000 have been accounted for as
sales, and the resulting gains on such sales were reported in operating results
during the period in which the securitization closed. Home Equity will change
the legal and economic structure of securitizations subsequent to March 31,
2000. Such future securitizations will be accounted for as borrowings.
For securitizations accounted for as sales, Home Equity has retained a
residual interest (the "Mortgage Securitization Residual Interest" or "MSRI").
The MSRI represents CHEC's right to receive, over the life of the
securitization, the excess of the weighted average coupon on the loans
securitized over the interest rates on the securities sold, a normal servicing
fee, a trustee fee, and an insurance fee (where applicable) net of the credit
losses relating to the loans securitized (the "Excess Spread").
The Company classifies MSRI as trading securities in accordance with
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," and accordingly carries MSRI at fair value on the Company's
balance sheet. Unrealized changes in MSRI fair values are included in the
Financial Services' revenues in the Company's Consolidated Statements of
Earnings.
Home Equity estimates the fair value of MSRI through the application
of discounted cash flow analysis. Such analysis requires the use of various
assumptions, the most significant of which are anticipated prepayments
(principal reductions in excess of contractually scheduled reductions),
estimated future credit losses, and the discount rate applied to future cash
flows. Home Equity continuously monitors the fair value of MSRI and the
reasonableness of the underlying assumptions in light of current market
conditions.
At March 31, 2000, Home Equity's MSRI portfolio comprised residual
interests in securitizations with a fair value of $161 million. This MSRI
carrying value reflects a $16 million reduction (charged to operations in the
fourth quarter of fiscal 2000) to increase the discount rate on future net cash
flows from 12% to 15%.
All other assumptions used in determining MSRI remain unchanged from
the prior year, with the exception of credit losses on variable interest rate
loans. Specifically, Home Equity assumes credit losses of 0.5% per annum for
fixed rate loans. Home Equity assumes a Constant Prepayment Rate ("CPR") for
fixed rate loans of 4.8% per annum in the first month of the loan, increasing
approximately 2.1% per annum each month to a maximum of 28% per annum by the
end of the twelfth month. Variable rate loans use a constant CPR of 32% per
annum. Home Equity assumes credit losses of 0.8% per annum for variable rate
loans, an increase from 0.5% per annum in fiscal 1999. Life-to-date performance
of the securitized pools does not differ significantly from management's
assumptions.
OFF-BALANCE-SHEET RISK
Centex Corporation and its subsidiaries enter into various financial
agreements in the normal course of business in order to manage exposure to
changing interest rates. The Company enters into interest rate
51
<PAGE> 53
swap and cap agreements for the purpose of converting variable rate debt into
fixed rate debt. As of March 31, 2000, $177 million in medium term debt was
subject to interest rate cap agreements limiting exposure to changes in LIBOR,
and $193 million in medium term debt was subject to interest rate swap
agreements such that the Company will pay a fixed rate of interest. As a
result, less than 22% of the Company's debt outstanding at March 31, 2000 was
subject to changes in various interest rates.
CTX Mortgage enters into forward sales agreements to mitigate the risk
that arises because it issues loan commitments to its customers at a specified
price and period, and subsequently commits to sell mortgage loans at a
specified price to various investors. At March 31, 2000, CTX Mortgage had loan
commitments to mortgagors of approximately $294 million and commitments from
investors against these loan commitments of approximately $176 million.
Home Equity enters into interest rate swap agreements and treasury
lock agreements in advance of its monthly fixed rate loan production in order
to hedge the risk of changes in interest rates for loans that are held for sale
and securitization. As of March 31, 2000, Home Equity had $179 million in fixed
and variable rate loans held for securitization, $130 million in interest rate
swap agreements, and no treasury lock agreements outstanding.
The Company does not engage in the trading of securities or other
financial instruments.
STATEMENTS OF CONSOLIDATED CASH FLOWS - SUPPLEMENTAL DISCLOSURES
Interest expenses relating to the Financial Services operations are
included in their respective costs and expenses. Interest related to
non-Financial Services operations are included as interest expense as summarized
below:
<TABLE>
<CAPTION>
---------------------------------------------
For the Years Ended March 31,
---------------------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Total Interest Incurred $ 128,520 $ 118,451 $ 78,128
Less - Financial Services (61,676) (76,870) (44,872)
--------- --------- ---------
Interest Expense $ 66,844 $ 41,581 $ 33,256
========= ========= =========
</TABLE>
Net payments made for federal, state and foreign income taxes during
the fiscal years ended March 31, 2000, 1999, and 1998 were $98.9 million, $43.7
million, and $23.3 million, respectively.
STATEMENTS 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. SFAS No. 133 requires that an
entity recognize all derivatives as either assets or liabilities in the
consolidated balance sheet and measure those instruments at fair value. In June
1999, SFAS No. 137 was issued, delaying the implementation of this statement
until April 2001. The company is in the process of assessing the impact SFAS
No. 133 will have on its financial statements.
52
<PAGE> 54
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent
with the fiscal 2000 presentation.
(C) PROPERTY AND EQUIPMENT
Property and equipment cost by major category and accumulated depreciation are
summarized below:
<TABLE>
<CAPTION>
-----------------------------
March 31,
-----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Land, Buildings and Improvements $ 60,203 $ 49,440
Machinery, Equipment and Other 227,391 183,375
Plants 344,225 322,991
--------- ---------
631,819 555,806
Accumulated Depreciation (271,215) (242,151)
--------- ---------
$ 360,604 $ 313,655
========= =========
</TABLE>
(D) INDEBTEDNESS
SHORT-TERM DEBT
Balances of short-term debt were:
<TABLE>
<CAPTION>
----------------------------------------------------------------
March 31,
----------------------------------------------------------------
2000 1999
---------------------------- ----------------------------
CENTEX FINANCIAL Centex Financial
CORPORATION SERVICES Corporation Services
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Banks $ 4,000 $ 185,973 $ -- $ 596,094
Commercial Paper 109,135 -- 289,140 --
Other Financial Institutions 33,773 229,354 14,516 726,850
---------- ---------- ---------- ----------
$ 146,908 $ 415,327 $ 303,656 $1,322,944
---------- ---------- ---------- ----------
Consolidated Short-term Debt $ 562,235 $1,626,600
========== ==========
</TABLE>
The Company borrows on a short-term basis from banks under uncommitted
lines which bear interest at prevailing market rates. The weighted-average
interest rates of the short-term borrowings during fiscal 2000 and 1999 were
5.7% and 6.0%, respectively. The weighted-average rates of balances at fiscal
year end fiscal 2000 and 1999 were 6.6% and 5.6%, respectively.
53
<PAGE> 55
LONG-TERM DEBT
Balances of long-term debt were:
<TABLE>
<CAPTION>
------------------------
March 31,
------------------------
2000 1999
-------- --------
<S> <C> <C>
Subordinated Debentures, 7.375% due in 2005 $ 99,747 $ 99,698
Subordinated Debentures, 8.75% , due in 2007 99,521 99,473
Medium-term Note Programs, 6.4% to 6.89%, due through 2003 539,439 74,803
Other Indebtedness, weighted-average 6.44%, due through 2027 12,453 10,325
-------- --------
$751,160 $284,299
======== ========
</TABLE>
Maturities of long-term debt during the next five fiscal years are: 2001,
$331,248; 2002, $194,789; 2003, $20,135; 2004, $205; 2005, $215.
Included in other long-term debt is a $2.1 million convertible
subordinated debenture sold at par in 1985 to a corporate officer. The
indebtedness, which matures in 2010, bears interest at LIBOR plus 1.5% and is
convertible into 400,000 shares of the Company's common stock. In connection
with this transaction, the Company has guaranteed the payment of a $2.1 million
note payable to a bank by the officer.
CREDIT FACILITIES
The Company maintains a $425 million multi-bank revolving credit
agreement expiring in August 2001. Under the terms of the agreement, $170
million may be borrowed directly by CTX Mortgage. There were no borrowings
outstanding by Centex Corporation under this facility during the fiscal years
ended March 31, 2000 and 1999. CTX Mortgage used this facility on certain
occasions during fiscal years ended March 31, 2000 and 1999. The Company also
has a $310 million multi-bank revolving credit agreement that expires on
November 15, 2000. There have been no borrowings under this facility since its
inception.
The Financial Services segment arranges most of its own short-term
borrowings through separate facilities that require only limited support from
Centex Corporation. During the third quarter of fiscal 2000, CTX Mortgage
entered into a five-year, extendable revolving sales agreement under which CHM,
an unaffiliated special purpose entity, committed to purchase from CTX Mortgage
at any one time up to $1.5 billion of home mortgages. Under the terms of this
sale agreement with CHM, CTX Mortgage is the sole manager of CHM and, in that
capacity, arranges for the sale of such loans into the secondary market. For a
subservicing fee, CTX Mortgage also acts as servicer of these mortgage loans
for CHM until CHM sells the loans. As of March 31, 2000, CTX Mortgage was
servicing approximately $704 million for CHM. CTX Mortgage also maintains $200
million in committed secured mortgage warehouse facilities and uncommitted
secured facilities of $500 million.
Home Equity finances its inventory of mortgage loans through $225
million (increased to $325 million in April 2000) in commitments from bank
sponsored commercial paper conduit facilities and $100 million in uncommitted
secured lines of credit, and $60 million of uncommitted unsecured lines of
credit.
Under the most restrictive covenants of the various debt agreements,
retained earnings of $808 million were free of restrictions at March 31, 2000.
54
<PAGE> 56
(E) CAPITAL STOCK
STOCKHOLDER RIGHTS PLAN
On October 2, 1996, the Board of Directors of the Company adopted a
new stockholder rights plan ("Plan") to replace the original rights plan which
expired on October 1, 1996. In connection with the Plan, the Board authorized
and declared a dividend of one right ("Right") for each share of Common Stock,
par value $.25 per share, of the Company ("Common Stock") to all stockholders
of record at the close of business on October 15, 1996. After giving effect to
the Company's two-for-one stock split effective March 2, 1998, each Right
entitles its holder to purchase one two-hundredths of a share of a new series
of preferred stock designated Junior Participating Preferred Stock, Series D,
at an exercise price of $67.50. The Rights will become exercisable upon the
earlier of 10 days after the first public announcement that a person or group
has acquired beneficial ownership of 15% or more of the Common Stock, or 10
business days after a person or group announces an offer, the consummation of
which would result in such person or group beneficially owning 15% or more of
the Common Stock (even if no purchases actually occur), unless such time
periods are deferred by appropriate Board action. The Plan excludes FMR Corp.
from causing the rights to become exercisable until such time as FMR Corp.,
together with certain affiliated and associated persons, collectively own 20%
or more of the Common Stock. If the Company is involved in a merger or other
business combination at any time after a person or group has acquired
beneficial ownership of 15% or more (or, in the case of FMR Corp., 20% or more)
of Common Stock, the Rights will entitle a holder to buy a number of shares of
common stock of the acquiring Company having a market value of twice the
exercise price of each Right. If any person or group acquires beneficial
ownership of 15% or more (or, in the case of FMR Corp., 20% or more) of Common
Stock, the Rights will entitle a holder (other than such person or any member
of such group) to buy a number of additional shares of Common Stock having a
market value of twice the exercise price of each Right. Alternatively, if a
person or group has acquired 15% or more (or, in the case of FMR Corp., 20% or
more) of the Common Stock, but less than 50% of the Common Stock, the Company
may at its option exchange each Right of a holder (other than such person or
any member of such group) for one share of Common Stock. In general, the Rights
are redeemable at $0.01 per Right until 15 days after the Rights become
exercisable as described above. Unless earlier redeemed, the Rights will expire
on October 12, 2006.
STOCK OPTIONS
The Company has two stock option plans: the Second Amended and
Restated 1998 Centex Corporation Employee Non-Qualified Stock Option Plan (the
"1998 Plan") and the Centex Corporation Amended and Restated 1987 Stock Option
Plan (the "1987 Plan"). The Centex Corporation Stock Option Plan (the "Centex
Plan") expired in fiscal 1999. Options granted under the 1998 Plan may not be
granted at less than the fair market value at the date of grant. Although the
1987 Plan provides that option grants may be at less than the fair market value
at the date of the grant, the Company has consistently followed the practice of
issuing options at or above the fair market value at the date of grant. Options
granted under the Centex Plan were not granted at less than the fair market
value at the date of the grant. Under all three plans, option periods and
exercise dates may vary within a maximum period of ten years.
The Company records proceeds from the exercise of options as additions
to common stock and capital in excess of par value. The federal tax benefit, if
any, is considered additional capital in excess of par value. No charges or
credits would be made to earnings unless options were to be granted at less
than the fair market value at the date of the grant.
55
<PAGE> 57
A summary of the activity of the three stock option plans is presented
below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
For the years ended March 31,
---------------------------------------------------------------------------------
2000 1999 1998
------------------------ ----------------------- -----------------------
WEIGHTED- Weighted- Weighted-
AVERAGE Average Average
NUMBER EXERCISE Number Exercise Number Exercise
OF SHARES PRICE of Shares Price of Shares Price
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding,
Beginning of Year 6,763,748 $22.46 5,260,056 $14.22 5,360,058 $10.89
Options Granted
At Fair Market Value 42,500 $27.53 2,254,800 $38.27 1,804,890 $18.36
Above Fair Market Value 2,337,590 $36.06 -- -- -- --
Options Exercised (1,336,568) $11.40 (709,283) $11.51 (1,660,518) $ 7.80
Options Forfeited/Expired (436,699) $32.24 (41,825) $18.44 (244,374) $15.18
---------- ---------- ----------
Options Outstanding, End of Year 7,370,571 $28.23 6,763,748 $22.46 5,260,056 $14.22
========== ========== ==========
Options Exercisable, End of Year 3,546,606 2,760,743 2,045,732
========== ========== ==========
Shares Available for Future Stock
Option Grants, End of Year 3,121,938 3,478,257 4,104,254
========== ========== ==========
Weighted-Average Fair Value of $14.80 $18.54 $9.31
Options Granted during the Year
</TABLE>
Using the treasury stock method, which assumes that any proceeds
together with the related tax benefits from the exercise of options would be
used to purchase common stock at current prices, the dilutive effect of the
options on outstanding shares as of March 31, 2000 would have been 1.1%. This
is significantly less than appears on a gross basis when compared to the
58,806,217 common shares outstanding as of March 31, 2000.
The following table summarizes information about stock options
outstanding at March 31, 2000:
<TABLE>
<CAPTION>
-------------------------------------------- -----------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- -----------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
SHARES CONTRACTUAL EXERCISE SHARES EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE OUTSTANDING PRICE
------------------------ ----------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 8.5625 - $14.3750 917,934 3.74 $12.07 669,742 $11.41
$15.0000 - $28.5313 2,174,312 6.28 $17.61 1,466,456 $17.35
$30.3438 - $36.0600 2,316,735 8.96 $35.86 624,178 $35.91
$36.4688 - $39.6875 1,961,590 8.01 $38.56 786,230 $38.60
--------- ---------
7,370,571 7.27 $28.23 3,546,606 $24.21
========= =========
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock- Based Compensation." Accordingly, no compensation
cost has been recognized for the stock option plans. Had compensation cost for
the Company's three stock option plans been determined based on the fair value
at the grant date for awards in fiscal 2000, 1999 and 1998 consistent with the
provisions of SFAS No. 123, the Company's net earnings and earnings per share
would have been reduced to the pro forma amounts indicated below:
56
<PAGE> 58
<TABLE>
<CAPTION>
-------------------------------------------------
For the years ended March 31,
-------------------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net Earnings - as Reported $ 257,132 $ 231,962 $ 144,806
Net Earnings - Pro Forma $ 231,399 $ 217,504 $ 140,034
Earnings Per Share - as Reported
Basic $ 4.34 $ 3.90 $ 2.45
Diluted $ 4.22 $ 3.75 $ 2.36
Earnings Per Share - Pro Forma
Basic $ 3.90 $ 3.66 $ 2.37
Diluted $ 3.80 $ 3.52 $ 2.29
</TABLE>
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
----------------------------------
For the Years Ended March 31,
----------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Expected Volatility 35.0% 34.3% 35.3%
Risk-Free Interest Rate 5.5% 5.7% 6.9%
Dividend Yield .5% .4% .6%
Expected Life (Years) 8 8 8
</TABLE>
(F) INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
--------------------------------------------
For the Years Ended March 31,
--------------------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Current Provision
Federal $ 143,101 $ 32,858 $ 18,555
State 22,228 12,012 9,092
--------- --------- ---------
165,329 44,870 27,647
--------- --------- ---------
Deferred (Benefit) Provision
Federal (3,274) 92,008 57,780
State (2,326) 4,454 1,401
--------- --------- ---------
(5,600) 96,462 59,181
--------- --------- ---------
Provision for Income Taxes $ 159,729 $ 141,332 $ 86,828
========= ========= =========
</TABLE>
The effective tax rate is greater than the federal statutory rate of
35% due to the following items:
<TABLE>
<CAPTION>
-----------------------------------------------
For the Years Ended March 31,
-----------------------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Financial Income Before Taxes $ 416,861 $ 373,294 $ 231,634
========= ========= =========
Income Taxes at Statutory Rate $ 145,902 $ 130,653 $ 81,072
Increases (Decreases) in Tax Resulting From -
State Income Taxes, net 10,265 9,068 5,822
Negative Goodwill Amortization (6,000) (6,000) (6,000)
Other 9,562 7,611 5,934
--------- --------- ---------
Provision for Income Taxes $ 159,729 $ 141,332 $ 86,828
========= ========= =========
Effective Tax Rate 38% 38% 37%
</TABLE>
57
<PAGE> 59
The deferred income tax (benefit) provision results from the following
temporary differences in the recognition of revenues and expenses for tax and
financial reporting purposes:
<TABLE>
<CAPTION>
------------------------------------------
For the Years Ended March 31,
------------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Utilization of Net Operating Loss Carryforwards $ -- $ 28,224 $ 43,771
Tax Basis in Excess of Book Basis 7,666 71,740 9,207
Uniform Capitalization for Tax Reporting -- 3,525 7,379
Excess Tax Depreciation and Amortization 7,626 2,366 4,097
Securitization Reporting Differences (9,567) -- --
Financial Accrual Changes and Other (11,325) (9,393) (5,273)
-------- -------- --------
$ (5,600) $ 96,462 $ 59,181
======== ======== ========
</TABLE>
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
------------------------
March 31,
------------------------
2000 1999
-------- --------
<S> <C> <C>
Deferred Tax Assets
Tax Basis in Excess of Book Basis 18,882 26,548
Net Operating Loss Carryforwards 2,245 17,631
Uniform Capitalization for Tax Reporting 32,051 30,924
Financial Accruals 79,435 60,301
Alternative Minimum Tax -- 4,555
Securitization Reporting Differences 8,487 --
All Other 14,440 7,898
-------- --------
Total Deferred Tax Assets 155,540 147,857
-------- --------
Deferred Tax Liabilities
Excess Tax Depreciation and Amortization $ 40,243 $ 31,347
Interest and Real Estate Taxes Expensed as Incurred 18,913 18,933
Equity Adjustments 32,222 27,675
Consolidated Return Regulation Deferrals 6,856 6,861
All Other 7,399 13,934
-------- --------
Total Deferred Tax Liabilities 105,633 98,750
-------- --------
Net Deferred Tax Assets $ 49,907 $ 49,107
======== ========
</TABLE>
At March 31, 2000, Centex had $6.4 million of net operating loss
carryforwards available to reduce future federal taxable income which, if
unused, expire as follows: 2006, $0.9 million; 2007, $3.0 million; 2008, $1.0
million; 2009, $0.5 million; 2010, $0.5 million; and 2011, $0.5 million.
Centex owns a minority interest in a subsidiary with a deferred tax
asset of approximately $132 million primarily related to net operating loss
carryforwards. The carryforwards will expire if unused 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.
(G) CENTEX DEVELOPMENT COMPANY, L.P.
In March 1987, certain of Centex's subsidiaries contributed to Centex
Development Company, L.P., (the "Partnership") a newly formed master limited
partnership, properties with a historical cost basis (which approximated market
value) of approximately $76 million. The Partnership was formed to enable
stockholders
58
<PAGE> 60
to participate in long-term real estate development projects whose dynamics are
inconsistent with Centex's traditional financial objectives.
The Partnership is controlled by its general partner, 3333 Development
Corporation ("Development"), a wholly-owned subsidiary of 3333 Holding
Corporation ("Holding"). Holding is a separate public company whose stock
trades in tandem with Centex's stock. The common stock of Holding was
distributed in 1987 (with warrants to purchase approximately 80% of the Class B
limited partnership units in the Partnership) as a dividend to the stockholders
of Centex and is held by a nominee. These securities 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 five-person Board of Directors of
Holding. Three of the Board members, representing the majority of the Board,
must be 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 year 1998, the 1,000 Class A Units were converted to 32,260 new Class A
Units. As of March 31, 2000, 35,082 Class C Units have been issued in exchange
for assets with a fair market value of $35.1 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 at March 31, 2000 totaled $32.8 million. Preference
payments in arrears at March 31, 2000 amounted to $14.8 million. No preference
payments were made during fiscal 2000.
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.
59
<PAGE> 61
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------------
March 31,
----------------------------
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 197,877 $ 111,632
Receivables 907,367 1,860,090
Inventories 2,343,682 1,639,664
Investments in Joint Ventures and Other 68,539 49,266
Property and Equipment, net 364,182 313,886
Other Assets 599,526 410,321
---------- ----------
$4,481,173 $4,384,859
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $1,244,500 $1,026,867
Short-term Debt 834,897 1,668,496
Long-term Debt 802,238 284,299
Minority Stockholders' Interest 129,352 140,721
Negative Goodwill 50,837 66,837
Stockholders' Equity 1,419,349 1,197,639
---------- ----------
$4,481,173 $4,384,859
========== ==========
</TABLE>
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
--------------------------------------------------
For the Years Ended March 31,
--------------------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 6,328,355 $ 5,179,188 $ 3,991,954
Costs and Expenses 5,907,660 4,805,894 3,760,445
----------- ----------- -----------
Earnings Before Income Taxes 420,695 373,294 231,509
Income Taxes 163,563 141,332 86,828
----------- ----------- -----------
NET EARNINGS $ 257,132 $ 231,962 $ 144,681
Other Comprehensive Loss (1,248) -- --
----------- ----------- -----------
COMPREHENSIVE INCOME $ 255,884 $ 231,962 $ 144,681
=========== =========== ===========
</TABLE>
(H) ACQUISITION OF VISTA PROPERTIES, INC.
In fiscal 1996, the Company acquired equity interests 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.
(I) ACQUISITION OF CAVCO INDUSTRIES
During fiscal 1997, Centex Real Estate Corporation acquired, for $74.3
million, approximately 80% of Cavco Industries, the largest producer of
manufactured homes in Arizona and New Mexico as well as the nation's largest
producer of park model homes. Cavco currently operates three manufactured
housing plants
60
<PAGE> 62
in the Phoenix area, a plant near Albuquerque, New Mexico, and a plant near San
Antonio, Texas. Centex purchased the remaining minority interest in Cavco
Industries for approximately $19.7 million during the third quarter of fiscal
2000.
Goodwill recorded by Centex in connection with the Cavco acquisition totaled
approximately $72 million and is being amortized over thirty years.
(J) BUSINESS SEGMENTS
The Company operates in five principal business segments: Home
Building, Investment Real Estate, Financial Services, Construction Products and
Contracting and Construction Services. These segments operate primarily in the
United States and their markets are nationwide. Revenues from any one customer
are not significant to the Company.
Intersegment revenues and investments in joint ventures are not
material and are not shown in the following tables. The investment in Centex
Development Company, L.P. (approximately $65 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 table sets forth financial information relating to the Conventional
Homes operations.
<TABLE>
<CAPTION>
------------------------------------------
For the Years Ended March 31,
------------------------------------------
2000 1999 1998
-------- -------- --------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 3,686.8 $ 2,819.4 $ 2,312.0
Cost of Sales (2,852.3) (2,194.7) (1,839.8)
Selling, General & Administrative Expenses (511.3) (382.5) (301.7)
--------- --------- ---------
Operating Earnings $ 323.2 $ 242.2 $ 170.5
========= ========= =========
Identifiable Assets $ 2,204.4 $1,686.9 $ 1,098.9
========= ========= =========
Capital Expenditures $ 12.6 $ 15.5 $ 7.7
========= ========= =========
Depreciation and Amortization $ 14.0 $ 8.5 $ 4.0
========= ========= =========
</TABLE>
MANUFACTURED HOMES
Manufactured Homes operations involve the manufacture by Cavco of
residential and park model homes and the sale of these homes through a network
of Company-owned and independent dealers. (See Note (I)).
61
<PAGE> 63
The following table sets forth financial information relating to the
Manufactured Homes operations.
<TABLE>
<CAPTION>
------------------------------------
For the Years Ended March 31,
------------------------------------
2000 1999 1998
------ ------ ------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 183.5 $ 178.6 $ 140.6
Cost of Sales (143.7) (138.3) (113.7)
Selling, General & Administrative Expenses (31.5) (27.5) (15.5)
------- ------- -------
Operating Earnings 8.3 12.8 11.4
Minority Interest (1.0) (2.5) (2.7)
------- ------- -------
Net Operating Earnings to Centex $ 7.3 $ 10.3 $ 8.7
======= ======= =======
Identifiable Assets $ 144.7 $ 140.9 $ 118.5
======= ======= =======
Capital Expenditures $ 3.9 $ 10.5 $ 7.2
======= ======= =======
Depreciation and Amortization $ 5.7 $ 5.1 $ 3.7
======= ======= =======
</TABLE>
INVESTMENT REAL ESTATE
Investment Real Estate operations involve the development of land for
multi-family, industrial, office, retail and mixed-use projects. The following
table sets forth financial information relating to the Investment Real Estate
operations.
<TABLE>
<CAPTION>
------------------------------------
For the Years Ended March 31,
------------------------------------
2000 1999 1998
------ ------ ------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 30.9 $ 33.7 $ 25.4
Cost of Sales (7.6) (14.9) (6.7)
Selling, General & Administrative Expenses (9.2) (5.4) (6.5)
Negative Goodwill Amortization 16.0 16.0 16.0
------ ------ ------
Operating Earnings $ 30.1 $ 29.4 $ 28.2
====== ====== ======
Identifiable Assets $117.2 $159.8 $227.9
====== ====== ======
Capital Expenditures $ -- $ .7 $ --
====== ====== ======
Depreciation and Amortization, excluding $ .1 $ .1 $ .1
====== ====== ======
Negative Goodwill
</TABLE>
Property sales related to Investment Real Estate's nominally valued
assets (See note H) resulted in operating margins of $19.6 million in fiscal
2000, $16.4 million in fiscal 1999 and $13.7 million in fiscal 1998. The
Investment Real Estate Group has approximately $57 million in nominally valued
assets.
62
<PAGE> 64
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 others. The
following table sets forth financial information relating to the Financial
Services operations.
<TABLE>
<CAPTION>
------------------------------------------
For the Years Ended March 31,
------------------------------------------
2000 1999 1998
-------- -------- --------
(Dollars in millions)
<S> <C> <C> <C>
Revenues (1) $ 430.6 $ 436.3 $ 246.3
Selling, General & Administrative Expenses (336.4) (267.1) (170.0)
Interest Expense (61.7) (76.9) (44.9)
-------- -------- --------
Operating Earnings $ 32.5 $ 92.3 $ 31.4
======== ======== ========
Identifiable Assets $ 771.5 $1,638.8 $1,317.0
======== ======== ========
Capital Expenditures $ 25.5 $ 17.7 $ 11.2
======== ======== ========
Depreciation and Amortization $ 14.1 $ 12.9 $ 9.3
======== ======== ========
</TABLE>
(1) Financial Services revenues include interest income of $83.4 million,
$97.0 million and $57.9 million in fiscal 2000, 1999 and 1998,
respectively. Substantially all of Centex's interest income in each
year is earned by the Financial Services segment.
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 Years Ended March 31,
------------------------------------
2000 1999 1998
------ ------ ------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 418.7 $ 336.1 $ 297.3
Cost of Sales & Expenses (245.3) (213.6) (207.0)
Selling, General & Administrative Expenses (4.7) (2.2) (2.0)
------- ------- -------
Operating Earnings 168.7 120.3 88.3
Minority Interest (63.8) (51.1) (40.6)
------- ------- -------
Net Operating Earnings to Centex $ 104.9 $ 69.2 $ 47.7
======= ======= =======
Identifiable Assets $ 410.8 $ 339.5 $ 328.5
======= ======= =======
Capital Expenditures $ 28.0 $ 33.8 $ 13.5
======= ======= =======
Depreciation and Amortization $ 18.6 $ 16.2 $ 15.9
======= ======= =======
</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 data; however, these amounts
are eliminated in consolidation.
63
<PAGE> 65
<TABLE>
<CAPTION>
------------------------------------------
For the Years Ended March 31,
------------------------------------------
2000 1999 1998
-------- -------- --------
(Dollars in millions)
<S> <C> <C> <C>
Revenues $ 1,205.8 $ 1,350.8 $ 953.8
Construction Contract Costs (1,130.7) (1,292.8) (912.0)
Selling, General & Administrative Expenses (51.6) (42.8) (34.6)
--------- --------- --------
Operating Income, as reported 23.5 15.2 7.2
Intracompany Interest Income* 8.4 7.2 5.2
--------- --------- --------
Total Economic Return $ 31.9 $ 22.4 $ 12.4
========= ========= ========
Identifiable Assets* $ 235.8 $ 256.7 $ 228.3
========= ========= ========
Capital Expenditures $ 7.5 $ 3.0 $ 2.3
========= ========= ========
Depreciation and Amortization $ 2.9 $ 2.6 $ 2.2
========= ========= ========
</TABLE>
*The "net assets" position of the Contracting and Construction
Services segment provides significant cash flow because payables and
accruals consistently exceed identifiable assets. Intracompany
interest income is computed on the group's cash flow in excess of its
equity.
CORPORATE AND OTHER, NET
Corporate general and administrative expenses represent salaries and
other costs not identifiable with a specific segment. Other, net includes new
business initiatives and other businesses which are not mature enough to stand
alone as separate business segments. Assets are primarily cash and cash
equivalents, receivables, property and equipment and other assets not
associated with a business segment.
The following table summarizes financial information relating to the
Corporate and Other, net segments.
<TABLE>
<CAPTION>
------------------------------------
For the Years Ended March 31,
------------------------------------
2000 1999 1998
------ ------ ------
(Dollars in millions)
<S> <C> <C> <C>
Operating Loss, Other, net $ (4.7) $(15.6) $ (7.4)
Minority Interest -- -- (.2)
------ ------ ------
Net Operating Loss to Centex $ (4.7) $(15.6) $ (7.6)
====== ====== ======
Corporate General & Administrative Expenses $(33.0) $(28.1) $(21.3)
====== ====== ======
Identifiable Assets $154.3 $112.1 $ 97.1
====== ====== ======
Capital Expenditures $ 4.6 $ 7.8 $ 18.3
====== ====== ======
Depreciation and Amortization $ 9.6 $ 6.9 $ 5.3
====== ====== ======
</TABLE>
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires companies to disclose the estimated fair value of their financial
instrument assets and liabilities. The estimated fair values shown below have
been determined using current quoted market prices where available and, where
necessary, estimates based on present value methodology suitable for each
category of financial instruments. Considerable judgment is required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. All assets and
liabilities, which are not considered financial instruments, have been valued
using historical cost accounting.
64
<PAGE> 66
The consolidated carrying values of Cash and Cash Equivalents, Other
Receivables, Accounts Payable and Accrued Liabilities and Short-term Debt
approximate their fair values. The carrying values and estimated fair values of
other financial assets and liabilities were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
March 31,
---------------------------------------------------------------------
2000 1999
------------------------------ ------------------------------
CARRYING FAIR Carrying Fair
VALUE VALUE Value Value
---------- ------------ ---------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Financial Assets
Residential Mortgage Loans $ 409,697 $ 421,138(1) $1,395,616 $1,425,105(1)
Mortgage Securitization Residual Interest $ 160,999 $ 160,999(2) $ 80,152 $ 80,152(2)
Financial Liabilities
Long-term Debt $ 751,160 $ 732,874(3) $ 284,299 $ 289,814(3)
</TABLE>
(1) Fair values are based on quoted market prices for similar instruments.
(2) The asset is carried at fair market value.
(3) Fair values are based on a present value discounted cash flow with the
discount rate approximating current market for similar instruments.
(L) COMMITMENTS AND CONTINGENCIES
In order to ensure the future availability of land for home building,
the Company has made cumulative deposits totaling approximately $51 million as
of March 31, 2000 for options to purchase undeveloped land and developed lots
having a total purchase price of approximately $1.3 billion. These options and
commitments expire at various dates to 2005. The Company has also committed to
purchase land and developed lots totaling approximately $1 million. In
addition, the Company has executed lot purchase contracts with the Partnership
(see Note (G)) which aggregate approximately $0.5 million.
In the normal course of its business the Company and/or its
subsidiaries are named as defendants in certain suits filed in various state
and federal courts. Management believes that none of the litigation matters in
which the Company or any subsidiary is involved would have a material adverse
effect on the consolidated financial condition or operations of the Company.
The Company has certain deductible limits under its workers'
compensation and automobile and general liability insurance policies for which
reserves are established based on the estimated costs of known and anticipated
claims.
65
<PAGE> 67
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF CENTEX CORPORATION:
We have audited the accompanying consolidated balance sheets of Centex
Corporation (a Nevada corporation) and subsidiaries as of March 31, 2000 and
1999, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three years in the period ended March
31, 2000. These financial statements and the supplemental information referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and supplemental
information based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Centex Corporation
and subsidiaries as of March 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States.
Our audits were made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The supplemental
balance sheet data of Centex Corporation and Financial Services are presented
for purposes of additional analysis and are not a required part of the basic
consolidated financial statements. This information has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 16, 2000
66
<PAGE> 68
QUARTERLY RESULTS (UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
------------------------------
For the Years Ended March 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
FIRST QUARTER
Revenues $ 1,372,233 $ 1,110,606
Earnings Before Income Taxes $ 93,110 $ 76,722
Net Earnings $ 58,436 $ 48,161
Earnings Per Share
Basic $ .98 $ .81
Diluted $ .95 $ .78
Average Shares Outstanding
Basic 59,446,165 59,530,844
Diluted 61,609,291 61,972,545
SECOND QUARTER
Revenues $ 1,429,443 $ 1,243,082
Earnings Before Income Taxes $ 107,331 $ 90,366
Net Earnings $ 65,495 $ 56,563
Earnings Per Share
Basic $ 1.10 $ .95
Diluted $ 1.07 $ .91
Average Shares Outstanding
Basic 59,435,195 59,549,247
Diluted 61,281,959 62,031,262
THIRD QUARTER
Revenues $ 1,429,161 $ 1,256,086
Earnings Before Income Taxes $ 101,729 $ 94,634
Net Earnings $ 63,176 $ 59,043
Earnings Per Share
Basic $ 1.07 $ .99
Diluted $ 1.04 $ .96
Average Shares Outstanding
Basic 59,230,006 59,410,876
Diluted 60,723,572 61,661,959
FOURTH QUARTER
Revenues $ 1,725,529 $ 1,545,066
Earnings Before Income Taxes $ 114,691 $ 111,572
Net Earnings $ 70,025 $ 68,195
Earnings Per Share
Basic $ 1.18 $ 1.15
Diluted $ 1.17 $ 1.10
Average Shares Outstanding
Basic 59,120,730 59,463,751
Diluted 60,100,560 61,749,414
</TABLE>
67
<PAGE> 69
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(See Item 11 below.)
ITEM 11. EXECUTIVE COMPENSATION
Except for the information relating to the executive officers of the
Company, which follows Item 4 of Part I of this Report, the information called
for by Items 10, 11, 12 and 13 is incorporated herein by reference to the
information included and referenced under the following captions in the
Company's Proxy Statement for the July 27, 2000 Annual Meeting of Stockholders
(the "2000 Centex Proxy Statement"):
<TABLE>
<CAPTION>
ITEM CAPTION IN THE 2000 PROXY STATEMENT
---- -----------------------------------
<S> <C>
10 Election of Directors
10 Section 16(a) Compliance
11 Executive Compensation
12 Security Ownership of Management and Certain Beneficial Owners
13 Certain Transactions
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(See Item 11 above.)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(See Item 11 above for information respecting indebtedness to Centex of
certain officers and directors.)
68
<PAGE> 70
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Exhibits
The information on exhibits required by this Item 14 is set
forth in the Centex index to Exhibits appearing on pages
121-123 of this Report.
(b) Reports on Form 8-K:
Current Report on Form 8-K of Centex Corporation dated August 9,
1999.
Current Report on Form 8-K of Centex Corporation dated August 27,
1999.
Current Report on Form 8-K of Centex Corporation dated January 27,
2000.
Current Report on Form 8-K of Centex Corporation dated February 1,
2000.
Current Report on Form 8-K of Centex Corporation dated May 1,
2000.
69
<PAGE> 71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CENTEX CORPORATION
----------------------------------------------------
Registrant
May 30, 2000 By: /s/ LAURENCE E. HIRSCH
-------------------------------------------------------
Laurence E. Hirsch, Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
May 30, 2000 /s/ LAURENCE E. HIRSCH
-------------------------------------------------------
Laurence E. Hirsch, Chairman of the Board and
Chief Executive Officer
(principal executive officer)
May 30, 2000 /s/ DAVID W. QUINN
-------------------------------------------------------
David W. Quinn, Vice Chairman of the Board and
Chief Financial Officer
(principal financial officer)
May 30, 2000 /s/ JOHN S. WORTH, SR.
-------------------------------------------------------
John S. Worth, Sr., Vice President and Controller
(principal accounting officer)
Directors: Barbara T. Alexander, Dan W. Cook III,
Juan L. Elek, Laurence E. Hirsch,
Clint W. Murchison, III, Charles H. Pistor, Jr.,
David W. Quinn, Paul R. Seegers and
Paul T. Stoffel
May 30, 2000 By: /s/ LAURENCE E. HIRSCH
-------------------------------------------------------
Laurence E. Hirsch,
Individually and as
Attorney-in-Fact*
------------
* Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.
70
<PAGE> 72
PART B.
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PREFATORY STATEMENT
PART B of this Report includes information relating to 3333 Holding
Corporation ("Holding"), File No. 1-9624, and subsidiary, and Centex
Development Company, L.P. (the "Partnership"), File No. 1-9625, and
subsidiaries (collectively the "Companies"). See the Joint Explanatory
Statement on page 1 of this Report. References to Holding in this Report shall
include references to its subsidiary, 3333 Development Corporation
("Development"), a Nevada corporation and the sole general partner of the
Partnership, unless the context otherwise requires. Because the Partnership is
a separate reporting entity under the Exchange Act, the information required by
Form 10-K is separately included even though the Partnership may be deemed a
"subsidiary" of Holding under the rules and regulations of the Securities and
Exchange Commission (the "Commission" or the "SEC") promulgated pursuant to the
Exchange Act. Accordingly, information provided with respect to the Partnership
should be deemed provided with respect to Holding to the extent appropriate.
Information relating to both Holding and the Partnership is included herein as
a single disclosure where applicable or appropriate; all other information is
set forth separately. Please refer to PART A of this Report for information
relating separately to Centex Corporation ("Centex") and its subsidiaries.
PART I
ITEM 1. BUSINESS
(a) Holding
Holding is a Nevada corporation incorporated on May 5, 1987. Its
executive offices are located at 2728 N. Harwood, Dallas, Texas 75201;
telephone (214) 981-6770.
Holding owns all of the outstanding common stock of Development, and,
as a result, has the ability to control Development. Development is the sole
general partner of the Partnership, a Delaware limited partnership engaged in
the real estate development business. Information concerning the acquisition of
the capital stock of Development by Holding is included in Note (B) of the
Notes to Combining Financial Statements of Holding and the Partnership (the
"Holding/Partnership Combining Financial Statements") included on pages 92-94
of this Report.
Holding is not engaged in any business other than its ownership and
control of Development. The Second Amended and Restated Agreement of Limited
Partnership of Centex Development Company, L.P. (the "Partnership Agreement"),
which governs the operations of the Partnership, provides that neither Holding
nor Development shall be permitted, prior to payout (as defined in the
Partnership Agreement) ("Payout"), to own business interests or to engage in
business activities other than those relating to the Partnership. If Holding
were to engage in any other business activities, the Partnership Agreement
would need to be amended to provide for the same.
71
<PAGE> 73
(b) The Partnership
GENERAL DEVELOPMENT OF BUSINESS
The Partnership is a Delaware limited partnership formed in March 1987
by Centex to broaden its line of business to include general real estate
development. Centex believed that this expansion would improve stockholder
value through longer-term real estate investments, real estate development and
the benefits of the partnership form of business. Because the real estate
development business generally requires a longer time horizon to maximize value
than Centex's core home building operations, and typically involves substantial
acquisition and development indebtedness, Centex concluded that this new line
of business could best be conducted through the Partnership, an independent,
publicly traded entity that is not consolidated with Centex for financial
reporting purposes. Development, a wholly-owned subsidiary of Holding, is the
sole general partner of the Partnership whose executive offices are located at
2728 N. Harwood, Dallas, Texas 75201; telephone (214) 981-6770.
The Partnership was formed to manage, develop and sell (i) certain real
estate, principally nonresidential, undeveloped land (the "Original
Properties"), acquired by the Partnership from certain wholly-owned subsidiaries
of Centex (the "Original Limited Partners"), and (ii) other properties acquired
by the Partnership, either directly or indirectly, in the ordinary course of
business. Pursuant to the initial issuance of Partnership units (the
"Distribution"), the Original Limited Partners contributed certain Original
Properties with a market value of approximately $76 million in exchange for an
aggregate of 1,000 Class A Units of limited partnership interest. All of the
Class A Units are currently owned by Centex through its Investment Real Estate
Group. Under the Partnership Agreement, the holders of the Class A Units of
limited partnership interest are entitled to a cumulative 9% preferred return
(the "Preferred Return") per annum on the average outstanding balance of their
unrecovered capital and certain other distributions of cash and other property
and allocations of income and loss in preference to other limited partners.
During fiscal 1998, the Partnership Agreement was amended to create a new class
of limited partnership units, Class C Preferred Limited Partnership Units
("Class C Units"), to be issued from time to time in exchange for assets
acquired from a limited partner or by an individual or entity who is to be
admitted as a limited partner. As of March 31, 2000, 35,082 Class C Units were
issued to Centex, the current holder of all outstanding Class A Units, in
exchange for assets acquired from Centex valued at $35.1 million. Under the
Partnership Agreement, holders of Class C Units are also entitled to a
cumulative 9% preferred return per annum on the average outstanding balance of
their unrecovered capital. Also, as part of the amendment to the Partnership
Agreement, the 1,000 Class A Units were converted to 32,260 Class A Units. See
Note (K) of the Notes to the Holding/Partnership Combining Financial Statements
included on pages 100-101 of this Report.
The Partnership is actively involved in all phases of acquisition,
development and sale of commercial, multi-family and residential properties.
During fiscal 1999, the Partnership acquired the New Jersey home building
operations of Centex Homes through the issuance of Class C Units. The
acquisition of the home building operations was strategic to the Partnership's
build-out plan for the East Windsor, New Jersey property (one of the Original
Properties). On April 15, 1999, the Partnership expanded the scope of its
operations to include international home building through its acquisition of
Fairclough Homes Group Limited, a United Kingdom home builder. As a result of
these acquisitions and the Partnership's increased development activities, the
operations of the Partnership can now be divided into five principal business
segments: Commercial Development, Multi-Family Development, Land Sales,
Domestic Home Building and International Home Building. A more detailed
discussion of each of the Partnership's segments is provided later in this
section.
72
<PAGE> 74
DESCRIPTION OF THE PARTNERSHIP SECURITIES
Pursuant to the terms of a nominee agreement among Centex, Holding,
the Partnership and the Nominee (the "Nominee Agreement"), restrictions are
imposed on the transfer of the Holding Common Stock and the Stockholder
Warrants separate from Centex Common Stock. Subject to certain restrictions,
Centex may, in its sole discretion, terminate the Nominee Agreement as to all
or any portion of the Stockholder Warrants and the Holding Common Stock
(collectively, the "Deposited Securities") and, unless sooner terminated, the
Nominee Agreement will terminate as to the Stockholder Warrants on November 30,
2007 (the "Scheduled Detachment Date"). Centex is not obligated to terminate
the Nominee Agreement as to the Holding Common Stock. The termination of the
Nominee Agreement as to any of the Deposited Securities will cause a detachment
("Detachment") of such securities from the Centex Common Stock. Upon a
termination of the Nominee Agreement, certificates evidencing each Centex
Stockholder's pro rata portion of the Deposited Securities in respect of which
the Nominee Agreement was terminated will be delivered to the Centex
Stockholders of record as of the record date set for the Detachment. From and
after such record date, certificates evidencing Centex Common Stock will no
longer represent the beneficial interest in the detached Deposited Securities.
NARRATIVE DESCRIPTION OF BUSINESS
The Partnership operates in five segments: Commercial Development,
Multi-Family Development, Domestic Home Building, International Home Building
and Land Sales.
Commercial Development actively develops office, industrial and retail
facilities as well as single family lots. Initially, many of the areas targeted
for development include land owned by the Partnership and Centex affiliates.
Commercial Development's operations during fiscal 2000 included: (1) completion
of 720,000 square feet of office and industrial space located in Florida, North
Carolina, California, Massachusetts, and Texas, (2) initiation of construction
on five new office and industrial facilities totaling 500,000 square feet,
including, in three instances, second phase construction for certain business
parks and locations in which the Partnership had already developed real estate,
and (3) acquisition of a 218,000 square foot existing office building located
in Dallas, Texas. Commercial Development primarily develops commercial
properties to hold for investment. Occupancy for completed properties at March
31, 2000 was at 84%. Commercial properties by geographic location are as
follows:
<TABLE>
<CAPTION>
Size
State Product Type (Sq. Ft.) Percent by State
----- ------------ --------- ----------------
<S> <C> <C> <C>
California Industrial/Flex 313,000 32%
Florida Industrial/Flex 74,000 22%
Office 140,000
Massachusetts Industrial/Flex 68,000 7%
North Carolina Industrial/Flex 143,000 15%
Texas Office 238,000 24%
</TABLE>
Multi-Family Development operations completed construction on a
400-unit apartment community in Grand Prairie, Texas and began construction on
a 382-unit apartment community in St. Petersburg, Florida. Multi-Family
Development primarily targets affordable to mid-market priced construction
projects. These projects are actively marketed for sale during the development
period.
73
<PAGE> 75
The Partnership acquired its Domestic Home Building operations from
Centex Homes during fiscal 1999 through the issuance of Class C Units. Centex
Homes also licensed to the Partnership the right to use the "Centex Homes"
trademark and trade name in New Jersey. The Domestic Home Building operations
involve the purchase and development of land or lots as well as the
construction and sale of single-family homes. Domestic Home Building is
actively building out the Partnership's land inventory in East Windsor, New
Jersey (one of the Original Properties) as well as pursuing "spot lot"
development outside of East Windsor. Domestic Home Building built and delivered
44 conventional homes during fiscal 2000.
The Partnership entered the International Home Building business
through its acquisition of all of the voting shares of Fairclough Homes Group
Limited, a British home builder ("Fairclough"), on April 15, 1999. The purchase
price at closing (approximately $219 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 entitle
the seller to receive substantially all of the net after-tax earnings of
Fairclough until March 31, 2001. After March 31, 2001, the Partnership will
redeem, for a nominal value, the preference shares.
Fairclough operates in four geographical regions in the United Kingdom
and develops a range of products from small single-family units to executive
houses and apartments. Fairclough currently has 84 developments located
throughout England and delivered 1,707 units in fiscal 2000 with prices ranging
from $80,000 to $1.0 million with the average selling price being $180,000.
International Home Building closings for fiscal 2000 and sales orders
at March 31, 2000, by the geographical regions are summarized below:
<TABLE>
<CAPTION>
Closings Sales Orders
-------- ------------
<S> <C> <C>
Southern Homes Counties 161 --
Northern Homes Counties 353 137
North West/Yorkshire 728 122
Midlands 465 108
----- ---
1,707 367
===== ===
</TABLE>
International Home Building intends to expand both in the United
Kingdom and on mainland Europe through a mixture of internal growth and further
acquisitions.
The Partnership's Land Sales operation provides property management
and coordinates the liquidation efforts for land investments for which no
development opportunity has been identified. During fiscal 2000, Land Sales'
revenues totaled $7.3 million and included the sale of 524 lots in Florida and
Texas, ten acres to Centex Homes in New Jersey, and ten acres to third parties
in Texas.
The Partnership had a backlog of land sales and sales of developed
properties of approximately $33 million as of March 31, 2000, and $26 million
as of March 31, 1999. The final sales prices for land in the backlog that is
ultimately sold may vary due to contractual clauses that adjust the price
depending upon the closing date.
Pursuant to an agreement with the Partnership (the "Management
Agreement"), Holding is obligated to provide property management and
development assistance and expertise to the Partnership, including seeking
zoning changes and special use permits, negotiating utility agreements, and
securing necessary rights of way and access on behalf of the Partnership, and,
consistent with the Plan, to develop and/or contract for sale and sell on
behalf of the Partnership some or all of such properties in exchange for
compensation for its
74
<PAGE> 76
efforts. Since Holding currently does not have any employees, it contracts with
certain Centex subsidiaries to provide such services to the Partnership.
Management of the Partnership believes that the Partnership receives these
services cheaper than an unaffiliated third parties would charge for similar
services. See "Item 10. Directors and Executive Officers of the
Registrants-Management Agreement."
Centex and its affiliates continue to conduct many facets of real
estate development and, for this reason, may be in competition with the
Partnership in certain activities and projects. Because the relationship
between Centex and its affiliates, on the one hand, and Holding, Development
and the Partnership, on the other hand, involve decisions by Centex and its
affiliates, directly or indirectly, on behalf of Holding, Development and the
Partnership, the transactions and activities of Holding, Development and/or the
Partnership may lack the benefit of arm's length bargaining and may involve
conflicts of interest. Holding, Development and the Partnership believe,
however, that adequate safeguards, including Boards of Directors of Holding and
Development consisting of a majority of independent outside directors,
sufficiently prevent any such conflicts from adversely affecting the business
of Holding, Development or the Partnership. To the extent that any conflict of
interest or the lack of arm's length bargaining may benefit Centex or its
affiliates, on the one hand, or the Partnership or Holding, on the other hand,
the combined value of the three tandem traded securities (Centex Common Stock,
Holding Common Stock and Stockholder Warrants) beneficially owned by a Centex
Stockholder should not be affected one way or another. See "Competition and
Regulation" within this Item 1 below.
The Partnership is not a real estate investment trust, and therefore
the Partnership's activities are not subject to the restrictions imposed on
real estate investment trusts qualified under the Internal Revenue Code of
1986, as amended.
For additional information concerning material properties owned by the
Partnership at March 31, 2000, see "Item 2. Properties."
COMPETITION AND REGULATION
Within the geographical areas where the Partnership has real estate
holdings, the Partnership is subject to substantial competition from other
owners of similarly-situated or developed properties who wish to sell or
develop their properties, many of whom may hold or be in the process of
developing more parcels than the Partnership, or may have greater financial
resources and longer operating histories than the Partnership. The Partnership
may also compete in the acquisition of additional desirable properties with a
variety of investors, including Centex and its affiliates, and institutional
investors and developers, seeking similar investments.
The Partnership's properties are generally located in geographical
areas where there is moderate to good demand for land suitable for development,
including California, Florida, New Jersey, North Carolina, and Texas.
Management believes the Partnership properties are well positioned to compete
with similar properties within each of these geographic areas.
Fairclough's operations account for approximately 1% of the new homes
market in the United Kingdom. The main competitive factors affecting
Fairclough's operations include location, price, mortgage interest rates,
construction costs, design and quality of homes, marketing expertise and the
availability of land.
During fiscal 2000, the United Kingdom housing market continued to be
robust in spite of rising interest rates. House price inflation in England and
Wales was marginally under 15% for calendar 1999. The strength of the new home
selling prices has caused land values to escalate significantly. In order to be
able to compete successfully for the acquisition of strategic land parcels,
Fairclough has put in place procedures
75
<PAGE> 77
to ensure that the company's strategic land portfolio is increased. These
procedures include a focus on "off-market" deals versus buying from other
developers at higher "end user" prices and the use of external planning
consultants. At March 31, 2000, Fairclough's land inventory for housing starts
was sufficient to accommodate 18 to 29 months of building volume.
Ownership and development of each of the Partnership's properties is
subject to licensing and regulation by zoning, land use, environmental, health,
sanitation and other agencies in the state and/or municipality in which the
property is located. Difficulties or failures in obtaining the required
licenses or approvals could delay or prevent the development or sale of any of
such properties. In addition, certain of the properties may be subject to
zoning limitations that may not permit development of such properties for their
highest and best use. The ability of the Partnership to obtain favorable zoning
changes may affect the ultimate value of such properties to the Partnership or
to a third-party purchaser.
EMPLOYEES
Holding and Development have no full-time employees. The directors and
executive officers perform all executive management functions; all other
services necessary to conduct Holding's business are performed by employees of
a subsidiary of Centex or its designee under a services agreement.
With the exception of Fairclough, the Partnership also has no
employees and is instead managed by Development, its general partner. At March
31, 2000, Fairclough employed 523 employees.
ITEM 2. PROPERTIES
(a) Holding
Due to the nature of its business, Holding does not own or hold for
investment any real or personal properties other than cash, receivables and
other similar assets, and the securities relating to its subsidiary,
Development.
(b) The Partnership
The Partnership properties consist of: (1) two remaining Original
Properties, (2) land acquired or contributed by Centex Homes for near-term
development and (3) three buildings from which Fairclough conducts its
operations.
Fairclough operates from five regional offices. Fairclough owns the
buildings in Ware, Hertforshire; Thame Ditton, Surrey; and Tamworth,
Staffordshire. The remaining two facilities are leased and are located in Sale,
Cheshire and Wakefield, Yorkshire.
The remaining Original Properties and land acquired or contributed by
Centex Homes for near-term development generally consist of land in various
stages of development zoned for commercial, multi-family and residential use.
The properties are located in Texas, North Carolina, New Jersey, Florida, and
California. Set forth below is a brief description of these properties.
Colony South Planning Unit (an Original Property). Colony South
Planning Unit is located in suburban Dallas, Texas in the cities of The Colony
(approximately 132 acres) and Lewisville (approximately 116 acres). The Colony
acreage is zoned office, general retail and business park. The Lewisville
acreage is zoned light industrial.
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<PAGE> 78
East Windsor (an Original Property). East Windsor is a development
which was originally comprised of approximately 600 acres with residential
tracts, farm parcels and 100 acres of office industrial zoned property in East
Windsor, New Jersey, a township located in the vicinity of Princeton. At March
31, 2000 there were 345 remaining acres owned by the Partnership. Through its
Domestic Homebuilding operations, the Partnership plans to build out the
remaining single-family land in East Windsor.
The Arbors of Wolf Penn Creek. The Arbors of Wolf Penn Creek is a
172-unit apartment complex located in College Station, Texas. The complex is
situated on eight acres and was completed in the fall of 1996. The Arbors of
Wolf Penn Creek was developed through a joint venture with a third party. The
complex was sold subsequent to March 31, 2000.
Heritage Park. Heritage Park is located in a suburb of Dallas, Texas
in the city of Allen and consists of approximately 42 acres. The Heritage Park
property is zoned single-family residential and commercial. The Partnership
sold 157 lots to Centex Homes during fiscal 2000 and is under contract to sell
an additional 103 lots to Centex Homes.
Park West at Gateway Centre. Park West at Gateway Centre is a 24-acre
industrial tract situated in a mixed-use development located in St. Petersburg,
Florida. During fiscal 1998, a 49.5% interest in a limited partnership, whose
only asset is the 24 acres, was acquired by the Partnership from Centex Homes
in exchange for Class C Units. During fiscal 2000, the Partnership acquired the
remaining 50.5% interest in the limited partnership. Also during fiscal 2000,
construction was completed on a 74,000 square foot industrial building and the
second phase of development on a 62,000-square foot building was started.
Southpointe. The Southpointe property, located in Plantation, Florida,
13 miles west of Ft. Lauderdale Airport, is comprised of two parcels totaling
18 acres. During fiscal 2000, the Partnership completed a 141,000-square foot
office building, which was 100% pre-leased by the General Services
Administration for use by the Internal Revenue Service, and began construction
on a 85,000-square foot office building. The 85,000-square foot building is 50%
pre-leased by Centex Rooney, a Centex subsidiary.
Westlake. The Westlake property is comprised of three parcels totaling
21 acres located in Charlotte, North Carolina. During fiscal 2000, the
Partnership completed its second industrial building in this business park and
began construction on a third pre-leased facility. Subsequent to March 31,
2000, the Partnership acquired 53 acres adjacent to its existing holdings and
is under negotiations for developing additional space for an existing business
park resident.
Northfield. Northfield is located in Ventura County, California
approximately 60 miles west of downtown Los Angeles and is comprised of 23
acres. Northfield is zoned light industrial and is situated in an industrial
business park. During fiscal 1999, the Partnership entered into a joint venture
agreement with a third party to develop three industrial buildings totaling
182,000-square feet on ten acres in the Northfield Business Park. During fiscal
2000, the Partnership completed the three buildings and began construction on a
235,000-square foot build-to-suit for sale.
Sheffield. Sheffield is an 18-acre multi-family tract located in Grand
Prairie, Texas. Sheffield was acquired by the Partnership from Centex Homes in
exchange for Class C Units in fiscal 1998. During fiscal 2000, the Partnership
completed construction of a 400-unit complex. The Partnership is actively
marketing this project for sale.
Vista Ridge. Vista Ridge is a 1,000-acre master planned community
located 25 miles north of the Dallas central business district in Dallas and
Denton counties, in the cities of Lewisville and Coppell, Texas. The
Partnership currently owns 55 acres zoned for multi-family and retail
development.
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Camarillo Ranch. Camarillo Ranch, originally comprised of 55 net
acres, is a light industrial business park located in Ventura County,
California, west of Los Angeles directly off the Ventura Freeway. The
Partnership completed construction on a 132,500-square foot pre-leased facility
in Camarillo Ranch during fiscal 2000. Additionally, the Partnership sold two
parcels comprising 6 acres in fiscal 2000.
Brighton Bay. Brighton Bay is located in Pinellas County, Florida, in
the city of St. Petersburg. During fiscal 1999, the Partnership acquired the
62-acre site in exchange for Class C Units. The two parcels acquired are zoned
for multi-family development. The master plan's infrastructure and interior
lakes are currently under development. The Partnership has plans to develop this
property in two phases to total 776-unit apartments. During fiscal 2000,
construction was started on the 382-unit first phase of development.
StarCenter. The StarCenter project is a community style recreational
ice skating facility the Partnership is developing for the Dallas Stars, a
National Hockey League franchise. The StarCenter, located in Euless, Texas is
being constructed on 3.8 acres the Partnership has pursuant to a ground lease
with the City of Euless.
ITEM 3. LEGAL PROCEEDINGS
Holding is not a party to, and its assets are not the subject of, any
material pending legal proceedings. The Partnership may be involved from time
to time in litigation matters incident to its day-to-day business; however,
management of Development believes that such litigation, if determined
unfavorably to the Partnership, would not have a material adverse effect on the
financial condition or operations of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF HOLDING AND DEVELOPMENT
Information concerning the present executive officers of Holding is
set forth below. The Partnership has no executive officers. The executive
officers of Holding set forth below hold the same offices in Development, the
general partner of the Partnership, as disclosed in "Item 10. Directors and
Executive Officers of the Registrants--Directors and Executive Officers of
Development."
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
Stephen M. Weinberg............................. President (1) 52
Kimberly A. Pinson.............................. Vice President, Treasurer, Controller and 35
Assistant Secretary (2)
</TABLE>
(1) Mr. Weinberg is an employee of a subsidiary of Centex and has been
President and a director of both Holding and Development, the general
partner of the Partnership, since April 1, 2000. Mr. Weinberg joined
Centex in 1978 and held positions of Centex Homes Division President
from 1984 to 1988 and Centex Homes Executive Vice President from 1988
until 1995. In 1995, Mr. Weinberg was appointed Chairman and Chief
Executive Officer for Centex HomeTeam Services, a Centex subsidiary,
where he served until his appointment as President of both Holding and
Development.
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<PAGE> 80
(2) Ms. Pinson is an employee of a subsidiary of Centex and serves as Vice
President, Treasurer, Controller and Assistant Secretary of Holding,
Development, and various Centex subsidiaries engaged in real estate
development. Ms. Pinson joined Vista Properties, Inc. (now Centex Real
Estate Corporation) in March 1993 and was elected to her present
positions with Holding and Development as of July 23, 1996.
All executive officers of Holding are elected annually by the Board of
Directors to serve until the next annual meeting of the Board of Directors or
until their successors have been duly elected. There are no family
relationships among or between such executive officers or the directors.
Holding's executive officers hold the same positions with its subsidiary,
Development.
Holding has no full-time employees. The directors and executive
officers perform all executive management functions; all other services
necessary to conduct Holding's business are performed by employees of a
subsidiary of Centex or its designee under a services agreement. See "Item 10.
Directors and Executive Officers of the Registrants--Services Agreement."
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Holding
Except as additionally provided below, the information called for by
this Item 5 with respect to Holding is incorporated herein by reference to (1)
the Joint Explanatory Statement on page 1 of this Report, (2) the information
included and referenced under the caption "Stock Prices and Dividends" on page
25 of this Report and (3) the information included in Notes (K) and (M) of the
Notes to the Holding/Partnership Combining Financial Statements on pages
100-104 of this Report.
Prior to the date of the distribution, Centex owned all of the issued
and outstanding shares of Holding Common Stock and, accordingly, there was no
public market for such shares. Following the distribution by Centex, shares of
Holding Common Stock have been tradeable only in tandem with, and as a part of,
shares of Centex Common Stock, and may not be separately sold or otherwise
transferred. Therefore, except with respect to the trading market established
for the tandem traded securities, there is no separate market for shares of
Holding Common Stock. Because of the tandem trading arrangement, it is not
possible to identify precisely the portion of the market price of the tandem
traded securities allocable to shares of Holding Common Stock.
The restrictions on the transfer of the Holding Common Stock and the
Stockholder Warrants separate from Centex Common Stock are imposed by the terms
of the Nominee Agreement. Centex Common Stock certificates issued after the
date of the Nominee Agreement bear a legend referring to the restrictions on
transfer imposed thereby.
No dividends have been paid on shares of Holding Common Stock since
the incorporation of Holding. Future cash dividends on Holding Common Stock
will depend on the earnings, financial condition, capital requirements and
other factors affecting Holding and Development.
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<PAGE> 81
(b) the Partnership
Except as additionally provided below, the information called for by
this Item 5 with respect to the Partnership is incorporated herein by reference
to (1) the Joint Explanatory Statement on page 1 of this Report, (2) the
information included and referenced under the caption "Stock Prices and
Dividends" on page 25 of this Report and (3) the information included in Notes
(K) and (M) of the Notes to the Holding/Partnership Combining Financial
Statements on pages 100-104 of this Report.
The Stockholder Warrants were issued to Centex immediately prior to
the November 30, 1987 Distribution to Centex Stockholders and, accordingly,
there was no public market for the Stockholder Warrants prior to the
Distribution. Following the Distribution by Centex, the Stockholder Warrants
have been tradeable only in tandem with, and as part of, shares of Centex
Common Stock, and may not be separately sold or otherwise transferred.
Therefore, except with respect to the trading market established for the tandem
traded securities, there is no separate market for the Stockholder Warrants.
Because of the tandem trading arrangement, it is not possible to identify
precisely the portion of the market price of the tandem traded securities
allocable to the Stockholder Warrants.
The restrictions on the transfer of the Stockholder Warrants and the
Holding Common Stock separate from Centex Common Stock are imposed by the terms
of the Nominee Agreement among Centex, Holding, the Partnership and the
Nominee. Centex Common Stock certificates issued after the date of the Nominee
Agreement bear a legend referring to the restrictions on transfer imposed
thereby.
No dividends or distributions have been made on the Stockholder
Warrants since their issuance.
Centex Homes is the current holder of all of the Class A Units and
Class C Units, and accordingly, at this time there is no public market for such
securities. At March 31, 2000, there were 32,260 Class A Units and 35,082 Class
C Units outstanding. See "Item 1. Business--General Development of Business."
In July 1995, in conjunction with the extension of the automatic Detachment
date from 1997 to 2007, Centex Homes (subsequently 2728 Holding Corporation,
liquidated in fiscal 1998), the then sole holder of all Class A Units, reduced
its unrecovered capital, which is defined as the limited partners' initial
capital contributions adjusted for repayments and other reductions, to
$47,261,000 and waived all unpaid preference totaling $37,523,000. Unrecovered
capital was reduced by an additional $4,500,000 during fiscal 1997 and
$10,000,000 during fiscal 1996 through distributions made by the partnership.
No preference payments were made during fiscal 1999 and 2000. Preference
payments in arrears at March 31, 2000 amounted to $14.8 million.
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<PAGE> 82
ITEM 6. SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES
3333 Holding Corporation and Subsidiary $ 607 $ 1,103 $ 1,505 $ 1,664 $ 2,045
Centex Development Company, L.P. and
Subsidiaries $378,199 $ 28,228 $ 19,618 $ 9,026 $ 13,943
Combined Revenues $378,199 $ 28,618 $ 20,121 $ 9,529 $ 14,470
NET EARNINGS (LOSS)
3333 Holding Corporation and Subsidiary $ (1,127) $ (1,385) $ (125) $ 206 $ 253
Centex Development Company, L.P. and
Subsidiaries $ 1,583 $ 1,815 $ 4,524 $ 719 $ 24
Combined Net Earnings $ 456 $ 430 $ 4,399 $ 925 $ 277
TOTAL ASSETS
3333 Holding Corporation and Subsidiary $ 3,023 $ 2,522 $ 10,423 $ 8,648 $ 8,652
Centex Development Company, L.P. and
Subsidiaries $515,188 $113,233 $ 59,260 $ 42,978 $ 43,168
Combined Assets $511,618 $112,176 $ 60,497 $ 50,127 $ 50,786
TOTAL DEBT
3333 Holding Corporation and Subsidiary $ -- $ 582 $ 1,480 $ 7,000 $ 7,600
Centex Development Company, L.P. and
Subsidiaries $323,740 $ 41,896 $ 13,821 $ 7,055 $ 3,326
Combined Debt $323,740 $ 42,478 $ 15,301 $ 14,055 $ 10,926
OPERATING EARNINGS (LOSS) PER SHARE/UNIT
3333 Holding Corporation and Subsidiary $ (1,127) $ (1,385) $ (125) $ 206 $ 253
Centex Development Company, L.P. and
Subsidiaries $ 25.08 $ 33.38 $ 140.14 $ 22.29 $ 0.74
AVERAGE SHARES/UNITS OUTSTANDING
3333 Holding Corporation and Subsidiary (shares) 1,000 1,000 1,000 1,000 1,000
Centex Development Company, L.P. and 63,116 54,377 32,281 32,260 32,260
Subsidiaries (units)
</TABLE>
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<PAGE> 83
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999
On a combined basis, the Companies' revenues for the fiscal year ended
March 31, 2000 totaled $378.2 million compared to revenues of $28.6 million for
the prior fiscal year. The significant increase in revenues resulted primarily
from the Partnership's acquisition of Fairclough Homes Group Limited, a British
home builder, on April 15, 1999. The companies had combined net earnings for
the fiscal year ended March 31, 2000 of $456,000 compared to combined net
earnings of $430,000 in fiscal 1999.
INTERNATIONAL HOME BUILDING
The following summarizes International Home Building's results for the
year ended March 31, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
-----------------------------
For the Years Ended March 31,
-----------------------------
2000 1999
--------- -----------
<S> <C> <C>
Revenues $ 329,582 $ --
Cost of Sales (283,456) --
General & Administrative Expenses (24,188) --
Interest Expense, Paid to Seller (18,229) --
--------- -----------
Operating Earnings $ 3,709 $ --
========= ===========
Units Closed 1,707 --
--------- -----------
</TABLE>
The Partnership acquired this segment in the first quarter of fiscal
2000. The seller received $219 million in non interest-bearing promissory notes
due March 31, 2001 and retained preferred non-voting shares in Fairclough.
During fiscal 2000, Fairclough generated after tax earnings totaling $18.2
million, which are subject to distribution to the seller under the preferred
share arrangement. The Companies have accounted for the non interest-bearing
debt and nominal residual value preferred shares as if they were a single debt
instrument. Accordingly, distributions attributable to the preferred shares are
accrued as interest expense in the accompanying financial statements. After
taxes, International Home Building had a loss of $128,000 for fiscal 2000.
DOMESTIC HOME BUILDING
The following summarizes Domestic Home Building's results for the two
year period ended March 31, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
----------------------------
For the Years Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues $ 13,377 $ 21,295
Cost of Sales (11,672) (17,108)
General & Administrative Expenses (1,495) (2,544)
-------- --------
Operating Earnings $ 210 $ 1,643
======== ========
Gross Margin per Unit $ 39 $ 57
======== ========
Units Closed 44 73
======== ========
</TABLE>
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<PAGE> 84
Fiscal 2000 revenues included revenues from the sale of single-family
homes in New Jersey which completed the build-out of certain communities. The
Partnership obtained final zoning approval for the development of an additional
251 single-family homes in July 1999. The decrease in the number of single-
family homes sold during fiscal 2000 resulted from a delay in the Partnership's
ability to market and sell homes in the new single-family community due to the
timing of the zoning approval.
COMMERCIAL DEVELOPMENT
Commercial Development operations during fiscal 2000 included: (1)
completion of 720,000 square feet of office and industrial space located in
Florida, North Carolina, California, Massachusetts, and Texas, (2) initiation
of construction on five new office and industrial facilities totaling 500,000
square feet, (3) acquisition of a 218,000 square foot existing office building
located in Dallas, Texas and (4) the sale of developed lots and land.
The following summarizes Commercial Development's results for the
two-year period ended March 31, 2000 (dollars and square feet in thousands):
<TABLE>
<CAPTION>
------------------------------
For the Years Ended March 31,
------------------------------
2000 1999
------- -------
<S> <C> <C>
Sales Revenues $ 4,465 $ 2,380
Rental Income 5,862 236
Cost of Sales (3,438) (2,077)
Selling, General & Administrative Expenses (1,758) (389)
Interest Expense (2,440) (91)
------- -------
Operating Earnings before Depreciation 2,691 59
Depreciation (1,246) (41)
------- -------
Operating Earnings $ 1,445 $ 18
======= =======
Operating Square Feet at March 31 976 38
======= =======
</TABLE>
Fiscal 2000 sales revenues included six acres in Camarillo, California
and forty developed lots in Plano, Texas. Sales revenues for the prior year
included ten acres in Oxnard, California sold to a joint venture in which the
Partnership indirectly owns a 10% interest and ten lots in Plano, Texas.
MULTI-FAMILY DEVELOPMENT
The following summarizes Multi-Family Development's results for the
two-year period ended March 31, 2000 (dollars and square feet in thousands):
<TABLE>
<CAPTION>
-----------------------------
For the Years Ended March 31,
-----------------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues $ 17,154 $ 342
Cost of Sales (17,057) --
General & Administrative Expenses (1,977) (1,814)
-------- --------
Operating Loss $ (1,880) $ (1,472)
======== ========
</TABLE>
Revenues for the fiscal year ended March 31, 2000 resulted from the
sale of the 304-unit apartment community in The Colony, Texas. Revenues for the
prior year period included development fees related to The Colony project.
During fiscal 2000, Multi-Family completed construction on a 400-unit
apartment community in Grand Prairie, Texas and began construction on a
382-unit apartment community in St. Petersburg, Florida.
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<PAGE> 85
Multi-Family is actively marketing for sale both its completed projects and
projects under construction. Subsequent to March 31, 2000, Multi-Family closed
on the sale of the 172-unit joint venture apartment complex located in College
Station.
LAND SALES
The Partnership's Land Sales operation provides property management
and coordinates the liquidation efforts for land investments for which no
development opportunity has been identified. The following summarizes Land
Sales' operating results for the two-year period ended March 31, 2000 (dollars
in thousands):
<TABLE>
<CAPTION>
-----------------------------
For the Years Ended March 31,
-----------------------------
2000 1999
------- -------
<S> <C> <C>
Revenues $ 7,759 $ 4,365
Cost of Sales (6,384) (3,570)
General & Administrative Expenses (569) (554)
------- -------
Operating Earnings $ 806 $ 241
======= =======
</TABLE>
Fiscal 2000 revenues from the sale of real estate totaled $7.3 million
and included revenues from the sale of 524 lots in Florida and Texas and ten
acres in New Jersey to Centex affiliates and ten acres in The Colony and
Dallas, Texas. Fiscal 1999 sales included the sale of 319 lots to Centex
affiliates in Florida and Texas and two small parcels located in The Colony and
Dallas, Texas.
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
On a combined basis, the Companies reported revenues of $28.6 million
for fiscal 1999, an increase of 42% from revenues of $20.1 million for the year
ended March 31, 1998. Net earnings for fiscal 1999 totaled $430,000 compared to
earnings of $4.4 million in fiscal 1998. The increased revenues primarily
resulted from sales of single family homes from the Partnership's Homebuilding
operations reduced by a decrease in land sales relative to 1998. Net earnings
decreased as a result of increased development overhead.
The Companies operated in four business segments: Domestic
Homebuilding, Commercial Development, Multi-Family Development, and Land Sales.
A discussion of the results of operations for each of the segments is presented
below.
DOMESTIC HOMEBUILDING
The Partnership acquired its New Jersey Homebuilding operations from
Centex Homes in April 1998. These operations delivered 73 homes during fiscal
1999 and generated $21.3 million in revenues and $1.6 million in operating
earnings.
COMMERCIAL DEVELOPMENT
Commercial Development generated $18,000 of net earnings in fiscal
1999 compared to breakeven operations for the year ended March 31, 1998.
Commercial Development revenues for the year totaled $2.6 million from the sale
of industrial land, developed lots, and rental income compared to rental income
of $73,000 in fiscal 1998.
The first Commercial Development facility, a 38,000 square foot
industrial building, was completed in December 1997. During fiscal 1999, the
Partnership began construction on four additional industrial facilities and one
office facility, totaling 634,000 square feet. Additionally, during fiscal
1999, the Partnership developed 16 acres of land into 55 single-family lots, 15
of which were sold in fiscal 1999.
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<PAGE> 86
MULTI-FAMILY DEVELOPMENT
Multi-Family Development fiscal 1999 revenues totaled $342,000
compared to $116,000 in fiscal 1998. Multi-Family reported an operating loss of
$1,472,000 for the fiscal year ended March 31, 1999 compared to a loss of
$175,000 for the period ended March 31, 1998.
In January 1998, the Companies commenced their Multi-Family
operations. The increased loss in fiscal 1999 is the result of twelve months of
operations versus three months in the prior year. Multi-Family completed a
304-unit pre-sold apartment community located in The Colony, Texas during
fiscal 1999. The sale of this property is scheduled to close in fiscal 2000.
Multi-Family also began construction on a 400-unit apartment community located
in Grand Prairie, Texas.
LAND SALES
Land Sales in fiscal 1999 generated $3.8 million in revenues and
contributed $241,000 in net earnings compared to $19.9 million in revenues and
net earnings of $4.6 million in fiscal 1998. Sales of real estate in fiscal
1999 consisted of 319 lots to Centex Homes and two small parcels located in The
Colony and Bryan Place, Texas. Fiscal 1998 sales of real estate included the
sale of 138 acres of land zoned multi-family and commercial, and the sale of
193 residential lots and office and warehouse buildings situated on 17 acres to
Centex Homes. Although the timing of real estate sales is uncertain and can
vary significantly from period to period, the fiscal 1999 reduction in sales is
also attributable to the Partnership's continued repositioning of the
Companies' land assets to consist primarily of land held for current and future
development.
LIQUIDITY AND CAPITAL RESOURCES
On April 15, 1999, the Partnership acquired Fairclough for a purchase
price of approximately $219 million. The Partnership financed the acquisition
by issuing to the seller two-year non-interest bearing promissory notes for
100% of the purchase price. The seller retained a special class of Fairclough's
stock to which is allocated substantially all of the earnings during the term
of the notes. The notes mature on March 31, 2001 and are full recourse to the
Partnership. A major portion of the notes is guaranteed by a letter of credit
the Partnership has obtained from a United Kingdom financial institution.
The Companies finance land acquisition and development activities
primarily from financial institution borrowings, issuance of Partnership Class
C Preferred Partnership Units and cash flows from operations (comprised largely
of proceeds from the sale of real estate). During fiscal 2000, the Partnership
closed on non-recourse commercial project loans totaling $49.8 million. Project
loans outstanding at March 31, 2000 totaled $51.1 million compared to $1.7
million at March 31, 1999. The project loans are collateralized by commercial
properties and have ten-year maturities with fixed interest rates ranging from
6.9% to 7.8%.
Properties under development are typically financed through short-term
variable and fixed rate borrowings and, to a limited extent depending on the
timing of the project construction, cash flows from operations. As properties
are completed, the properties are either sold or refinanced with long-term
fixed rate debt. In both instances, the proceeds are used to repay the
short-term borrowings. The net repayment of short-term borrowings reduced cash
flows by $18.1 million during fiscal 2000.
During fiscal 2000, the Partnership issued 8,095 Class C Preferred
Partnership Units ("Class C Units") in exchange for assets valued at $8.1
million. The assets acquired included both land and $4.8 million in cash. A
total of 35,082 Class C Units have been issued since 1998 in connection with
the acquisition of assets valued at $35.1 million. Assets acquired include the
New Jersey homebuilding operation of Centex Homes in April 1999, land zoned for
both commercial and residential uses and $5.8 million in cash.
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<PAGE> 87
The Companies believe that the revenues, earnings, and liquidity from
the sale of single family homes, land sales, and the sale and permanent
financing of development projects will be sufficient to provide the necessary
funding for current and future needs.
YEAR 2000 COMPLIANCE
Beginning in fiscal year 1997, the Companies began to evaluate and
implement changes to their systems in order to ensure Year 2000 compliance. As
a result of this process, the Companies and their subsidiaries tested all
critical systems during calendar year 1999 and repaired, upgraded and/or
replaced those found to not be Year 2000 compliant. The cost of replacing,
upgrading or otherwise changing non-compliant systems was not material to the
Companies as a whole, or to the Companies' individual subsidiaries. The
Companies used internally generated cash to fund the correction of all
non-compliant systems. The Companies' Year 2000 compliance preparation included
the hiring of a third party consultant (through Holding's services agreement
with Centex Service Company), the surveying of material vendors and suppliers
and the completion of a contingency plan.
As a result of the attention that the Companies paid to addressing
their Year 2000 readiness, the Companies have not, to date, experienced any
adverse impact on their operations or financial condition or the operations or
financial condition of any of their individual subsidiaries as a result of any
Year 2000 compliance issues. In addition, the Companies are not aware of any
Year 2000 problems experienced by any of their vendors, subcontractors or other
third parties. If any such third parties were affected by Year 2000 compliance
issues, the compliance issues have not caused, to date, any adverse effects on
the Companies' operations or financial condition, or the operations or
financial condition of any of their individual subsidiaries.
Although the Companies have not been affected to date by Year 2000
compliance issues, Year 2000 issues could arise subsequent to the filing of
this report. The Companies believe that such circumstances are highly unlikely
to occur and that, even if they were to occur, it is highly unlikely that the
Companies' operations or financial condition would be materially adversely
affected. Nevertheless, the Companies intend to continue to monitor Year 2000
related issues and immediately address any effects that may arise as a result.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Annual Report on Form 10-K
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the context of the statement and generally
arise when the 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 forecasted 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; adverse weather; 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.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's financial position is exposed to fluctuation in
variable interest rates for its construction loans and to a certain extent to
fluctuations in variable interest rates prior to obtaining a locked rate on
permanent project financing. At March 31, 2000, the Partnership did not have
any outstanding interest-protection contracts. In addition, as part of the
Partnership's acquisition of Fairclough, the Partnership issued two-year, non
interest-bearing notes payable in British pounds sterling. As of March 31,
2000, the Partnership had not utilized any forward or option contracts on
foreign currencies or commodities, or other types of derivative financial
instruments, to mitigate any of the foreign currency exchange rate risk
associated with the promissory notes.
The Partnership utilizes both short-term and long-term debt in its
financing strategy. For fixed rate debt, changes in interest rates generally
affect the fair market value of the debt instrument, but not the Partnership's
earnings or cash flows. Conversely, for variable rate debt, changes in interest
rates generally do not impact the fair market value of the debt instrument, but
do affect the Partnership's future earnings and cash flows. At March 31, 2000,
the Partnership had $51 million in fixed rate permanent debt with a
weighted-average interest rate of 7.4%. The permanent debt has monthly
principal and interest debt service with ten-year maturities ranging from 2008
to 2015. Also at March 31, 2000, the Partnership had $33 million in short-term
variable rate construction loans. If interest rates increased 100 basis points,
the annual effect of such an increase to the Partnership's financial position
and cash flows would approximate $330,000 based on the balances outstanding at
March 31, 2000. The fluctuation in interest rates is not determinable; and
accordingly, actual results from interest rate fluctuation could differ from
the estimate presented above.
87
<PAGE> 89
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT
COMPANY, L. P. AND SUBSIDIARIES
Combining Balance Sheets 89
Combining Statements of Operations 90
Combining Statements of Cash Flows 91
Combining Statements of Stockholders' Equity and Partners' Capital 92
Notes to Combining Financial Statements 92
Report of Independent Public Accountants 105
Quarterly Results 106
</TABLE>
88
<PAGE> 90
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L. P. AND SUBSIDIARIES
COMBINING BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
March 31,
----------------------------------------------------------------------------
2000 1999 2000 1999 2000 1999
--------- --------- --------- --------- --------- ---------
Centex Development 3333 Holding
Company, L.P. and Corporation
Combined Subsidiaries and Subsidiary
---------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalents -
Unrestricted $ 56,399 $ 364 $ 56,383 $ 331 $ 16 $ 33
Restricted 1,915 -- 1,915 -- -- --
Receivables -
Affiliates -- -- 2,916 1,963 -- --
Centex Corporation and Subsidiaries 1,919 38 3,880 38 -- --
Notes 3,131 3,554 3,131 3,554 -- --
Other 11,158 1,142 11,152 1,132 6 10
Inventories -
Housing Projects 253,433 4,757 253,433 4,757 -- --
Land Held for Development and Sale 38,044 46,713 38,044 46,713 -- --
Commercial and Multi-family
Projects Under Development 38,464 51,294 37,451 50,919 1,013 375
Investments -
Commercial Properties, net 61,420 1,899 61,420 1,899 -- --
Real Estate Joint Ventures 2,595 672 2,595 672 -- --
Affiliate -- -- -- -- 1,716 1,616
Property and Equipment, net 3,578 231 3,481 89 97 142
Other Assets -
Goodwill, net 30,727 -- 30,727 -- -- --
Deferred Charges and Other 8,835 1,512 8,660 1,166 175 346
--------- --------- --------- --------- --------- ---------
$ 511,618 $ 112,176 $ 515,188 $ 113,233 $ 3,023 $ 2,522
========= ========= ========= ========= ========= =========
LIABILITIES, STOCKHOLDERS' EQUITY AND
PARTNERS' CAPITAL
Accounts Payable and Accrued Liabilities -
Affiliates $ -- $ -- $ -- $ -- $ 2,916 $ 1,963
Centex Corporation and Subsidiaries -- 751 -- 332 1,961 419
Other 118,693 8,217 119,162 8,676 105 390
Notes Payable -
Centex Corporation and Subsidiaries -- 582 -- -- -- 582
Other 323,740 41,896 323,740 41,896 -- --
Stockholders' Equity and Partners' Capital -
Stock and Stock/class B Unit Warrants 501 501 500 500 1 1
Capital in Excess of Par Value 800 800 -- -- 800 800
Retained Earnings (Deficit) (2,856) (1,633) (96) -- (2,760) (1,633)
Partners' Capital 70,740 61,062 71,882 61,829 -- --
--------- --------- --------- --------- --------- ---------
Total Stockholders' Equity and
Partners' Capital 69,185 60,730 72,286 62,329 (1,959) (832)
--------- --------- --------- --------- --------- ---------
$ 511,618 $ 112,176 $ 515,188 $ 113,233 $ 3,023 $ 2,522
========= ========= ========= ========= ========= =========
</TABLE>
See Notes to Combining Financial Statements.
89
<PAGE> 91
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L. P. AND SUBSIDIARIES
COMBINING STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
For the Years Ended March 31,
-------------------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- -------- -------- -------- --------
Centex Development 3333 Holding
Company, L.P. and Corporation and
Combined Subsidiaries Subsidiary
---------------------------- ---------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Real Estate Sales $371,610 $ 27,437 $ 18,939 $371,610 $ 27,437 $ 18,939 $ -- $ -- $ --
Interest and Other Income 6,589 1,181 1,182 6,589 791 679 607 1,103 1,505
-------- -------- -------- -------- -------- -------- -------- -------- --------
378,199 28,618 20,121 378,199 28,228 19,618 607 1,103 1,505
-------- -------- -------- -------- -------- -------- -------- -------- --------
COSTS AND EXPENSES
Cost of Real Estate Sold 321,044 22,755 13,585 321,044 22,755 13,585 -- -- --
Selling, General and
Administrative Expenses 32,184 5,123 1,745 31,072 3,567 1,489 1,719 2,269 913
Interest 20,681 310 392 20,666 91 20 15 219 717
-------- -------- -------- -------- -------- -------- -------- -------- --------
373,909 28,188 15,722 372,782 26,413 15,094 1,734 2,488 1,630
-------- -------- -------- -------- -------- -------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES 4,290 430 4,399 5,417 1,815 4,524 (1,127) (1,385) (125)
Income Taxes 3,834 -- -- 3,834 -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
NET EARNINGS (LOSS) $ 456 $ 430 $ 4,399 $ 1,583 $ 1,815 $ 4,524 $ (1,127) $ (1,385) $ (125)
======== ======== ======== ======== ======== ======== ======== ======== ========
NET EARNINGS ALLOCABLE TO LIMITED
PARTNERS $ 1,583 $ 1,815 $ 4,524
======== ======== ========
NET EARNINGS (LOSS) PER UNIT/SHARE $ 25.08 $ 33.38 $ 140.14 $ (1,127) $ (1,385) (125)
======== ======== ======== ======== ======== ========
WEIGHTED-AVERAGE UNITS/
SHARES OUTSTANDING 63,116 54,377 32,281 1,000 1,000 1,000
</TABLE>
See notes to combining financial statements.
90
<PAGE> 92
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L. P. AND SUBSIDIARIES
COMBINING STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------------------------------------------
March 31,
----------------------------------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------
Centex Development
Company, L.P. and
Combined Subsidiaries
---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $ 456 $ 430 $ 4,399 $ 1,583 $ 1,815 $ 4,524
Adjustments -
Depreciation and Amortization 3,879 115 15 3,835 78 10
Loss From Joint Ventures (30) -- -- (30) -- --
(Increase) Decrease in Receivables (5,238) (204) (664) (8,156) 5,419 (7,684)
Decrease (Increase) in Notes Receivable 423 1,556 (2,745) 423 1,556 (2,745)
Decrease (Increase) in Inventories 21,278 (43,054) 5,195 21,916 (43,129) 5,645
(Increase) Decrease in Commercial Properties (57,423) 6 (1,956) (57,423) 6 (1,956)
(Increase) Decrease in Other Assets (2,556) (1,400) (112) (2,727) (1,066) (100)
Increase (Decrease) in Payables and Accruals 67,813 4,627 1,683 68,517 4,638 1,950
-------- -------- -------- -------- -------- --------
28,602 (37,924) 5,815 27,938 (30,683) (356)
-------- -------- -------- -------- -------- --------
CASH FLOWS - INVESTING ACTIVITIES
(Increase) Decrease in Advances to
Joint Ventures (1,893) 2,368 (2,838) (1,893) 1,806 (2,276)
Property and Equipment Additions, net 224 (217) (93) 223 (126) --
-------- -------- -------- -------- -------- --------
(1,669) 2,151 (2,931) (1,670) 1,680 (2,276)
-------- -------- -------- -------- -------- --------
CASH FLOWS - FINANCING ACTIVITIES
Decrease in Notes Payable -
Centex Corporation and Subsidiaries (582) (898) (5,520) -- -- --
Other 27,311 28,075 6,766 27,311 28,075 6,766
Decrease in Notes Receivable -
Centex Corporation and Subsidiaries -- 7,700 -- -- -- --
Issuance of Class C Partnership Units 4,830 1,000 -- 4,830 1,000 --
Capital Distributions -
Return of Capital -- -- -- 100 -- --
Preference Payments -- -- (4,500) -- -- (4,500)
-------- -------- -------- -------- -------- --------
31,559 35,877 (3,254) 32,241 29,075 2,266
-------- -------- -------- -------- -------- --------
Effect of Exchange Rate Changes On
Cash (542) -- -- (542) -- --
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH 57,950 104 (370) 57,967 72 (366)
CASH AT BEGINNING OF YEAR 364 260 630 331 259 625
-------- -------- -------- -------- -------- --------
CASH AT END OF YEAR $ 58,314 $ 364 $ 260 $ 58,298 $ 331 $ 259
======== ======== ======== ======== ======== ========
<CAPTION>
-------------------------------
March 31,
-------------------------------
2000 1999 1998
-------- -------- --------
3333 Holding
Corporation and
Subsidiary
-------------------------------
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings (Loss) $ (1,127) $ (1,385) (125)
Adjustments -
Depreciation and Amortization 44 37 5
Loss From Joint Ventures -- -- --
(Increase) Decrease in Receivables 4 751 (585)
Decrease (Increase) in Notes Receivable -- -- --
Decrease (Increase) in Inventories (638) 75 (450)
(Increase) Decrease in Commercial Properties -- -- --
(Increase) Decrease in Other Assets 171 (334) (12)
Increase (Decrease) in Payables and Accruals 2,210 (5,618) 7,420
-------- -------- --------
664 (6,474) 6,253
-------- -------- --------
CASH FLOWS - INVESTING ACTIVITIES
(Increase) Decrease in Advances to
Joint Ventures (100) (205) (644)
Property and Equipment Additions, Net 1 (91) (93)
-------- -------- --------
(99) (296) (737)
-------- -------- --------
CASH FLOWS - FINANCING ACTIVITIES
Decrease in Notes Payable
Centex Corporation and Subsidiaries (582) (898) (5,520)
Other -- -- --
Decrease in Notes Receivable -
Centex Corporation and Subsidiaries -- 7,700 --
Issuance of Class C Partnership Units -- -- --
Capital Distributions -
Return of Capital -- -- --
Preference Payments -- -- --
-------- -------- --------
(582) 6,802 (5,520)
-------- -------- --------
Effect of Exchange Rate Changes On
Cash -- -- --
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (17) 32 (4)
CASH AT BEGINNING OF YEAR 33 1 5
-------- -------- --------
CASH AT END OF YEAR $ 16 $ 33 $ 1
======== ======== ========
</TABLE>
See notes to combining financial statements.
91
<PAGE> 93
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L. P. AND SUBSIDIARIES
COMBINING STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Centex Development Company, L.P. and 3333 Holding
Subsidiaries Corporation and Subsidiary
------------------------------------------------- -----------------------------------
Class B General Limited Capital In Retained
Unit Partner's Partners' Stock Excess Of Earnings
Combined Warrants Capital Capital Warrants Par Value (Deficit)
-------- -------- --------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1997 $ 33,414 $ 500 $ 767 $ 32,236 $ 1 $ 800 $ (123
Preference Payments (4,500) -- -- (4,500) -- -- --
Issuance of Class C
Partnership Units 7,542 -- -- 7,542 -- -- --
Net Earnings (Loss) 4,399 -- -- 4,524 -- -- (125)
-------- -------- -------- -------- -------- -------- --------
Balance at March 31, 1998 40,855 500 767 39,802 1 800 (248)
Issuance of Class C
Partnership Units 19,445 -- -- 19,445 -- -- --
Net Earnings 430 -- -- 1,815 -- -- (1,385)
-------- -------- -------- -------- -------- -------- --------
Balance at March 31, 1999 60,730 500 767 61,062 1 800 (1,633)
GENERAL PARTNER
CONTRIBUTION -- -- 375 -- -- -- --
ISSUANCE OF CLASS C
PARTNERSHIP UNITS 8,095 -- -- 8,095 -- -- --
NET EARNINGS 456 1,583 -- -- (1,127)
ACCUMULATED OTHER
COMPREHENSIVE LOSS (96) -- -- (96) -- -- --
--------
COMPREHENSIVE INCOME 360
-------- -------- -------- -------- -------- -------- --------
BALANCE AT MARCH 31, 2000 $ 69,185 $ 500 $ 1,142 $ 70,644 $ 1 $ 800 $ (2,760
======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes to combining financial statements.
NOTES TO COMBINING FINANCIAL STATEMENTS
(A) COMPREHENSIVE INCOME
Comprehensive income is summarized for the three-year period ended
March 31, 2000 below (dollars in thousands):
<TABLE>
<CAPTION>
-----------------------------
For the Years Ended March 31,
-----------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Net Income $ 456 $ 430 $4,399
Other Comprehensive Loss:
Foreign Currency Translation Adjustments (96) -- --
------ ------ ------
Comprehensive Income $ 360 $ 430 $4,399
====== ====== ======
</TABLE>
(B) ORGANIZATION
In March 1987, Centex Development Company, L.P. (the "Partnership"), a
master limited partnership, was formed to enable holders of Centex Corporation
("Centex") stock to participate in long-term real estate development projects
whose dynamics are inconsistent with Centex's traditional financial objectives.
Certain
92
<PAGE> 94
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 controlled 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 (the
"Securities") was distributed in 1987 (with warrants to purchase approximately
80% of the Class B limited partnership units in the Partnership) as a dividend
to the stockholders of Centex. The Securities, held by 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 will
automatically become detached in November 2007.
The stockholders of Centex elect the Board of Directors of Holding. In
October 1999, the Board of Directors expanded the size of the board to four
directors. The majority of the Board members are independent outside directors,
none of whom are directors of Centex. Accordingly, the stockholders of Centex
control the general partner of the Partnership. The general partner and
independent Board of Directors of Holding manage the Partnership's conduct of
its activities including the sales, development, maintenance and zoning of
properties. The general partner may sell or acquire properties, including the
contributed property, and enter into other business transactions without the
consent of the limited partners. In addition, the limited partners cannot
remove the general partner.
Supplementary condensed combined financial statements of Centex
Corporation and subsidiaries, 3333 Holding Corporation and subsidiary and
Centex Development Company, L.P. and subsidiaries are set forth below. For
additional information on Centex Corporation and subsidiaries, see their
separate financial statements and related footnotes.
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------
March 31,
----------------------------
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 197,877 $ 111,632
Receivables 907,367 1,860,090
Inventories 2,343,682 1,639,664
Investments in Joint Ventures and Other 68,539 49,266
Property and Equipment, net 364,182 313,886
Other Assets 599,526 410,321
---------- ----------
$4,481,173 $4,384,859
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $1,244,500 $1,026,867
Short-term Debt 834,897 1,668,496
Long-term Debt 802,238 284,299
Minority Stockholders' Interest 129,352 140,721
Negative Goodwill 50,837 66,837
Stockholders' Equity 1,419,349 1,197,639
---------- ----------
$4,481,173 $4,384,859
========== ==========
</TABLE>
93
<PAGE> 95
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------------------------------------
For the Years Ended March 31,
--------------------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 6,328,355 $ 5,179,188 $ 3,991,954
Costs and Expenses 5,907,660 4,805,894 3,760,445
----------- ----------- -----------
Earnings Before Income Taxes 420,695 373,294 231,509
Income Taxes 163,563 141,332 86,828
----------- ----------- -----------
NET EARNINGS $ 257,132 $ 231,962 $ 144,681
Other Comprehensive Loss (1,248) -- --
----------- ----------- -----------
COMPREHENSIVE INCOME $ 255,884 $ 231,962 $ 144,681
=========== =========== ===========
</TABLE>
(C) BASIS OF PRESENTATION
The accompanying combining financial statements present the individual
and combined financial statements of Holding and its subsidiary and the
Partnership as of March 31, 2000 and 1999, and results of operations for each
of the three years ended March 31, 2000. The financial statements of the
Partnership are included in the combined statements since Development, as
general partner of the Partnership, is able to exercise effective control over
the Partnership.
(D) SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue from home building projects and real estate sales are
recognized as homes and properties are sold and title passes.
INVENTORY CAPITALIZATION AND COST ALLOCATION
Projects under development and held for sale are stated at the lower
of cost (including development costs and, where appropriate, capitalized
interest and real estate taxes) or fair value less costs to sell. Capitalized
costs are included in cost of sales in the combining statements of operations
as related revenues are recognized. Interest costs relieved from inventories
are included in cost of sales. The Companies review recoverability of their
inventories on an individual basis in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of Long-lived
Assets and for Long-Lived Assets to be Disposed Of."
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and
improvements are capitalized and depreciated. Repairs and maintenance are
expensed as incurred. Depreciation is provided on a straight-line basis over
the estimated useful lives of depreciable assets. Costs and accumulated
depreciation applicable to assets retired or sold are eliminated from the
accounts and any resulting gains or losses are recognized at such time.
GOODWILL
Goodwill represents the excess of purchase price over net assets of
businesses acquired. Goodwill is amortized over 20 years. The Companies monitor
goodwill and other intangibles to determine whether any impairment of these
assets has occurred. In making such determination, the Companies evaluate the
performance, on an undiscounted basis, of the underlying businesses which gave
rise to such amount. In case of an impairment, the recorded costs would be
written down to fair value on a discounted basis. Goodwill amortization totaled
$2.1 million in fiscal 2000 and was zero in fiscal 1999 and fiscal 1998.
94
<PAGE> 96
EARNINGS (LOSS) PER SHARE/UNIT
Earnings (loss) per share/unit is based on the weighted-average number
of outstanding shares of common stock of 1,000 for Holding and the
weighted-average number of outstanding Class A and Class C limited partnership
units of the Partnership of 63,116; 54,377; and 32,281 for fiscal years 2000,
1999 and 1998, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent
with fiscal 2000 presentation.
COMBINING STATEMENTS OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES
Interest capitalized by the Partnership during fiscal years ended March
31, 2000, 1999 and 1998 totaled $3,689,000, $1,015,000 and $22,000,
respectively. Land assets acquired by the Partnership during fiscal years ended
March 31, 2000 and 1999 in exchange for Class C Partnership Units totaled
$3,265,000 and $18,445,000, respectively. In addition, during the fiscal year
ended March 31, 2000, the Partnership issued 4,830 new Class C Partnership Units
for $4.8 million. No income taxes were paid during the years ended March 31,
2000, 1999 and 1998. The Partnership acquired the assets and assumed liabilities
of Fairclough Homes totaling $267,720,000 and $296,980,000, respectively.
(E) PROPERTY AND EQUIPMENT
Property and equipment cost by major category and accumulated
depreciation are summarized below:
<TABLE>
<CAPTION>
-----------------------
March 31,
-----------------------
2000 1999
------- -------
(Dollars in thousands)
<S> <C> <C>
Land, Buildings and Improvement $ 3,119 $ --
Machinery, Equipment and Other 1,042 317
------- -------
4,161 317
Accumulated Depreciation (583) (86)
------- -------
$ 3,578 $ 231
======= =======
</TABLE>
(F) NOTES RECEIVABLE
Development issued common stock to Holding and used the proceeds to
advance $7.7 million to a wholly-owned subsidiary of Centex, as evidenced by a
note receivable due April 30, 1999 bearing interest at prime plus .875%. During
fiscal year 1999, the note was repaid. Interest income of $116,000 and $732,000
related to this note is included in the accompanying combining financial
statements for the years ended March 31, 1999 and 1998, respectively.
Notes Receivable - Other at March 31, 2000 and 1999 have stated
interest rates ranging up to 10% and are due in monthly or quarterly
installments. The weighted-average interest rate was 9% at both March 31, 2000
and 1999. Notes receivable at March 31, 2000 are collectible over two years,
with $3,123,000 being due within one year. As of March 31, 2000, all notes were
current; however, one loan was in default with respect to development
obligations on the land securing the note. The Partnership is currently working
with the borrower to cure the default. The value of the underlying collateral
exceeds the note receivable amount
95
<PAGE> 97
at March 31, 2000. Therefore, should the default under the note agreement not be
resolved, management does not anticipate any material impact to the financial
statements.
(G) NOTES PAYABLE
Pursuant to a master note agreement between Holding and Centex, Centex
had advanced Holding an additional $1,000,000 at March 31, 1998 secured by a
pledge of all of the issued and outstanding shares of Development (the "Holding
Note"). During fiscal 1999, the Holding Note was repaid and the pledge
agreement was terminated. The note bore interest at prime plus 1%. Interest
expense of $62,000 and $372,000 related to this note is included in the
accompanying financial statements for the years ended March 31, 1999 and 1998,
respectively.
In addition, Centex Multi-Family Communities L.P., a wholly-owned
subsidiary of Centex Development Company, L.P., has a note agreement with
Centex (the "MF Note") to fund certain predevelopment costs. The MF Note is
unsecured and bears interest at prime, payable quarterly and had an outstanding
receivable balance of $1,257,000 at March 31, 2000.
Non-recourse notes payable, secured solely by the underlying real
estate, totaled $75.8 million at March 31, 2000. As land is sold, a portion of
the proceeds is restricted for repayment of the notes. In addition, the
Partnership, through wholly-owned single asset entities, had limited-recourse
construction debt outstanding at March 31, 2000 totaling $29.1 million. The
Partnership itself has also issued limited guarantees for up to 20% of the
commitments. The note balances and rates in effect were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
------------------------------------------------------------------------
MATURITIES AS OF MARCH 31,
------------------------------------------------------------------------
2005
OR
TOTAL 2001 2002 2003 2004 LATER
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NON-RECOURSE DEBT
Mortgage Notes 6.92% to 7.79% $ 51,078 $ 1,188 $ 1,279 $ 1,377 $ 1,482 $ 45,752
Mezzanine Note 9.00% 4,294 -- 4,294 -- -- --
-------- -------- -------- ------- ------- --------
55,372 1,188 5,573 1,377 1,482 45,752
-------- -------- -------- ------- ------- --------
LIMITED-RECOURSE DEBT
Construction Notes LIBOR(A)
+ 1.75% to 4% 29,111 9,467 15,623 4,021 -- --
-------- -------- -------- ------- ------- --------
FULL-RECOURSE DEBT
Entity purchase Zero Coupon 218,839 218,839 -- -- -- --
Land Notes 5.45% to 8.88% 20,418 15,513 4,905 -- -- --
-------- -------- -------- ------- ------- --------
239,257 234,352 4,905 -- -- --
-------- -------- -------- ------- ------- --------
$323,740 $245,007 $ 26,101 $ 5,398 $ 1,482 $ 45,752
======== ======== ======== ======= ======= ========
</TABLE>
(A) The 30-day LIBOR rate at March 31, 2000 and 1999 was 6.13% and
4.94% respectively.
(H) COMMITMENTS AND CONTINGENCIES
As of March 31, 2000, the Partnership had remaining commitments of
approximately $33.1 million on construction contracts.
To facilitate construction loans obtained by wholly-owned single asset
entities, the Partnership has issued demand notes made payable to the
single-asset entities equal to, in some instances, 20% of the construction loan
commitment amount. The single-asset entities have signed these demand notes
over to the lender as a form of additional collateral on the construction
loans. The demand notes are payable only in the event of default on the
construction loan. As of March 31, 2000, the Partnership had issued demand
notes totaling $2.6 million.
96
<PAGE> 98
The single-asset entities have also obtained demand notes from Centex
for up to 10% of the construction loan commitment amount. These demand notes
have been signed over to the lenders as additional collateral on the
construction loans, and may be called only in the event of a default on the
demand notes issued by the Partnership.
(I) BUSINESS SEGMENTS
The Partnership operates in five principal business segments -
International Home Building, Domestic Home Building, Commercial Development,
Multi-Family Development ("Multi-Family"), 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's
accounting policies are the same as those described in the summary of
significant accounting policies.
The Domestic Home Building operation involves the purchase and
development of the Partnership's land and the purchase of lots together with
the construction and sale of single-family homes. Domestic Home Building is
actively building out the Partnership's land holding in East Windsor, New
Jersey, as well as pursuing "spot lot" development in that general market area.
Commercial Development actively develops office, industrial, and retail
facilities as well as single-family lot development. Commercial Development is
developing the buildings primarily for investment. Multi-Family Development
develops affordable to mid- market apartment projects and town homes.
Multi-Family's strategy is to market the projects for sale prior to or during
construction. Land Sales is responsible for the property management and
liquidation of land investments for which no development opportunity has been
identified.
Domestic Home Building, Commercial Development, Multi-Family
Development, and Land Sales evolved in fiscal 1999 as a result of (1) new
business initiatives in the commercial development arena, (2) the commencement
of Domestic Home Building in April 1998, and (3) the management team structure
put in place to conduct the increased development activities. These segments
did not exist in fiscal 1998. Therefore, the following tables present financial
information relating to these segments for the two year period ended March 31,
2000.
INTERNATIONAL HOME BUILDING
The following table sets forth financial information relating to the
International Home Building operations.
<TABLE>
<CAPTION>
-----------------------------
For the Years Ended March 31,
-----------------------------
2000 1999
--------- -----------
(Dollars in thousands)
<S> <C> <C>
Revenues $ 329,582 $ --
Cost of Sales (283,456) --
Selling, General & Administrative Expenses (42,417) --
--------- -----------
Operating Earnings before Taxes $ 3,709 $ --
========= ===========
Identifiable Assets $ 347,748 $ --
========= ===========
Depreciation and Amoritization $ 2,438 $ --
========= ===========
</TABLE>
The Partnership acquired this segment in the first quarter of fiscal
2000. The seller received $219 million in non-interest bearing promissory notes
due in April 2001 and retained preferred non-voting shares in Fairclough.
During fiscal 2000, Fairclough generated after tax earnings totaling $18.2
million, which are subject to distribution to the seller under the preferred
share arrangement. The companies have accounted for the non-interest bearing
debt and nominal residual value preferred shares as if they were a single debt
instrument. Accordingly, distributions attributable to the preferred shares are
accrued as interest expense in
97
<PAGE> 99
the accompanying financial statements. See Note (L) for additional information
regarding the Fairclough acquisition. After taxes, International Home Building
had a loss of $128,000 for fiscal 2000.
DOMESTIC HOME BUILDING
The following table sets forth financial information relating to the
Domestic Home Building operations.
<TABLE>
<CAPTION>
------------------------------
For the Years Ended March 31,
------------------------------
2000 1999
-------- --------
(Dollars in thousands)
<S> <C> <C>
Revenues $ 13,377 $ 21,295
Cost of Sales (11,672) (17,108)
Selling, General & Administrative Expenses (1,495) (2,544)
-------- --------
Operating Earnings $ 210 $ 1,643
======== ========
Identifiable Assets $ 9,270 $ 10,920
======== ========
Capital Expenditures $ -- $ 126
======== ========
Depreciation and Amortization $ 52 $ 37
======== ========
</TABLE>
Fiscal 2000 revenues included revenues from the sale of single-family
homes in New Jersey which completed the build-out of certain communities. The
Partnership obtained final zoning approval for the development of an additional
251 single-family homes in July 1999. The decrease in the number of single-
family homes sold during fiscal 2000 resulted from a delay in the Partnership's
ability to market and sell homes in the new single-family community due to the
timing of the zoning approval.
COMMERCIAL DEVELOPMENT
Commercial Development operations during fiscal 2000 included: (1)
completion of 720,000 square feet of office and industrial space located in
Florida, North Carolina, California, Massachusetts, and Texas, (2) initiation
of construction on five new office and industrial facilities totaling 500,000
square feet, (3) acquisition of a 218,000 square foot existing office building
located in Dallas, Texas and (4) the sale of developed lots and land. The
following table sets forth financial information relating to the Commercial
Development operation.
<TABLE>
<CAPTION>
-----------------------------
For the Years Ended March 31,
-----------------------------
2000 1999
-------- --------
(Dollars in thousands)
<S> <C> <C>
Revenues $ 10,327 $ 2,616
Cost of Sales (3,438) (2,077)
Selling, General & Administrative Expenses (5,444) (521)
-------- --------
Operating Earnings $ 1,445 $ 18
======== --------
Identifiable Assets $ 85,905 $ 44,820
======== ========
Depreciation and Amortization $ 1,246 $ 41
======== ========
</TABLE>
Fiscal 2000 sales revenues included six acres in Camarillo, California
and forty developed lots in Plano, Texas. Sales revenues for the prior year
included ten acres in Oxnard, California sold to a joint venture in which the
Partnership indirectly owns a 10% interest and ten lots in Plano, Texas.
98
<PAGE> 100
MULTI-FAMILY DEVELOPMENT
The following table sets forth financial information relating to the
Multi-Family operation.
<TABLE>
<CAPTION>
----------------------------
For the Years Ended March 31,
----------------------------
2000 1999
-------- ---------
(Dollars in thousands)
<S> <C> <C>
Revenues $ 17,154 $ 342
Cost of Sales (17,057) --
Selling, General & Administrative Expenses (1,977) (1,814)
-------- --------
Operating Loss $ (1,880) $ (1,472)
-------- --------
Identifiable Assets $ 30,898 $ 31,337
======== ========
Capital Expenditures $ -- $ 91
======== ========
Depreciation and Amortization $ 44 $ 37
======== ========
</TABLE>
Revenues for the fiscal year ended March 31, 2000 resulted from the
sale of the 304-unit apartment community in The Colony, Texas. Revenues for the
prior year included development fees related to The Colony project.
During fiscal 2000, Multi-Family completed construction on a 400-unit
apartment community in Grand Prairie, Texas, and began construction on a
382-unit apartment community in St. Petersburg, Florida. Multi-Family is
actively marketing for sale both its completed projects and projects under
construction.
LAND SALES
The Partnership's Land Sales operation provides property management
and coordinates the liquidation efforts for land investments for which no
development opportunity has been identified. The following table sets forth
financial information relating to the Land Sales operations.
<TABLE>
<CAPTION>
----------------------------
For the Years Ended March 31,
----------------------------
2000 1999
-------- --------
(Dollars in thousands)
<S> <C> <C>
Revenues $ 7,759 $ 4,365
Cost of Sales (6,384) (3,570)
Selling, General & Administrative Expenses (569) (554)
-------- --------
Operating Earnings $ 806 $ 241
======== ========
Identifiable Assets $ 37,797 $ 25,099
======== ========
Depreciation and Amortization $ 99 $ --
======== ========
</TABLE>
Fiscal 2000 revenues from the sale of real estate totaled $7.3 million
and included revenues from the sale of 524 lots in Florida and Texas and ten
acres in New Jersey to Centex affiliates and ten acres in The Colony and Bryan
Place, Texas. Fiscal 1999 sales included the sale of 319 lots to Centex
affiliates in Florida and Texas and two small parcels located in The Colony and
Dallas, Texas.
(J) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires companies to disclose the
estimated fair value of their financial instrument assets and liabilities. The
estimated fair values shown below have been determined using current quoted
market prices where available and, where necessary, estimates based on present
value methodology suitable for each category of financial instruments.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the
99
<PAGE> 101
amounts that the Company could realize in a current market exchange. All assets
and liabilities which are not considered financial instruments have been valued
using historical cost accounting.
The consolidated carrying values of Cash and Cash Equivalents, Other
Receivables, Accounts Payable and Accrued Liabilities and Short-term Debt
approximate their fair values. The carrying values and estimated fair values of
other financial liabilities were as follows (dollars in thousands):
<TABLE>
<CAPTION>
--------------------------------------------------------------
March 31,
--------------------------------------------------------------
2000 1999
------------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Financial Liabilities
Long-term Debt $51,078 $49,903(A) $ 1,740 $ 1,828(A)
</TABLE>
(A) Fair values are based on a present value discounted cash flow with the
discount rate approximating current market for similar instruments.
(K) STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
EQUITY SECURITIES
The Partnership Agreement contemplates the issuance of three classes
of limited partnership units, Class A Units, Class B Units, and Class C Units.
In March 1987, 1,000 Class A Units were issued to Centex subsidiaries in
exchange for assets valued at approximately $76 million. The Class B Units,
held by a nominee on behalf of the stockholders, will detach and trade
separately from Centex stock on the earlier of Payout (as defined below) or
November 30, 2007, the scheduled detachment date. As of February 24, 1998, the
1,000 Class A Units were converted to 32,260 new Class A Units.
On March 31, 1998, 7,542 Class C Units were issued in exchange for
assets with a fair market value of $7.5 million. Under the Partnership
Agreement, holders of Class C Units are entitled to substantially the same
rights as holders of Class A Units in connection with matters in common, such
as voting, allocations, and distributions. During fiscal 2000 and 1999, 8,095
and 19,445 Class C Units, respectively, were issued in exchange for assets with
a fair market value of $8.1 and $19.4 million.
PREFERRED RETURN
The Partnership Agreement provides that the Class A and Class C
limited partners are entitled to a cumulative preferred return of 9% per annum
on the average outstanding balance of their Unrecovered Capital, as defined.
Unrecovered Capital represents initial capital contributions as reduced by
repayments and is the basis for preference accruals. In July 1995, in
conjunction with the extension of the detachment date, the limited partner
waived preference payments totaling $37.5 million and reduced the Class A
Unrecovered Capital in the Partnership, as defined, to $47.3 million.
Distributions made by the Partnership reduced Unrecovered Capital, as defined,
$4.5 million during fiscal 1997 and $10 million during fiscal 1996. During
fiscal 1998, the Partnership made preference payments to its limited partner
totaling $4.5 million. No preference payments were made during fiscal 1999 or
2000. Preference payments in arrears at March 31, 2000 amounted to $14.8
million and Unrecovered Capital for Class A and Class C limited partners
totaled $32.8 million and $35.1 million, respectively.
ALLOCATION OF PROFITS AND LOSSES
As provided in the Partnership Agreement, prior to Payout (as defined
below), net income of the Partnership is to be allocated to the partners in the
following order of priority:
100
<PAGE> 102
[i] To the Class A and Class C limited partners to the extent of
the cumulative preferred return.
[ii] To the partners to the extent and in the same ratio that
cumulative net losses were allocated.
[iii] To the partners in accordance with their percentage interests,
as defined. Currently, this would be a combined 20% to the
Class A and Class C limited partners and 80% to the general
partner.
All loss allocations and allocations of net income after Payout will
be made to the partners in accordance with their percentage interests, as
defined.
DISTRIBUTIONS
Distributions of cash or other property are to be made at the
discretion of the general partner and are to be distributed in the following
order of priority:
[i] Prior to the time at which the Class A and Class C limited partners
have received aggregate distributions equal to their original capital
contribution ("Payout"), distributions of cash or other property shall
be made as follows:
[a] To the Class A and Class C limited partners with respect to
their preferred return, then
[b] To the partners in an amount equal to the maximum marginal
corporate tax rate times the amount of taxable income
allocated to the partners, then
[c] To the Class A and Class C limited partners until their
Unrecovered Capital is reduced to zero.
[ii] After Payout, distributions of cash will be made to the partners in
accordance with their percentage interests, as defined.
WARRANTS
In November 1987, Centex acquired from the Partnership 100 warrants to
purchase 100 Class B Units in the Partnership at an exercise price of $500 per
Class B Unit, and Centex acquired from Holding 100 warrants to purchase 100
shares of Holding common stock at an exercise price of $800 per share. These
warrants are subject to future adjustment to provide the holders of options to
purchase Centex common stock with the opportunity to acquire Class B Units and
shares of Holding. These warrants will generally become exercisable upon the
detachment of the tandem-traded securities from Centex common stock.
(L) ACQUISITION OF FAIRCLOUGH HOMES GROUP LIMITED
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 $219 million) was paid by the delivery of two-year
non interest-bearing promissory notes. Additionally, the seller of the voting
shares retained non-voting preference shares in Fairclough that will entitle it
to receive substantially all of the net after-tax earnings of Fairclough until
March 31, 2001. During that time period CDC-UK may, however, participate in
Fairclough's earnings in excess of certain specified levels.
However, because the non-voting preference shares retained by the
seller have the characteristics of debt, the preference obligations are being
reported as interest expense in the financial statements. A major portion of
the promissory notes is secured by a letter of credit obtained by the
Partnership from a United Kingdom bank.
During the period between April 15, 1999 and March 31, 2001,
Fairclough'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.
101
<PAGE> 103
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 preliminary allocation of
the purchase price is as follows (dollars in thousands):
<TABLE>
<S> <C>
Inventories, Property and Equipment and Other $ 266,535
Goodwill 29,260
Notes Issued and Liabilities Assumed (295,795)
---------
Cash Paid $ --
=========
</TABLE>
The following unaudited pro forma results of operations for the
two-year period ended March 31, 1999 give effect to the April 15, 1999
acquisition of Fairclough as if such transaction had occurred on April 1, 1998
and 1997, respectively. The financial information for Fairclough included in
the unaudited pro forma results of operations is derived from Fairclough's
operating results for fiscal years ended December 31, 1998 and 1997, in
accordance with U.S. generally accepted accounting principles and translated to
U.S. dollars. This information is based on the historical financial statements
of the Companies and the historical financial statements of Fairclough. The pro
forma adjustments are directly attributable to the transaction referenced
above, and are expected to have a continuing impact on the business, results of
operations, and financial position. The above preliminary allocation of the
purchase price will be finalized in the first quarter of fiscal 2001 upon
further analysis of the assets acquired.
<TABLE>
<CAPTION>
Pro Forma Results of Operations
--------------------------------------------------
For the Year Ended March 31, 1999
--------------------------------------------------
(Dollars in thousands, except per unit/share data)
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
--------- ------------- --------------
<S> <C> <C> <C>
Revenues $ 356,381 $ 355,991 $ 1,103
========= ========= =========
Net Earnings (Loss) $ 421 $ 1,806 $ (1,385)
========= ========= =========
Net Earnings Allocable to Limited Partner $ 1,806
=========
Earnings (Loss) Per Unit/Share $ 33.21 $ (1,385)
========= =========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Results of Operations
--------------------------------------------------
For the Year Ended March 31, 1998
--------------------------------------------------
(Dollars in thousands, except per unit/share data)
Centex
Development
Company, L.P. 3333 Holding
and Corporation
Combined Subsidiaries and Subsidiary
--------- ------------- --------------
<S> <C> <C> <C>
Revenues $ 409,547 $ 409,044 $ 1,505
========= ========= =========
Net Earnings (Loss) $ 3,221 $ 3,346 $ (125)
========= ========= =========
Net Earnings Allocable to Limited Partner $ 3,346
=========
Earnings (Loss) Per Unit/Share $ 103.65 $ (125)
========= =========
</TABLE>
102
<PAGE> 104
The unaudited pro forma results of operations are not necessarily
indicative of what actual results of operations of the Companies would have
been for the period, nor do they represent the Companies' results of operations
for future periods.
The unaudited pro forma results of operations include the following
adjustments:
o Amortization of goodwill and other intangibles based upon
the Partnership's allocation of the purchase price. Goodwill
is being amortized over a 20-year period;
o Elimination of the historical interest expense of Fairclough
related to debt not assumed by the Partnership;
o Additional interest expense representing the preference
payments for substantially all the net after-tax earnings of
Fairclough to the seller;
o Amortization of deferred debt issuance costs which are being
amortized over the term of the debt;
o Income tax adjustments related to the above pro forma items.
(M) RELATED PARTY TRANSACTIONS
SERVICE AND MANAGEMENT AGREEMENTS
Holding has a service agreement with Centex Service Company, a
wholly-owned subsidiary of Centex, whereby Centex Service will provide certain
tax, accounting and other similar services for Holding. This agreement was
amended in fiscal 1999 to include development services and the monthly fee
increased from $2,500 per month to $30,000 per month. Service fees of $360,000
in fiscal 2000 and 1999 and $30,000 in fiscal 1998 are reflected as
administrative expenses in the accompanying combining financial statements.
The Partnership paid $583,000, $713,000, and $640,000 to Holding
during fiscal years 2000, 1999 and 1998, respectively, pursuant to an agreement
whereby Holding provides management services to the Partnership in connection
with the development and operation of properties acquired by the Partnership,
maintenance of partnership property and accounting and clerical services.
SALES AND PURCHASES
Partnership revenues during fiscal years 2000, 1999, and 1998 include
land sales to Centex Homes of $5,373,000, $3,364,000, and $6,494,000,
respectively. Gains associated with lot sales to Centex totaled $333,000,
$139,000 and $906,000 for fiscal years 2000, 1999 and 1998, respectively. At
March 31, 2000, Centex Homes had contracts to purchase lots for the aggregate
price of approximately $433,000 to be paid as lots are delivered.
OTHER
The Partnership, through its operating subsidiaries, executed
contracts with certain of Centex's construction subsidiaries totaling $14.9
million in fiscal 2000 and $43.2 million in fiscal 1999 for the construction of
multi-family apartments, a recreational ice skating facility and two office
buildings. During fiscal 2000, $23.5 million was paid to Centex's construction
subsidiaries pursuant to the construction contracts. Additionally, during
fiscal 2000, in connection with third-party construction and permanent loans
made to the Partnership's operating subsidiaries during the year, the
Partnership paid an aggregate of $186,000 in title insurance premiums and
escrow fees to Centex title insurance subsidiaries.
Centex has made limited guarantees relating to a number of the
Partnership's construction and permanent project loans. At March 31, 2000 these
guarantees totaled $3.4 million and are payable only in the event of default by
the Partnership under its obligations as a limited guarantor on these loans.
103
<PAGE> 105
A subsidiary of the Partnership has entered into a lease of
approximately 135,000 square feet of space in its Dallas, Texas office building
to Centex Service Company.
(N) INCOME TAXES
At March 31, 2000, Holding had operating loss carryforwards for income
tax reporting purposes of $2,720,000. If unused, the loss carryforwards will
expire in fiscal years 2009 through 2021. Holding has not recognized these tax
assets in its balance sheet due to its history of operating losses. Holding
joins with its subsidiaries in filing consolidated income tax returns. The
taxable income of the Partnership has been allocated to the holders of the
Class A and Class C Units. Accordingly, no tax provision for Partnership
earnings is shown in the combining financial statements.
104
<PAGE> 106
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF 3333 HOLDING CORPORATION:
We have audited the accompanying combining balance sheets of 3333
Holding Corporation and subsidiary and Centex Development Company, L.P. and
subsidiaries as of March 31, 2000 and 1999, and the related combining
statements of operations, cash flows, and stockholders' equity and partners'
capital for each of the three years in the period ended March 31, 2000. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the individual and combined financial
positions of 3333 Holding Corporation and subsidiary and Centex Development
Company, L.P. and subsidiaries as of March 31, 2000 and 1999, and the
individual and combined results of their operations and their cash flows for
each of the three years in the period ended March 31, 2000, in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Dallas, Texas,
May 16, 2000
105
<PAGE> 107
QUARTERLY RESULTS (UNAUDITED)
(Dollars in thousands, except per share/unit data)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
For the Years Ended March 31,
------------------------------------------------------------------------------------
2000 1999 2000 1999 2000 1999
--------- --------- --------- --------- --------- ---------
Centex Development 3333 Holding
Company, L.P. and Corporation
Combined Subsidiaries and Subsidiary
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
FIRST QUARTER
Revenues $ 78,669 $ 6,308 $ 78,669 $ 6,076 $ 150 $ 476
Earnings (Loss) Before
Taxes $ 281 $ (346) $ 854 $ (193) $ (573) $ (153)
Net Earnings (Loss) $ 20 $ (346) $ 593 $ (193) $ (573) $ (153)
Earnings (Loss) Per
Unit/Share $ 10.01 $ (3.93) $ (573) $ (153)
Average Units Outstanding 59,270 49,119 -- --
Average Shares Outstanding -- -- 1,000 1,000
SECOND QUARTER
Revenues $ 91,130 $ 7,772 $ 91,130 $ 7,656 $ 154 $ 281
Earnings (Loss) Before
Taxes $ 367 $ 375 $ 869 $ 628 $ (502) $ (253)
Net Earnings (Loss) $ 56 $ 375 $ 558 $ 628 $ (502) $ (253)
Earnings (Loss) Per
Unit/Share $ 9.09 $ 11.79 $ (502) $ (253)
Average Units Outstanding 61,399 53,279 -- --
Average Shares Outstanding -- -- 1,000 1,000
THIRD QUARTER
Revenues $ 79,450 $ 5,694 $ 79,450 $ 5,653 $ 153 $ 194
Earnings (Loss) Before
Taxes $ (83) $ 13 $ (77) $ 391 $ (6) $ (378)
Net Earnings (Loss) $ (112) $ 13 $ (106) $ 391 $ (6) $ (378)
Earnings (Loss) Per
Unit/Share $ (1.66) $ 6.99 $ (6) $ (378)
Average Units Outstanding 63,773 55,911 -- --
Average Shares Outstanding -- -- 1,000 1,000
FOURTH QUARTER
Revenues $ 128,950 $ 8,844 $ 128,950 $ 8,843 $ 150 $ 152
Earnings (Loss) Before
Taxes $ 3,725 $ 388 $ 3,771 $ 989 $ (46) $ (601)
Net Earnings (Loss) $ 492 $ 388 $ 538 $ 989 $ (46) $ (601)
Earnings (Loss) Per
Unit/Share $ 7.98 $ 16.69 $ (46) $ (601)
Average Units Outstanding 67,342 59,247 -- --
Average Shares Outstanding -- -- 1,000 1,000
</TABLE>
106
<PAGE> 108
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
(a) Holding
DIRECTORS AND EXECUTIVE OFFICERS OF HOLDING
Except as additionally provided below, the information called for by this Item
10 with respect to Holding is incorporated herein by reference to the
information included under the captions "Election of Directors" and "Section
16(a) Compliance" in Holding's proxy statement for the 2000 Annual Meeting of
Stockholders of Holding to be held on July 27, 2000 (the "2000 Holding Proxy
Statement"); however, as required by Instruction 3 to Item 401(b) of Regulation
S-K, information regarding executive officers of Holding is included under the
caption "Executive Officers of Holding and Development" included in Part B of
this Report following Item 4.
SERVICES AGREEMENT
Holding has no full-time employees. The directors and executive officers of
Holding, who hold the same directorships and offices in Development, perform
all executive management functions. See "Item 11. Executive Compensation." All
tax, accounting, bookkeeping, clerical and similar services that are necessary
to operate the business of Holding are provided pursuant to a services
agreement (the "Services Agreement") entered into between Holding and Centex
Service Company. See "Item 13. Certain Relationships and Related Transactions."
The terms of the Services Agreement are subject to automatic renewal for
successive one-year terms unless either party elects to terminate the Services
Agreement upon at least 30 days written notice prior to December 31 of any
year. However, the Services Agreement may not be terminated by Holding (other
than in the event of a breach by Centex Service Company constituting gross
negligence or willful or wanton misconduct) prior to the full and complete
detachment of the Stockholder Warrants from Centex Common Stock or the
occurrence of Payout. Service fees of $360,000 were paid pursuant to the
Services Agreement during fiscal 2000.
(b) The Partnership
GENERAL PARTNER AND MANAGEMENT
With the exception of Fairclough, the Partnership has no directors, officers or
employees and, instead, is managed by Development, its sole general partner.
Development, in turn, is controlled by its sole stockholder, Holding. Directors
and officers of Development perform all executive management functions required
for the Partnership. Except as provided in the Plan with respect to the
Original Properties, the limited partners of the Partnership have no power to
direct or participate in the control of the Partnership or to remove the
general partner. Development and the outside independent Board of Directors of
Holding manage how the Partnership conducts its activities including the sales
development, maintenance and zoning of properties belonging to the Partnership
and all other decisions regarding the Partnership's business or operations. See
"Item 1. Business." The Partnership has entered into a management agreement
pursuant to which Holding will sell, develop, maintain and zone the properties
of the Partnership for and on behalf of the Partnership. Holding is managed
107
<PAGE> 109
by a five-person Board of Directors elected by the stockholders of Centex. The
majority of the Board Members are independent outside directors, none of whom
are directors of Centex. See "Management Agreement" below in this Item 10.
Except for the allocations of profit and loss and distributions of cash and
other property to which Development is entitled under the Partnership
Agreement, and except for the right to be reimbursed for certain expenses,
Development does not receive any compensation from the Partnership in respect
of its duties and obligations as general partner of the Partnership. See "Item
11. Executive Compensation."
DIRECTORS AND EXECUTIVE OFFICERS OF DEVELOPMENT
Information concerning the present directors and executive officers of
Development is set forth below.
<TABLE>
<CAPTION>
NAME Position AGE
---- -------- ---
<S> <C> <C>
Stephen M. Weinberg............................. Director and President (1) 52
Josiah O. Low, III.............................. Director (2)* 61
David M. Sherer................................. Director (3)* 63
Richard C. Decker............................... Director (4) 47
Roger O. West................................... Director and Chairman of the Board (5) 55
Kimberly A. Pinson.............................. Vice President, Treasurer, Controller and
Assistant Secretary (6) 35
</TABLE>
* Member of the audit committee of the Board of Directors.
(1) Mr. Weinberg is an employee of a subsidiary of Centex and has been
President and a director of both Holding and Development, the general
partner of the Partnership, since April 1, 2000. Mr. Weinberg joined
Centex in 1978 and held positions of Centex Homes Division President
from 1984 to 1988 and Centex Homes Executive Vice President from 1988
until 1995. In 1995 Mr. Weinberg was appointed Chairman and Chief
Executive Officer for Centex HomeTeam Services, a Centex subsidiary,
where he served until his appointment as President of both Holding and
Development.
(2) Mr. Low has been Managing Director of Donaldson, Lufkin & Jenrette
Securities Corporation since February 1988. Mr. Low is also a director
of Holding, Co Star Group, Inc., The Musicland Group, Inc., and St.
Laurent Paperboard, Inc. Mr. Low was elected as a director of
Development as of June 1, 1987.
(3) Mr. Sherer has been President of David M. Sherer Associates, Inc., a
commercial real estate, development, investment, and brokerage firm,
for 24 years. Mr. Sherer is also a director of Holding. Mr. Sherer was
elected as a director of Development as of June 1, 1987.
(4) Mr. Decker is an employee of a subsidiary of Centex and was President
and CEO of Holding and Development, the general partner of CDC, from
April 1, 1998 until his resignation on March 31, 2000. Mr. Decker has
been Director of both Holding and Development effective June 10, 1998.
Mr. Decker has also been a director and officer of various Centex
subsidiaries engaged in real estate development since July 1996. Prior
thereto, Mr. Decker was a partner with Dallas-based Trammell Crow
Company, a commercial real estate development firm, for 15 years, and
served as Principal from 1990 until 1995. From 1995 until July 1996,
Mr. Decker operated Decker & Company, a Phoenix, Arizona-based real
estate development company.
(5) Mr. West has been Chairman of the Board of both Holding and Development
since April 1, 2000, and a director of both Holding and Development
since October 1999. Mr. West has served as Executive Vice President and
General Counsel of Healthcare Realty Trust Incorporated, a real estate
investment
108
<PAGE> 110
trust listed on the New York Stock Exchange, since May 1994. From 1992
to 1994, Mr. West was a Managing Director of Geary, Porter & West,
P.C., a Dallas-based law firm.
(6) Ms. Pinson is an employee of a subsidiary of Centex and serves as Vice
President, Treasurer, Controller and Assistant Secretary of Holding,
Development, and various Centex subsidiaries engaged in real estate
development. Ms. Pinson joined Vista Properties, Inc. (now Centex Real
Estate Corporation) in March 1993 and was elected to her present
positions with Holding and Development as of July 23, 1996.
All directors are elected annually by the stockholders to serve until
the next annual meeting of stockholders and until their successors have been
elected and qualified, subject to removal by a vote of the holders of not less
than two-thirds of the outstanding shares of the common stock, par value $1.00
per share, of Development. All executive officers of Development are elected
annually by the Board of Directors to serve until the next annual meeting of
the Board of Directors or until their successors have been duly elected and
qualified. There are no family relationships among or between Development's
directors or executive officers.
The current executive officers of Development are employees of one of
the subsidiaries of Centex, and it is presently anticipated that this
arrangement will continue. See "Item 11. Executive Compensation."
MANAGEMENT AGREEMENT
All services (other than executive management decision-making)
necessary to operate the Partnership's business are provided by Holding
pursuant to a management agreement (the "Management Agreement"). Under the
Management Agreement, Holding maintains all necessary books and records, and
provides all additional accounting and clerical services that Development may
deem necessary. Holding's responsibilities related to real estate management
also include ensuring that the Partnership's properties are operated, managed
and maintained in full compliance with all relevant laws and regulations, that
all real property and any improvements thereon are maintained and repaired,
that all income produced by the Partnership's properties is collected and that
any development on any property is done in an efficient manner. Because Holding
currently does not have any employees, it contracts with certain Centex
subsidiaries to provide such services to the Partnership.
Holding is entitled to reimbursement from the Partnership for all
reasonable costs and expenses incurred and paid by Holding in connection with
the performance of its duties and obligations under the Management Agreement,
plus a $25,000 quarterly managerial fee. During fiscal 2000, Holding received
$583,000 from the Partnership for its services.
The Management Agreement also provides that Holding will provide,
consistent with the Plan, pre- development and development services on behalf
of the Partnership, and the Management Agreement specifically provides that
Holding is delegated full authority to carry out and perform on behalf of the
Partnership all aspects of the Plan.
The term of the Management Agreement is subject to automatic renewal
for successive one-year terms unless either party elects to terminate the
Management Agreement upon at least 30 days written notice prior to December 31
of any year. However, it may not be terminated by the Partnership (other than
in the event of a breach by Holding constituting gross negligence or willful or
wanton misconduct) prior to the latest of the complete detachment of the
Stockholder Warrants from Centex Common Stock, Payout or the payment in full of
the Holding Note.
109
<PAGE> 111
From time to time, Holding delegates the performance of certain of its
responsibilities to Centex Service Company and other Centex subsidiaries, upon
terms and conditions to be determined. These responsibilities may include
enhancement of properties owned or controlled by the Partnership, for which
reasonable additional compensation may be paid by the Partnership to Holding
pursuant to terms to be negotiated between them. In turn, some or all of such
additional compensation may be paid by Holding to Centex Service Company or
other Centex subsidiaries.
ITEM 11. EXECUTIVE COMPENSATION
Holding and the Partnership
The information called for by this Item 11 with respect to Holding and
the Partnership is incorporated herein by reference to the information included
and referenced under the caption "Executive Compensation" in the 2000 Holding
Proxy Statement.
With the exception of Fairclough, the Partnership does not have any
directors, officers or employees, and is managed by its sole general partner,
Development. Except for the allocations of profit and loss and distributions of
cash and other property to which Development is entitled under the Partnership
Agreement, and except for the right to be reimbursed for certain expenses,
Development does not receive any compensation from the Partnership with respect
to its duties and obligations as general partner of the Partnership. As general
partner, Development is entitled to be allocated certain items of income and
loss of the Partnership and to receive certain distributions of cash from the
Partnership depending upon the level of income and cash available for
distribution and whether Payout has occurred. The terms and conditions upon
which Development will be allocated items of income and loss and receive
distributions are set forth in the Partnership Agreement. For a summary of
these rights and benefits, see Note (K) of the Notes to the Holding/Partnership
Combining Financial Statements included on pages 100-101 of this Report.
The directors and executive officers of Development perform all
executive management functions for the Partnership. See "Item 10. Directors and
Executive Officers of the Registrants." Services required by the Partnership in
its operations are also provided pursuant to the Management Agreement with
Holding pursuant to which Holding operates, manages and develops the properties
of the Partnership for and on behalf of the Partnership. See "Item 10.
Directors and Executive Officers of the Registrants--Management Agreement." The
executive officers of Development did not receive any remuneration from
Development or the Partnership for the year ended March 31, 2000. Directors of
Development who are neither officers nor employees of Development, Centex or
Centex's subsidiaries received compensation from Development in the form of
directors' and committee members' fees. During fiscal 2000, each executive
officer of Development received remuneration from Centex or one of its
subsidiaries in his capacity as a director, officer or employee thereof. None
of the directors or executive officers of Development received any additional
compensation from Centex or any of its subsidiaries for services rendered on
behalf of Development or the Partnership during fiscal 2000.
During fiscal 2000, Richard C. Decker, Chairman and President, until
his resignation from these positions effective March 31, 2000, and Kimberly A.
Pinson, Vice President, Treasurer, Controller and Assistant Secretary of
Development, both of whom are employees of subsidiaries of Centex, have devoted
a majority of their time and attention to the management of Development and
Holding. Mr. Decker and Ms. Pinson provided such services to Development on
behalf of and in their capacities as officers of Holding pursuant to the
Management Agreement. Each current executive officer of Development continues
to receive remuneration from Centex or one of its subsidiaries in his capacity
as an officer or employee thereof and is not compensated by Development or the
Partnership.
110
<PAGE> 112
The directors of Development, who also hold the same directorships in
Holding and are neither officers nor employees of Development, Centex or
Centex's subsidiaries, each receive directors' fees annually in their
capacities as directors of Development ($12,500) and Holding ($12,500). Each
director who is neither an officer nor an employee of Development, Centex or a
subsidiary of Centex, also receives $1,500 per meeting for each combined board
meeting and $1,000 per committee meeting attended of Development and Holding.
During fiscal 2000, board meeting fees of $7,500 for Development and $11,000
for Holding were paid to each director eligible for payment. Mr. West, who was
appointed to the board in October 1999, received meeting fees of $4,000 for
Holding. In addition, Holding reimburses these directors for the reasonable
expenses incurred in attending directors' and committee meetings.
111
<PAGE> 113
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Holding
The information called for by this Item 12 with respect to Holding is
incorporated herein by reference to the information included and referenced
under the caption "Security Ownership of Management and Certain Beneficial
Owners" in the 2000 Holding Proxy Statement.
(b) The Partnership
The following table sets forth certain information with respect to the
ownership of the equity securities of the Partnership as of May 19, 2000 by
Development, the directors of Development, individually itemized, all directors
and executive officers of Development as a group, and any person known to the
Partnership to be the beneficial owner of more than 5% of any class of the
Partnership's equity securities. Except as otherwise indicated, all securities
are owned directly, and the beneficial owner of such securities has the sole
voting and investment power with respect thereto.
<TABLE>
<CAPTION>
NUMBER OF
UNITS
NAME OF OR WARRANTS PERCENT
TITLE OF CLASS* BENEFICIAL OWNER** OWNED OF CLASS
--------------- ------------------ ----------- --------
<S> <C> <C> <C>
General Partner Interest (1) 3333 Development Corporation ........................ All 100%
2728 N. Harwood
Dallas, Texas 75201
Class A Units (2) Centex Homes ........................................ 32,260.085 100%
2728 N. Harwood
Dallas, Texas 75201
Stockholder Warrants (3) 3333 Development Corporation ........................ -- ***
Richard C. Decker (4)................................ -- ***
Josiah O. Low, III................................... -- ***
David M. Sherer...................................... -- ***
Stephen M. Weinberg (4).............................. 1 ***
Roger O. West ....................................... -- ***
All directors and executive officers of
Development as a group (5 persons) (4)............... 1 ***
FMR Corp. (5)........................................ 71 7.92%
82 Devonshire Street
Boston, Massachusetts 02109
Sanford C. Bernstein & Co., Inc.(6).................. 53 5.87%
767 Fifth Avenue
New York, New York 10153
</TABLE>
112
<PAGE> 114
<TABLE>
<S> <C> <C> <C>
Centex Class B Unit Centex Corporation................................... 100 100%
Warrants (7) 2728 N. Harwood
Dallas, Texas 75201
Class B Units (8) Centex Homes (9)..................................... 250 20%
2728 N. Harwood
Dallas, Texas 75201
Centex Corporation................................... 100 8%
2728 N. Harwood
Dallas, Texas 75201
FMR Corp. (10)....................................... 71 5.68%
82 Devonshire Street
Boston, Massachusetts 02109
Class C Units (11) Centex Homes ........................................ 35,081.559 100%
2728 N. Harwood
Dallas, Texas 75201
</TABLE>
-------------------
* Under the terms of the Partnership Agreement, the Partnership is
managed by a sole corporate general partner and none of the present
classes of the Partnership's securities are "voting securities" within
the meaning of the rules and regulations of the Commission promulgated
pursuant to the Exchange Act. Nonetheless, information with respect to
each class of the Partnership's equity securities has been set forth
in accordance with such rules and regulations.
** The address of any person who is the beneficial owner of more than
five percent of a class of the Partnership's securities is also
included.
*** Less than 1%.
(1) In connection with the formation of the Partnership, Development made
a capital contribution to the Partnership of $767,182, in exchange for
Development's general partner interest in the Partnership. As general
partner, Development is entitled to receive allocations of income and
loss and distributions of property from the Partnership.
(2) The Class A Units were issued to the Original Limited Partners in
exchange for the Original Properties. Record title to the Class A
Units presently is held by Centex Homes. See "Item 1.
Business--General Development of Business." As of the date or dates
when the Stockholder Warrants are deemed to have been exercised, the
Class A Units and Class C Units will be automatically converted
collectively into (i) a number of Class B Units equal to 20% of the
total number of Class B Units that would be outstanding after
conversion based on the actual exercise of the Stockholder Warrants
and the assumed exercise of all the then exercisable Centex Class B
Unit Warrants (see footnote (3)) and (ii) a like number of Class A
Units and Class C Units. The Class A Units and Class C Units will be
automatically canceled upon Payout and the exercise and/or expiration
of all of the Stockholder Warrants and the Centex Class B Unit
Warrants.
(3) The Nominee holds record title to the Stockholder Warrants, which are
exercisable for Class B Units, for the benefit of Centex Stockholders
pursuant to the Nominee Agreement. See "Item 5. Market for Registrant's
Common Equity and Related Stockholder Matters." However, the Nominee
has no power to vote the Class B Units issuable upon exercise of the
Stockholder
113
<PAGE> 115
Warrants or to direct the investment of the Stockholder Warrants or
such Class B Units. Beneficial ownership of the Stockholder Warrants
is, by virtue of the Nominee arrangement, indirect and undivided. The
number of Stockholder Warrants listed as beneficially owned has been
rounded to the nearest whole warrant. The Class B Units issuable upon
exercise of the Stockholder Warrants have not been shown as
"beneficially owned" under the rules and regulations of the Commission
promulgated pursuant to the Exchange Act because the beneficial owners
of the Stockholder Warrants have no present right to exercise the
Stockholder Warrants and acquire Class B Units.
(4) Shares of Centex Common Stock (and therefore a beneficial interest in
Stockholder Warrants) covered by stock options that are outstanding
under the Centex Corporation Amended and Restated 1987 Stock Option
Plan and the Second Amended and Restated 1998 Centex Corporation
Employee Non-Qualified Stock Option Plan and exercisable on May 19,
2000 or within 60 days thereafter are included as "beneficially owned"
pursuant to the rules and regulations of the SEC. Amounts include the
following shares of Centex Common Stock (and therefore a beneficial
interest in the following Stockholder Warrants) that may be acquired
upon exercise of such stock options: Mr. Decker - 27,400 shares (and
therefore a beneficial interest in .42 Stockholder Warrants); Mr.
Weinberg - 34,000 shares (and therefore a beneficial interest in .52
Stockholder Warrants); and all directors and executive officers of
Development as a group (5 persons) - 61,400 shares (and therefore a
beneficial interest in .94 Stockholder Warrants). In addition, this
table includes shares of Centex Common Stock (and therefore a
beneficial interest in Stockholder Warrants) that may be beneficially
owned as of March 31, 2000 pursuant to the Centex Common Stock Fund of
the Profit Sharing and Retirement Plan of Centex Corporation, a
defined contribution plan, as follows: Mr. Weinberg - 3,373 shares
(and therefore a beneficial interest in .05 Stockholder Warrants); and
all directors and executive officers of Development as a group (5
persons) - 3,373 shares (and therefore a beneficial interest in .05
Stockholder Warrants).
(5) Based solely upon information contained in the Schedule 13G/A
(Amendment No. 15) of FMR Corp. filed with the SEC on February 28,
2000 with respect to Centex Common Stock owned as of February 23, 2000
(the "FMR 13G"). According to the FMR 13G, such number includes
849,645 shares (and therefore a beneficial interest in 13 Stockholder
Warrants) over which FMR Corp. had the sole power to vote or direct
the vote and 4,654,595 shares (and therefore a beneficial interest in
71.22 Stockholder Warrants) over which FMR Corp. had sole dispositive
power.
(6) Based solely upon information contained in the Schedule 13G of Sanford
C. Bernstein & Co. ("Bernstein") filed with the SEC on February 8,
2000 with respect to Centex Common Stock owned as of December 31, 1999
(the "Bernstein 13G"). According to the Bernstein 13G, such number
includes 1,306,775 shares (and therefore a beneficial interest in 20
Stockholder Warrants) over which Bernstein had sole voting or
dispositive power, 416,340 shares (and therefore a beneficial interest
in 6.37 Stockholder Warrants) over which Bernstein had shared voting
power and 3,449,075 shares (and therefore a beneficial interest in
52.78 Stockholder Warrants) over which Bernstein had sole dispositive
power. According to the Bernstein 13G, with respect to the 416,340
shares (and therefore a beneficial interest in 6.37 Stockholder
Warrants) over which Bernstein had shared voting power, Bernstein's
clients have appointed an independent voting agent which has
instructions to vote such shares in the same manner as Bernstein.
(7) On November 30, 1987, Centex acquired from the Partnership 100
warrants (the "Centex Class B Unit Warrants") to purchase a like
number of Class B Units, subject to adjustment, pursuant to an
agreement for purchase of warrants. The Centex Class B Unit Warrants
are generally in the same form as, and contain the same terms as, the
Stockholder Warrants, except for the manner in which
114
<PAGE> 116
they may be subdivided (and the corresponding exercise price) and the
applicable exercise period. See Note (K) of the Notes to the
Holding/Partnership Combining Financial Statements included on pages
100-101 of this Report.
(8) Presently, there are no Class B Units issued or outstanding. Class B
Units that may be acquired upon the exercise of (i) the Stockholder
Warrants and (ii) the Centex Class B Unit Warrants, and the Class B
Units that may be acquired upon conversion of outstanding Class A
Units and Class C Units as of the date of the exercise of the
Stockholder Warrants, which date Centex may indirectly determine by
virtue of its ability, in its sole and absolute discretion, to
determine the date of detachment of the Stockholder Warrants from
Centex Common Stock, are included as "beneficially owned" pursuant to
the rules and regulations of the SEC promulgated pursuant to the
Exchange Act. See footnotes (2), (3) and (11). The number of Class B
Units and the percentage of class listed assume that the Stockholder
Warrants and the Centex Class B Unit Warrants have been exercised in
full for Class B Units but that no subdivision of any of the warrants
has occurred; however, both the Stockholder Warrants and the Centex
Class B Unit Warrants may be subdivided or combined and any such
subdivision or combination would necessarily change the number of
Class B Units beneficially owned and the percent of class represented
thereby.
(9) When issued, Centex Homes, as the owner of all of the Class A Units
and Class C Units, will hold record title to 250 Class B Units through
the conversion features of the Class A Units and the Class C Units.
See footnotes (2) and (11).
(10) According to the FMR 13G, such number includes 849,645 shares of
Centex Common Stock (and therefore a beneficial interest in 13 Class B
Units) over which FMR Corp. had the sole power to vote or direct the
vote and 4,654,595 shares of Centex Common Stock (and therefore a
beneficial interest in 71 Class B Units) over which FMR Corp. had sole
dispositive power.
(11) The Class C Units were issued in exchange for assets acquired by the
Partnership from Centex Homes. See "Item 1. Business--General
Development of Business." As of the date or dates when the Stockholder
Warrants are deemed to have been exercised, the Class A Units and
Class C Units will be automatically converted collectively into (i) a
number of Class B Units equal to 20% of the total number of Class B
Units that would be outstanding after conversion based on the actual
exercise of the Stockholder Warrants and the assumed exercise of all
the then exercisable Centex Class B Unit Warrants (see footnote (3))
and (ii) a like number of Class A Units and Class C Units. The Class A
Units and Class C Units will be automatically canceled upon Payout and
the exercise and/or expiration of all of the Stockholder Warrants and
the Centex Class B Unit Warrants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Holding
The information called for in Item 13 with respect to Holding is
incorporated herein by reference to the information included under the caption
"Certain Transactions" in the 2000 Holding Proxy Statement.
(b) The Partnership
Holding entered into the Services Agreement in May 1987 with Centex
Service Company, whereby they provide certain tax, accounting and other services
for Holding at a fee of $2,500 per month. In April
115
<PAGE> 117
1998, the Services Agreement was amended to also include certain real estate
development and management services and the related fee increased to $30,000
per month. Service fees of $360,000 were paid pursuant to this agreement for
fiscal 2000.
The Partnership has entered into an agreement with Holding to provide
management services to the Partnership in connection with the development,
operation and maintenance of the Partnership property and other administrative
services. Management fees and reimbursable costs totaling $583,000 were
incurred under this agreement during fiscal 2000.
In connection with Holding's acquisition of additional shares of
common stock of Development in 1987, Holding borrowed $7,700,000 from Centex
pursuant to a secured promissory note (the "Holding Note"). The Holding Note,
which had a fluctuating balance, bore interest, payable quarterly, at the prime
rate of interest of NationsBank, N.A. ("NationsBank") plus 1%. On May 29, 1998,
the outstanding principal balance of the Holding Note was repaid. The Holding
Note was secured by a pledge of all the issued and outstanding shares of
Development, and such pledge has been terminated. There was interest expense of
$62,000 related to the Holding Note for the year ended March 31, 1999.
In 1987, Development advanced $7,700,000 to a wholly-owned subsidiary
of Centex pursuant to an unsecured note and related loan agreement. The note
bore interest, payable quarterly, at the prime rate of interest of NationsBank
plus 7/8%. On May 29, 1998, the outstanding principal balance on the note was
repaid. Fiscal 1999 interest income on the note totaled $116,000.
In fiscal 2000, the Partnership sold to Centex Homes certain tracts of
land for $5,373,000. Centex Homes has agreements to purchase an additional 103
lots from the Partnership.
During fiscal 1998, the Partnership Agreement governing the
Partnership was amended to allow for the issuance of Class C Units, to be
issued in exchange for assets acquired from a limited partner or from an entity
who is to be admitted as a limited partner. During fiscal 2000, the Partnership
acquired assets valued at $8,095,000 in exchange for 8,095 Class C Units.
In April 1998, a 49% owned subsidiary of the Partnership purchased,
for $3.1 million, the real estate development properties of an indirect
subsidiary of Centex Real Estate Corporation. In connection with the
transaction, the Partnership's subsidiary could borrow up to $500,000 on a
revolving basis from Centex Corporation.
The Partnership, through its operating subsidiaries, executed
contracts with certain of Centex's construction subsidiaries totaling $14.9
million in fiscal 2000 and $43.2 million in fiscal 1999 for the construction of
multi-family apartments and two office buildings. During fiscal 2000, $23.5
million was paid to Centex's construction subsidiaries pursuant to the
contracts. Additionally, during fiscal 2000, in connection with third-party
construction and permanent loans made to the Partnership's operating
subsidiaries during the year, the Partnership paid an aggregate of $186,000 in
title insurance premiums and escrow fees to Centex title insurance
subsidiaries.
Centex has made limited guarantees relating to a number of the
Partnership's construction and permanent project loans. At March 31, 2000,
these guarantees totaled $3.4 million and are payable only in the event of
default by the Partnership under its obligations as a limited guarantor on
these loans.
116
<PAGE> 118
Fairclough Acquisition
In connection with the Fairclough acquisition certain obligations of
the purchaser, a wholly-owned subsidiary of the Partnership, were guaranteed by
the Partnership, including payment under two notes for a major portion of the
$219 million purchase price, and payment of the dividends due to the seller
from April 1, 1999 through March 31, 2001. Centex Homes, the sole limited
partner of the Partnership, has agreed that if the Partnership does not have
sufficient funds to satisfy its obligations (excluding any payment under the
negotiable note), Centex Homes will make such capital contributions to the
Partnership as are necessary to enable the Partnership to satisfy such
obligations (again excluding any payment under the negotiable note).
In addition, Centex agreed that if Centex Homes does not perform its
obligations, Centex will take appropriate action to cause the performance of
those obligations.
Payment of the negotiable note is primarily secured by a letter of
credit issued by a United Kingdom bank. In order to obtain the letter of
credit, the Partnership guaranteed payment of the principal amount when due to
the bank. Centex also provided an assurance to the bank that if the Partnership
does not meet its obligations, Centex will cause the Partnership to have
sufficient funds to perform its obligations, primarily through Centex's
purchase of limited partnership units in the Partnership.
117
<PAGE> 119
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Exhibits
(A) Holding
The information on exhibits required by this Item 14 is set forth in
the Holding Index to Exhibits appearing on pages 124-125 of this Report.
(B) The Partnership
The information on exhibits required by this Item 14 is set forth in
the Partnership Index to Exhibits appearing on pages 126-130 of this Report.
(b) Reports on Form 8-K:
Current Report on Form 8-K of Centex Development Company, L.P.
dated April 29,1999.
Current Report on Form 8-K/A of Centex Development Company, L.P.
dated June 29,1999.
118
<PAGE> 120
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
3333 HOLDING CORPORATION
-------------------------------------------------
Registrant
May 30, 2000 By: /s/ STEPHEN M. WEINBERG
-------------------------------------------------
Stephen M. Weinberg,
Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrants in the capacities and on the dates indicated.
May 30, 2000 /s/ STEPHEN M. WEINBERG
-------------------------------------------------
Stephen M. Weinberg,
Director and President
(principal executive officer)
May 30, 2000 /s/ KIMBERLY A. PINSON
-------------------------------------------------
Kimberly A. Pinson,
Vice President, Treasurer, Controller
and Assistant Secretary
(principal financial officer
and principal accounting officer)
Directors: Richard C. Decker, Josiah O. Low, III,
David M. Sherer, Stephen M. Weinberg and
Roger O. West
May 30, 2000 By: /s/ STEPHEN M. WEINBERG
-------------------------------------------------
Stephen M. Weinberg,
Individually and as
Attorney-in-Fact*
-------------
* Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.
119
<PAGE> 121
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, 3333 Development Corporation, as general partner of, and
on behalf of, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CENTEX DEVELOPMENT COMPANY, L.P.
---------------------------------------------
Registrant
By: 3333 Development Corporation, General Partner
May 30, 2000 By: /s/ STEPHEN M. WEINBERG
---------------------------------------------
Stephen M. Weinberg,
Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of 3333
Development Corporation, as general partner of, and on behalf of, the
registrant in the capacities and on the dates indicated.
May 30, 2000 By: /s/ STEPHEN M. WEINBERG
---------------------------------------------
Stephen M. Weinberg,
Director and President
(principal executive officer)
May 30, 2000 /s/ KIMBERLY A. PINSON
---------------------------------------------
Kimberly A. Pinson,
Vice President, Treasurer, Controller
and Assistant Secretary
(principal financial officer
and principal accounting officer)
Directors: Richard C. Decker, Josiah O. Low, III,
David M. Sherer, Stephen M. Weinberg and
Roger O. West
May 30, 2000 By: /s/ STEPHEN M. WEINBERG
---------------------------------------------
Stephen M. Weinberg,
Individually and as
Attorney-in-Fact*
--------------
* Pursuant to authority granted by powers of attorney, copies of which are
filed herewith.
120
<PAGE> 122
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
3.1 Restated Articles of Incorporation of Exhibit 4.1 to Joint Registration
Centex. Statement of Centex Corporation
("Centex"), 3333 Holding Corporation
("Holding") and Centex Development
Company, L.P. (The "Partnership")
on Form S-8 filed with the Securities
and Exchange Commission (the
"Commission") on June 1, 1998 (the
"1998 Form S-8")
3.2 Amended and Restated By-laws of Exhibit 3.2 to Centex 1999 Form 10-K/A
Centex.
4.1 Specimen Centex common stock Exhibit 4.3 to Joint Registration
certificate (with tandem trading Statement of Centex, Holding and the
legend and Rights Agreement Partnership, on Form S-8 filed with the
legend). Commission on June 2, 1997 (the "1997
Form S-8")
4.2 Nominee Agreement, dated Exhibit 4.2 to Centex 1993 Form 10-K
November 30, 1987, by and Between
Centex, Holding and the Partnership,
and Chemical Bank, as successor
nominee.
4.3 Agreement for Purchase of Warrants, Exhibit 4.3 to Centex 1993 Form 10-K
dated as of November 30, 1987, by
and between Holding and Centex.
4.4 Rights Agreement, dated as of Exhibit 1 to Form 8-A Registration
October 2, 1996, between Centex and Statement of Centex dated October 2,
ChaseMellon Shareholder Services, 1996
LLC, as rights agent.
4.5 Instruments with respect to long-term Not Applicable
debt, which do not exceed 10% of the
total assets of Centex and its
subsidiaries, have not been filed.
Centex agrees to furnish a copy of
such instruments to the Commission
upon request.
</TABLE>
121
<PAGE> 123
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
4.6 Amendment No. 1 to Second Exhibit 4.6 to Centex 1999 Form 10-K/A
Amended and Restated Agreement of
Limited Partnership of the
Partnership.
10.1 Centex Corporation Stock Option Exhibit 10.1 to Centex 1993 Form 10-K
Plan, as amended.*
10.2 Centex Corporation Amended and Exhibit 10.1 to the Centex Form 10-Q
Restated 1987 Stock Option Plan.* for the quarter Ended December 31, 1999
10.3 Second Amended and Restated 1998 Exhibit 4 to Registration Statement of
Centex Corporation Employee Non- Centex on Form S-8 dated August 27, 1999
Qualified Stock Option Plan.*
10.4 Credit Agreement, dated as of May 1, Exhibit 10.2 to Amendment No. 3, dated
1987, by and between Holding and November 24, 1987, to Registration
Centex and related (i) Promissory Statement of Holding on Form 10 (File
Note, dated May 1, 1987, executed No. 1-9624), dated July 12, 1987
by Holding and payable to the order
of Centex in the principal amount of
$7,700,000 and (ii) Pledge and
Security Agreement, dated as of May
1, 1987, executed by Holding in favor
of Centex.
10.5 Executive Employment Agreement, Exhibit 10.6 to Centex 1993 Form 10-K
dated as of September 17, 1990,
between Centex and Laurence E.
Hirsch.*
10.6 Executive Employment Agreement, Exhibit 10.7 to Centex 1993 Form 10-K
Dated as of January 18, 1991,
between Centex and David W.
Quinn.*
10.7 Termination of Employment and Exhibit 10.7 to Centex 1998 Form 10-K
Consulting Agreement, dated as of
December 4, 1997, between Centex
and William J Gillilan III.*
</TABLE>
122
<PAGE> 124
INDEX TO EXHIBITS
CENTEX CORPORATION
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
10.8 Centex Corporation $2,100,000 Filed herewith.
Convertible Subordinated Note issued
to Laurence E. Hirsch on May 28,
1999.*
10.9 Amended and Restated Supplemental Filed herewith.
Executive Retirement Plan of Centex
Corporation.*
10.10 Centex Corporation Deferred Exhibit 4 to Registration Statement on
Compensation Plan. Form S-8 dated May 26, 2000
21.1 List of Subsidiaries of Centex. Filed herewith.
23 Consent of Independent Public Filed herewith.
Accountants.
24.1 Powers of Attorney. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
</TABLE>
-----------------
* Management contract or compensatory plan or arrangement
123
<PAGE> 125
INDEX TO EXHIBITS
3333 HOLDING CORPORATION
AND SUBSIDIARY
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
3.1 Articles of Incorporation of Holding. Exhibit 3.2a to Amendment No. 1, dated
October 14, 1987 ("Amendment No.
1"), to the Registration Statement of
Holding on Form 10 (File No. 1-9624),
dated July 12, 1987 (the "Holding
Registration Statement")
3.2 By-laws of Holding, as amended. Exhibit 3.2 to Annual Report on Form
10-K of Holding (File No. 1-9624) for
fiscal year ended March 31, 1993 (the
"Holding Form 10-K")
4.1 Specimen Holding common stock Exhibit 4.1 to Amendment No. 1
certificate.
4.2 Specimen Centex common stock Exhibit 4.3 to 1997 Form S-8
certificate (with tandem trading
legend and Rights Agreement
legend).
4.3 Nominee Agreement, dated as of Exhibit 4.3 to Holding Form 10-K
November 30, 1987, by and between
Centex, Holding and the Partnership,
and Chemical Bank, as successor
nominee.
4.4 Agreement for Purchase of Warrants, Exhibit 4.4 to Holding Form 10-K
dated as of November 30, 1987, by
and between Holding and Centex.
10.1 Services Agreement, dated as of May Exhibit 10.1 to Amendment No. 3, Dated
5, 1987, by and between Holding and November 24, 1987 ("Amendment
Centex Service Company. No. 3"), to the Holding Registration
Statement
</TABLE>
124
<PAGE> 126
INDEX TO EXHIBITS
3333 HOLDING CORPORATION
AND SUBSIDIARY--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
10.2 Credit Agreement, dated as of May 1, Exhibit 10.2 to Amendment No. 3
1987, by and between Holding and
Centex and related (i) Promissory Note,
dated May 1, 1987, executed by Holding and
payable to the order of Centex in the
principal amount of $7,700,000 and (ii)
Pledge and Security Agreement, dated as of
May 1, 1987, executed by Holding in favor
of Centex.
10.3 Credit Agreement, dated as of May 1, Exhibit 10.3 to the Holding
1987, by and between 3333 Development Registration Statement
Corporation ("Development") and Centex
Real Estate Corporation ("Real Estate") and
Related Promissory Note, dated May 1, 1987,
executed by Centex International, Inc. (as
assignee), payable to the order of Development
in the principal amount of $7,700,000.
10.4 Management Agreement by and between Holding Exhibit 10.4 to the Holding 1998 10-K
and the Partnership dated as of April 1, 1994.
10.5 Amendment No.1 to Management Agreement by Exhibit 10.5 to the Holding 1998 10-K
and between the Partnership and Holding Dated
as of October 1, 1996.
21.2 Subsidiaries of Holding. Filed herewith.
23 Consent of Independent Public Exhibit 23 of Centex Exhibits filed
Accountants. herewith
24.2 Powers of Attorney. Filed herewith.
27.2 Financial Data Schedule. Filed herewith.
</TABLE>
125
<PAGE> 127
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
2.1 Option Agreement, dated as of Exhibit 2.1 to Centex 1994 Form 10-K
November 3, 1988, by and between the
Partnership and Estrella Properties, Ltd.
2.2 Additional Interest Agreement, dated Exhibit 2.2 to Centex 1994 Form 10-K
March 30, 1989, by and between the
Partnership and Westinghouse Credit
Corporation.
2.3 Construction Loan Agreement, dated Exhibit 2.3 to Centex 1994 Form 10-K
March 30, 1989, by and among Westinghouse
Credit Corporation and the Partnership.
2.4 Forster Ranch Development Exhibit 2.4 to Centex 1994 Form 10-K
Agreement, dated March 31, 1989, by and
between the City of San Clemente, California
and the Partnership.
3.1 Articles of Incorporation, as Exhibit 3.2a to Amendment No. 1,
amended, of Development as dated October 14, 1987 (the
currently in effect. "Partnership Amendment No. 1"), to
the Registration Statement of the
Partnership on Form 10 (File No. 1-
9625), dated July 12, 1987 (the
"Partnership Registration Statement")
3.2 By-laws of Development, as Exhibit 3.2 to Annual Report on Form
amended. 10-K of the Partnership (File No. 1-
9625) for fiscal year ended March 31,
1993 (the "Partnership Form 10-K")
4.1 Certificates of Limited Partnership of Exhibit 4.1 to the Partnership
the Partnership. Registration Statement
4.2 Second Amended and Restated Exhibit 4.4 to 1998 Form S-8
Agreement of Limited Partnership of
the Partnership.
4.3 Specimen certificate for Class A Exhibit 4.3 to the Partnership
limited partnership units. Registration Statement
</TABLE>
126
<PAGE> 128
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
4.4 Specimen certificate for Class B Exhibit 4.4 to the Partnership
limited partnership units. Registration Statement
4.5 Specimen certificate for Class C Exhibit 4.7 to 1998 Form S-8
limited partnership units.
4.6 Warrant Agreement, dated as of Exhibit 4.5 to the Partnership Form
November 30, 1987, by and between 10-K
the Partnership and Centex.
4.7 Specimen warrant certificate. Exhibit 4.6 to the Partnership
Amendment No. 3
4.8 Specimen Centex common stock Exhibit 4.3 to 1997 Form S-8
certificate (with tandem trading legend
and Rights Agreement legend).
4.9 Nominee Agreement, dated as of Exhibit 4.8 to the Partnership
November 30, 1987, by and between Form 10-K
Centex, Holding and the Partnership,
and Chemical Bank, as successor
nominee.
4.10 Agreement for Purchase of Warrants, Exhibit 4.9 to the Partnership
dated as of November 30, 1987, by Form 10-K
and between the Partnership and
Centex.
4.11 Form of Operating Partnership Exhibit 4.11 to the Partnership
Agreement. Registration Statement
4.12 Instrument constituting Negotiable Exhibit 4.12 to the Holding Form 10-
Loan Notes 2001 dated April 15, 1999 Q for the quarter ended September 30,
made by CDC-UK. 1999
4.13 Instrument constituting Guaranteed Exhibit 4.13 to the Holding Form 10-
Unsecured Set Off Loan Notes 2001 Q for the quarter ended September 30,
dated April 15, 1999 made by 1999
CDC-UK.
</TABLE>
127
<PAGE> 129
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
10.1 Management Agreement, dated as of Exhibit 10.4 to the Holding 1998 10-K
April 1, 1994, by and between the
Partnership and Holding.
10.2 Amendment No. 1 to Management Exhibit 10.5 to the Holding 1998 10-K
Agreement, dated as of October 1,
1996, by and between the Partnership
and Holding.
10.3 Documents of Conveyance of Property Exhibit 10.2 to the Partnership
from Centex Land Corporation to the Amendment No. 1
Partnership.
10.4 Documents of Conveyance of Property Exhibit 10.3 to the Partnership
from Centex Homes Corporation to Registration Statement
the Partnership.
10.5 Documents of Conveyance of Property Exhibit 10.4 to the Partnership
from Fox & Jacobs, Inc. to the Registration Statement
Partnership.
10.6 Documents of Conveyance of Property Exhibit 10.5 to the Partnership
from Great Lakes Development Co., Registration Statement
Inc. to the Partnership.
10.7 Agreement, dated as of April 1, 1987, Exhibit 10.6 to the Partnership
by and among the Partnership, Real Registration Statement
Estate, Centex Homes Corporation
and Centex Land Company.
10.8 Agreement, dated as of April 1, 1987, Exhibit 10.7 to the Partnership
by and between the Partnership and Registration Statement
Centex Homes of New Jersey, Inc.
10.9 Waiver Agreement, dated as of July Exhibit 10.9 to Annual Report on
28, 1995, by and between the Form 10-K of the Partnership (File
Partnership, Real Estate and No. 1-9625) for the fiscal year ended
Development. March 31, 1996 (the "1996
Partnership 10-K")
</TABLE>
128
<PAGE> 130
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
10.10 Waiver Agreement, dated as of Exhibit 10.10 to the 1996 Partnership
September 13, 1995, but effective as 10-K
of July 1, 1995, by and between the
Partnership, Real Estate and Development.
10.11 Waiver Agreement, dated as of September 27, Exhibit 10.11 to the 1996 Partnership
1995, but effective as of July 1, 1995, by 10-K
and between the Partnership, Real Estate and
Development.
10.12 Waiver Agreement, dated as of December 31, Exhibit 10.12 to the 1996 Partnership
1995, by and between the Partnership, 10-K
Real Estate and Development.
10.13 Waiver Agreement, dated as of March 29, 1996, Exhibit 10.13 to the 1996 Partnership
by and between the Partnership, Real 10-K
Estate and Development.
10.14 Waiver Agreement, dated as of January 8, 1996, Exhibit 10.14 to the 1996 Partnership
but effective as of January 1, 1996, by 10-K
and between the Partnership, Real Estate and
Development.
10.15 Waiver Agreement, dated as of June 30, 1996, Exhibit 10.15 to the 1997 Partnership
by and between the Partnership, Real Estate 10-K
and Development.
10.16 Waiver Agreement, dated as of September 30, Exhibit 10.16 to the 1997 Partnership
1996, by and between the Partnership, 10-K
Centex Homes, 2728 Holding Corporation
("2728 Holding") and Development.
10.17 Waiver Agreement, dated as of March 31, Exhibit 10.17 to the 1997 Partnership
1997, by and between the Partnership, 10-K
Centex Homes, 2728 Holding and Development.
</TABLE>
129
<PAGE> 131
INDEX TO EXHIBITS
CENTEX DEVELOPMENT COMPANY, L.P.
AND SUBSIDIARIES--CONTINUED
<TABLE>
<CAPTION>
EXHIBIT FILED HEREWITH OR
NUMBER EXHIBIT INCORPORATED BY REFERENCE
------- ------- -------------------------
<S> <C> <C>
10.18 Share Purchase Agreement dated Exhibit 10.18 to the Holding Form
April 15, 1999 by among AMEC 8-K filed April 29, 1999
Plc, as Guarantor, AMEC Finance
Limited, as Seller, and Centex
Development Company UK Limited,
as Purchaser.
10.19 Irrevocable Letter of Credit dated Exhibit 10.19 to the Holding Form 10-Q
April 15, 1999 made by National for the quarter ended September 30,
Westminster Bank Plc to AMEC 1999
Finance Limited for certain
obligations of CDC-UK.
23 Consent of Independent Public Exhibit 23 of Centex Exhibits filed
Accountants. herewith
24.3 Powers of Attorney. Filed herewith.
27.3 Financial Data Schedule. Filed herewith.
99.1 Real Estate and Accumulated Filed herewith.
Depreciation - Schedule III
</TABLE>
130
