-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QmKD0Q77lF91/GbXEBjJMbY/PZz9mbITR04g1kkohZi4H1i+QZBV7/FKZx/fb41Q fkGDH+pIl6QAUjaqgnYT9A== /in/edgar/work/20000531/0000950134-00-005108/0000950134-00-005108.txt : 20000919 0000950134-00-005108.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950134-00-005108 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTEX CORP CENTRAL INDEX KEY: 0000018532 STANDARD INDUSTRIAL CLASSIFICATION: [1531 ] IRS NUMBER: 750778259 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-06776 FILM NUMBER: 646449 BUSINESS ADDRESS: STREET 1: P O BOX 199000 STREET 2: 2728 N HARWOOD CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149815000 MAIL ADDRESS: STREET 1: PO BOX 199000 STREET 2: 2728 N HARWOOD CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: CENTEX CONSTRUCTION CO INC DATE OF NAME CHANGE: 19681211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3333 HOLDING CORP CENTRAL INDEX KEY: 0000818762 STANDARD INDUSTRIAL CLASSIFICATION: [6500 ] IRS NUMBER: 752178860 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-09624 FILM NUMBER: 646450 BUSINESS ADDRESS: STREET 1: PO BOX 199000 STREET 2: 3100 MCKINNON STE 370 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2149816548 MAIL ADDRESS: STREET 1: PO BOX 19000 STREET 2: PO BOX 19000 CITY: DALLAS STATE: TX ZIP: 75219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTEX DEVELOPMENT CO LP CENTRAL INDEX KEY: 0000818764 STANDARD INDUSTRIAL CLASSIFICATION: [6500 ] IRS NUMBER: 752168471 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-09625 FILM NUMBER: 646451 BUSINESS ADDRESS: STREET 1: PO BOX 19000 STREET 2: 3100 MCKINNON STE 370 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2149816548 MAIL ADDRESS: STREET 1: PO BOX 19000 STREET 2: PO BOX 19000 CITY: DALLAS STATE: TX ZIP: 75219 10-K405 1 0001.txt FORM 10-K FOR FISCAL YEAR END MARCH 31, 2000 1 =============================================================================== 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
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH NAME OF EACH EXCHANGE ON WHICH EXCHANGE ON WHICH TITLE OF EACH CLASS REGISTERED TITLE OF EACH CLASS REGISTERED -------------------- ---------------- ------------------- ----------------- 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
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: 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
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. =============================================================================== 2 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. 1 3 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] 2 4 TABLE OF CONTENTS FORM 10-K
PAGE ---- 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
3 5 TABLE OF CONTENTS (CONTINUED)
PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES PART I PAGE ---- 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 ------------------ INDICES TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES.......................................................... 121 3333 HOLDING CORPORATION AND SUBSIDIARY...................................................... 124 CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES............................................ 126
4 6 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 5 7 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. 6 8 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. 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
7 9 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
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.
For the Years Ended March 31, ---------------------------------------------------------------- 2000 1999 1998 1997 1996 ------- ------- ------- ------- ------- 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 ======= ======= ======= ======= =======
8 10
For the Years Ended March 31, ----------------------------------------------------------------- 2000 1999 1998 1997 1996 ----- ----- ----- ----- ----- SALES (ORDERS) BACKLOG, AT THE END OF PERIOD (IN UNITS): 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 ----- ----- ----- ----- ----- 7,579 6,792 4,916 4,308 5,533 ===== ===== ===== ===== =====
For the Years Ended March 31, ----------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- 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 ------ ------ ------ ------ ------ 19,407 15,931 13,026 11,882 13,516 ====== ====== ====== ====== ======
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. 9 11 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. 10 12 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. 11 13 The land held, by state, at March 31, 2000 is set forth in the following table:
State Acres Zoning - ---------------- ------ ---------------------------------------- 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 =====
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. 12 14 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:
For the Years Ended March 31, ---------------------------------------------------------- 2000 1999 1998 1997 1996 ------ ------ ------ ------ ------ 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%
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, 13 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.
For the Years Ended March 31, ------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- LOANS 20,568 15,582 7,982 4,100 450 ORIGINATION VOLUME (IN BILLIONS) $ 1.3 $ 1.0 $ 0.5 $ 0.2 $.03
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 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 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 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 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 18 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 19 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, 20 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 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 24 EMPLOYEES The following table presents the breakdown of employees in each line of business as of March 31, 2000: Line of Business Employees ---------------- --------- 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 =======
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 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.
NAME AGE POSITIONS WITH CENTEX - --------------------------------------- ------ ---------------------------------------------------------------- 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)
24 26 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)
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS STOCK PRICES AND DIVIDENDS
------------------------------------------------------------------------------ YEAR ENDED MARCH 31, 2000 Year Ended March 31, 1999 ---------------------------------- ------------------------------------ PRICE Price -------------------- ---------------------- HIGH LOW DIVIDENDS High Low Dividends --------- -------- --------- ------ -------- --------- 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
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 27 ITEM 6. SELECTED FINANCIAL DATA SUMMARY OF SELECTED FINANCIAL DATA (Unaudited)
---------------------------------------------------------------------------- (Dollars in thousands, except per share data) For the Years Ended March 31, ---------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------ ------------ ------------ ------------ ------------ 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
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 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):
------------------------------------------------------------ For the Years Ended March 31, ------------------------------------------------------------ 2000 1999 ------------------------------------------------------------ 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%
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 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):
------------------------------------------------------------- For the Years Ended March 31, ------------------------------------------------------------- 2000 1999 ------------------------------------------------------------- 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
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):
------------------------------------- For the Years Ended March 31, ------------------------------------- 2000 1999 ------------------------------------- Revenues $ 30.9 $ 33.7 ============== ============== Operating Earnings $ 30.1 $ 29.4 ============== ==============
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 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):
------------------------------ For the Years Ended March 31, ------------------------------ 2000 1999 ------------------------------ 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 ========== ==========
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 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 32 CONSTRUCTION PRODUCTS The following summarizes Construction Products' results for the two-year period ended March 31, 2000 (dollars in millions):
------------------------------- For the Years Ended March 31, ------------------------------- 2000 1999 ------------------------------- 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 ========== ==========
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):
------------------------------ For the Years Ended March 31, ------------------------------ 2000 1999 ------------------------------ 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 ========== ==========
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 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):
---------------------------------------------------------------- For the Years Ended March 31, ---------------------------------------------------------------- 1999 1998 ---------------------------------------------------------------- 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%
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 34 The following summarizes Manufactured Homes' results for the two-year period ended March 31, 1999 (dollars in millions):
---------------------------------------------------------------------------- For the Years Ended March 31, ---------------------------------------------------------------------------- 1999 1998 ---------------------------------------------------------------------------- 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
INVESTMENT REAL ESTATE The following summarizes Investment Real Estate's results for the two-year period ended March 31, 1999 (dollars in millions):
-------------------------------------- For the Years Ended March 31, -------------------------------------- 1999 1998 -------------------------------------- Revenues $ 33.7 $ 25.4 =============== =============== Operating Earnings $ 29.4 $ 28.2 =============== ===============
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 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):
------------------------------ For the Years Ended March 31, ------------------------------ 1999 1998 ------------------------------ 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 ========== ==========
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 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):
------------------------------- For the Years Ended March 31, ------------------------------- 1999 1998 ------------------------------- 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 ========== ==========
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):
------------------------------- For the Years Ended March 31, ------------------------------- 1999 1998 ------------------------------- 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 ========== ==========
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 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):
------------------------------------------------ For the Years Ended March 31, ------------------------------------------------ 2000 1999 1998 ------------------------------------------------ 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 ============ ============ ============
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 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): 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 ============
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 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 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 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):
MATURITIES THROUGH MARCH 31, --------------------------------------------------------------------------- 2001 2002 2003 2004 2005 ------------ ------------ ------------ ------------ ------------ 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%
MATURITIES THROUGH MARCH 31, ------------ Thereafter Total Fair Value ------------ ------------ ------------ 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%
(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 42 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FINANCIAL INFORMATION 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
41 43 CENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED REVENUES AND OPERATING EARNINGS BY LINE OF BUSINESS (Dollars in thousands)
-------------------------------------------------------------------------------- For the Years Ended March 31, -------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------ ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============ ============
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 44 CENTEX CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED EARNINGS (Dollars in thousands, except per share data)
------------------------------------------ For the Years Ended March 31, ------------------------------------------ 2000 1999 1998 ------------------------------------------ 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 ============ ============ ============
See notes to consolidated financial statements. 43 45 CENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
---------------------------- Centex Corporation and Subsidiaries ---------------------------- March 31, ---------------------------- 2000 1999 ------------ ------------ 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 ============ ============
See notes to consolidated financial statements. 44 46 CENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
------------------------------------------------------------------------------- Centex Corporation Financial Services ----------------------------------- ---------------------------------- March 31, March 31, ----------------------------------- ---------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ $ 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 ============ ============ ============ ============
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 47 CENTEX CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (Dollars in thousands)
------------------------------------------------ For the Years Ended March 31, ------------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ 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 ============ ============ ============
See notes to consolidated financial statements. 46 48 CENTEX CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (Dollars in thousands)
------------------------------------------------------------------------------------------- Accumulated Capital In Other Preferred Common Excess Of Retained Comprehensive Stock Stock Par Value Earnings Loss Total ------------ ------------ ------------ ------------ ------------- ------------ 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 ============ ============ ============ ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 47 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:
----------------------------------------------- For the Years Ended March 31, ----------------------------------------------- 2000 1999 1998 ------------ ------------ ------------ 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 ============ ============ ============
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 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 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 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 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:
--------------------------------------------- For the Years Ended March 31, --------------------------------------------- 2000 1999 1998 --------- --------- --------- 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 ========= ========= =========
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 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:
----------------------------- March 31, ----------------------------- 2000 1999 --------- --------- 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 ========= =========
(D) INDEBTEDNESS SHORT-TERM DEBT Balances of short-term debt were:
---------------------------------------------------------------- March 31, ---------------------------------------------------------------- 2000 1999 ---------------------------- ---------------------------- CENTEX FINANCIAL Centex Financial CORPORATION SERVICES Corporation Services ----------- ---------- ----------- ---------- 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 ========== ==========
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 55 LONG-TERM DEBT Balances of long-term debt were:
------------------------ March 31, ------------------------ 2000 1999 -------- -------- 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 ======== ========
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 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 57 A summary of the activity of the three stock option plans is presented below:
--------------------------------------------------------------------------------- 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 ---------- --------- ---------- --------- ---------- --------- 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
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:
-------------------------------------------- ----------------------------- 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 - ------------------------ ----------- ------------- --------- ----------- --------- $ 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 ========= =========
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 58
------------------------------------------------- For the years ended March 31, ------------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- 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
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:
---------------------------------- For the Years Ended March 31, ---------------------------------- 2000 1999 1998 ---- ---- ---- 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
(F) INCOME TAXES The provision for income taxes includes the following components:
-------------------------------------------- For the Years Ended March 31, -------------------------------------------- 2000 1999 1998 --------- --------- --------- 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 ========= ========= =========
The effective tax rate is greater than the federal statutory rate of 35% due to the following items:
----------------------------------------------- For the Years Ended March 31, ----------------------------------------------- 2000 1999 1998 --------- --------- --------- 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%
57 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:
------------------------------------------ For the Years Ended March 31, ------------------------------------------ 2000 1999 1998 -------- -------- -------- 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 ======== ======== ========
Components of deferred income taxes are as follows:
------------------------ March 31, ------------------------ 2000 1999 -------- -------- 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 ======== ========
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 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 61 SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
---------------------------- March 31, ---------------------------- 2000 1999 ---------- ---------- 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 ========== ==========
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
-------------------------------------------------- For the Years Ended March 31, -------------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- 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 =========== =========== ===========
(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 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.
------------------------------------------ For the Years Ended March 31, ------------------------------------------ 2000 1999 1998 -------- -------- -------- (Dollars in millions) 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 ========= ========= =========
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 63 The following table sets forth financial information relating to the Manufactured Homes operations.
------------------------------------ For the Years Ended March 31, ------------------------------------ 2000 1999 1998 ------ ------ ------ (Dollars in millions) 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 ======= ======= =======
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.
------------------------------------ For the Years Ended March 31, ------------------------------------ 2000 1999 1998 ------ ------ ------ (Dollars in millions) 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
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 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.
------------------------------------------ For the Years Ended March 31, ------------------------------------------ 2000 1999 1998 -------- -------- -------- (Dollars in millions) 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 ======== ======== ========
(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.
------------------------------------ For the Years Ended March 31, ------------------------------------ 2000 1999 1998 ------ ------ ------ (Dollars in millions) 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 ======= ======= =======
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 65
------------------------------------------ For the Years Ended March 31, ------------------------------------------ 2000 1999 1998 -------- -------- -------- (Dollars in millions) 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 ========= ========= ========
*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.
------------------------------------ For the Years Ended March 31, ------------------------------------ 2000 1999 1998 ------ ------ ------ (Dollars in millions) 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 ====== ====== ======
(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 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:
--------------------------------------------------------------------- March 31, --------------------------------------------------------------------- 2000 1999 ------------------------------ ------------------------------ CARRYING FAIR Carrying Fair VALUE VALUE Value Value ---------- ------------ ---------- ------------ (Dollars in thousands) 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)
(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 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 68 QUARTERLY RESULTS (UNAUDITED) (Dollars in thousands, except per share data)
------------------------------ For the Years Ended March 31, ------------------------------ 2000 1999 ----------- ----------- 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
67 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"):
ITEM CAPTION IN THE 2000 PROXY STATEMENT ---- ----------------------------------- 10 Election of Directors 10 Section 16(a) Compliance 11 Executive Compensation 12 Security Ownership of Management and Certain Beneficial Owners 13 Certain Transactions
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 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 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 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 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 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:
Size State Product Type (Sq. Ft.) Percent by State ----- ------------ --------- ---------------- 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%
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 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:
Closings Sales Orders -------- ------------ Southern Homes Counties 161 -- Northern Homes Counties 353 137 North West/Yorkshire 728 122 Midlands 465 108 ----- --- 1,707 367 ===== ===
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 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 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. 76 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. 77 79 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."
NAME POSITION AGE - ---- -------- --- Stephen M. Weinberg............................. President (1) 52 Kimberly A. Pinson.............................. Vice President, Treasurer, Controller and 35 Assistant Secretary (2)
(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. 78 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. 79 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. 80 82 ITEM 6. SELECTED FINANCIAL DATA FINANCIAL HIGHLIGHTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE/UNIT DATA)
------------------------------------------------------------------------- For the Years Ended March 31, ------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- 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)
81 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):
----------------------------- For the Years Ended March 31, ----------------------------- 2000 1999 --------- ----------- 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 -- --------- -----------
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):
---------------------------- For the Years Ended March 31, ---------------------------- 2000 1999 -------- -------- 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 ======== ========
82 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):
------------------------------ For the Years Ended March 31, ------------------------------ 2000 1999 ------- ------- 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 ======= =======
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):
----------------------------- For the Years Ended March 31, ----------------------------- 2000 1999 -------- -------- Revenues $ 17,154 $ 342 Cost of Sales (17,057) -- General & Administrative Expenses (1,977) (1,814) -------- -------- Operating Loss $ (1,880) $ (1,472) ======== ========
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. 83 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):
----------------------------- For the Years Ended March 31, ----------------------------- 2000 1999 ------- ------- Revenues $ 7,759 $ 4,365 Cost of Sales (6,384) (3,570) General & Administrative Expenses (569) (554) ------- ------- Operating Earnings $ 806 $ 241 ======= =======
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. 84 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. 85 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. 86 88 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 89 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 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
88 90 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L. P. AND SUBSIDIARIES COMBINING BALANCE SHEETS (DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------- March 31, ---------------------------------------------------------------------------- 2000 1999 2000 1999 2000 1999 --------- --------- --------- --------- --------- --------- Centex Development 3333 Holding Company, L.P. and Corporation Combined Subsidiaries and Subsidiary ---------------------- ---------------------- ------------------------ 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 ========= ========= ========= ========= ========= =========
See Notes to Combining Financial Statements. 89 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)
------------------------------------------------------------------------------------------- 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 ---------------------------- ---------------------------- ------------------------------ 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
See notes to combining financial statements. 90 92 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L. P. AND SUBSIDIARIES COMBINING STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
---------------------------------------------------------- March 31, ---------------------------------------------------------- 2000 1999 1998 2000 1999 1998 -------- -------- -------- -------- -------- -------- Centex Development Company, L.P. and Combined Subsidiaries ---------------------------- ---------------------------- 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 ======== ======== ======== ======== ======== ======== ------------------------------- March 31, ------------------------------- 2000 1999 1998 -------- -------- -------- 3333 Holding Corporation and Subsidiary ------------------------------- 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 ======== ======== ========
See notes to combining financial statements. 91 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)
----------------------------------------------------------------------------------------- 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) -------- -------- --------- --------- -------- ---------- --------- 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 ======== ======== ======== ======== ======== ======== ========
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):
----------------------------- For the Years Ended March 31, ----------------------------- 2000 1999 1998 ------ ------ ------ Net Income $ 456 $ 430 $4,399 Other Comprehensive Loss: Foreign Currency Translation Adjustments (96) -- -- ------ ------ ------ Comprehensive Income $ 360 $ 430 $4,399 ====== ====== ======
(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 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)
---------------------------- March 31, ---------------------------- 2000 1999 ---------- ---------- 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 ========== ==========
93 95 SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS (Dollars in thousands)
-------------------------------------------------- For the Years Ended March 31, -------------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- 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 =========== =========== ===========
(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 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:
----------------------- March 31, ----------------------- 2000 1999 ------- ------- (Dollars in thousands) Land, Buildings and Improvement $ 3,119 $ -- Machinery, Equipment and Other 1,042 317 ------- ------- 4,161 317 Accumulated Depreciation (583) (86) ------- ------- $ 3,578 $ 231 ======= =======
(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 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):
------------------------------------------------------------------------ MATURITIES AS OF MARCH 31, ------------------------------------------------------------------------ 2005 OR TOTAL 2001 2002 2003 2004 LATER -------- -------- -------- ------- ------- -------- 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 ======== ======== ======== ======= ======= ========
(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 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.
----------------------------- For the Years Ended March 31, ----------------------------- 2000 1999 --------- ----------- (Dollars in thousands) 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 $ -- ========= ===========
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 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.
------------------------------ For the Years Ended March 31, ------------------------------ 2000 1999 -------- -------- (Dollars in thousands) 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 ======== ========
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.
----------------------------- For the Years Ended March 31, ----------------------------- 2000 1999 -------- -------- (Dollars in thousands) 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 ======== ========
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. 98 100 MULTI-FAMILY DEVELOPMENT The following table sets forth financial information relating to the Multi-Family operation.
---------------------------- For the Years Ended March 31, ---------------------------- 2000 1999 -------- --------- (Dollars in thousands) 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 ======== ========
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.
---------------------------- For the Years Ended March 31, ---------------------------- 2000 1999 -------- -------- (Dollars in thousands) 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 $ -- ======== ========
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 99 101 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):
-------------------------------------------------------------- March 31, -------------------------------------------------------------- 2000 1999 ------------------------- ------------------------- Carrying Fair Carrying Fair Value Value Value Value -------- ------- -------- ------- Financial Liabilities Long-term Debt $51,078 $49,903(A) $ 1,740 $ 1,828(A)
(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: 100 102 [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. 101 103 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): Inventories, Property and Equipment and Other $ 266,535 Goodwill 29,260 Notes Issued and Liabilities Assumed (295,795) --------- Cash Paid $ -- =========
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.
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 --------- ------------- -------------- 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) ========= =========
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 --------- ------------- -------------- 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) ========= =========
102 104 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. 103 105 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. 104 106 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 105 107 QUARTERLY RESULTS (UNAUDITED) (Dollars in thousands, except per share/unit data)
------------------------------------------------------------------------------------ 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 ------------------------ ------------------------ ------------------------ 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
106 108 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 107 109 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.
NAME Position AGE - ---- -------- --- 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
* 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 108 110 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. 109 111 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. 110 112 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. 111 113 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.
NUMBER OF UNITS NAME OF OR WARRANTS PERCENT TITLE OF CLASS* BENEFICIAL OWNER** OWNED OF CLASS --------------- ------------------ ----------- -------- 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
112 114 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
- ------------------- * 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 113 115 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 114 116 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 115 117 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. 116 118 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. 117 119 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. 118 120 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. 119 121 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. 120 122 INDEX TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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.
121 123 INDEX TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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.*
122 124 INDEX TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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.
- ----------------- * Management contract or compensatory plan or arrangement 123 125 INDEX TO EXHIBITS 3333 HOLDING CORPORATION AND SUBSIDIARY
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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
124 126 INDEX TO EXHIBITS 3333 HOLDING CORPORATION AND SUBSIDIARY--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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.
125 127 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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
126 128 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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.
127 129 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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")
128 130 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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.
129 131 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE - ------- ------- ------------------------- 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
130 EX-10.8 2 0002.txt $2,100,000 CONVERTIBLE SUBORDINATED NOTE 1 EXHIBIT 10.8 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS ("STATE LAWS") AND MAY NOT BE TRANSFERRED UNLESS THE COMPANY IS FIRST FURNISHED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OR ANY STATE LAWS. TRANSFER OF THIS NOTE IS ALSO RESTRICTED AS HEREINAFTER PROVIDED. CENTEX CORPORATION CONVERTIBLE SUBORDINATED NOTE $2,100,000 Dallas, Texas May 28, 1999 FOR VALUE RECEIVED, Centex Corporation, a Nevada corporation (herein, together with any successor to all or substantially all of its assets, by merger or otherwise, called the "Company"), promises to pay to Laurence E. Hirsch (the "Holder"), at the Company's principal executive office in Dallas, Dallas County, Texas, or such other place as the Company may specify to the Holder in writing, the principal sum of Two Million One Hundred Thousand dollars ($2,100,000), in lawful money of the United States of America, and to pay interest from the date hereof on the unpaid principal balance hereof at a fluctuating rate per annum which shall change from time to time so that it will always be equal to the Interest Rate (as hereinafter defined) or the Highest Lawful Rate (as hereinafter defined), whichever is the lesser. As used herein, the term "Interest Rate" shall mean the rate of interest charged from to time on that certain promissory note, dated March 1, 1995, between Holder and NationsBank of Texas, N.A. (now known as Bank of America, N.A.), evidencing an indebtedness in a maximum amount of $2,100,000 (and all renewals, extensions, modifications and amendments of and to such promissory note) (the "Bank Note"). The "Highest Lawful Rate" shall be the maximum rate of interest that the Company may pay on this Note from time to time under applicable laws. If and to the extent the Highest Lawful Rate is determined pursuant to the laws of the State of Texas, the Indicated Rate Ceiling provided by Article 5069-1.04 of the Texas Revised Civil Statutes Annotated, as amended, shall be the ceiling applicable to this Note. 1. Payment Terms. The principal of this Note shall be payable in full on March 31, 2010. Accrued interest on this Note shall be payable on any day on which interest is due and payable on the Bank Note, and at maturity of this Note. The Company promises to pay interest, payable on demand, on overdue principal and, to the extent permitted by law, on overdue interest, from their due dates at the Highest Lawful Rate. 2. Subordination. Upon any liquidation of the Company or distribution of assets to creditors of the Company in bankruptcy, receivership, or otherwise, no payment of principal or interest shall be demanded, made, or received on this Note, nor shall any portion of this Note be directly or indirectly repurchased by the Company (except through conversion of this Note into Common Stock, to the extent permitted - 1 - 2 by Section 3 below), until all Senior Indebtedness (as hereinafter defined) has been paid in full. Any cash, securities, or property received by the Holder in violation of the immediately preceding sentence shall be held in trust for the benefit of the holders of Senior Indebtedness and promptly paid over to them, pro rata as their respective interests may appear, upon demand. The Holder shall be subrogated to the rights of any holder of Senior Indebtedness to the extent the Holder or the Company pays funds over to any holder of Senior Indebtedness pursuant to these subordination provisions, but such right of subrogation may not be enforced until all Senior Indebtedness has been paid in full. "Senior Indebtedness" means obligations of the Company, whether outstanding on the date hereof or created hereafter, for (a) money borrowed by the Company, (b) money borrowed by others and guaranteed by the Company, (c) indebtedness incurred, assumed, or guaranteed by the Company in connection with the payment of all or any portion of the purchase price of any business, real property, or other assets (except indebtedness incurred for materials acquired or services rendered in the ordinary course of business of the Company) purchased by the Company or any of its subsidiaries, (d) indebtedness arising in favor of any bonding company under any performance or payment bond or other similar bond issued by such bonding company in connection with any construction contract to which the Company or any of its subsidiaries is or was a party, (e) renewals, extensions, and refundings of any indebtedness described in clauses (a)-(d), inclusive, and (f) interest due and premium and collection costs owed by the Company with respect to any indebtedness described in clauses (a)-(e), inclusive, including interest which accrues subsequent to any bankruptcy or similar proceeding involving the Company; provided, however, that Senior Indebtedness shall not include (x) any indebtedness which is expressly stated in any instrument binding on the holder of such indebtedness not to be Senior Indebtedness, (y) this Note, or (z) any indebtedness as to which neither the Company nor any subsidiary has any personal liability. Upon request of the Company, the Holder will expressly confirm to any holder or proposed holder of indebtedness conforming to the preceding definition that such indebtedness is "Senior Indebtedness" within the meaning of the preceding sentence. 3. Conversion. The Holder may, at his option (but subject to the provisions of this Note relating to compliance with the Securities Act and State Laws), convert the unpaid Vested Principal (as hereinafter defined) of this Note into Common Stock (as hereinafter defined) of the Company, at the rate of one share of Common Stock for each five dollars and twenty five cents ($5.25) of Vested Principal so converted, at any time and from time to time, by surrendering this Note, together with written directions as to the amount of Vested Principal to be converted, to the Company at its principal executive office. Upon such surrender, the Company shall promptly issue and deliver to the Holder one or more certificates (as the Holder may specify) evidencing the shares into which the Vested Principal has been converted, and shall return this Note to the Holder with a notation thereon showing the amount of Vested Principal that has been converted and the date of such conversion. Any such conversion shall be deemed effective, and the shares issuable in respect thereof shall be deemed issued, on the first Business Day (defined as any day on which banks are authorized to be open for business under Texas law) following the day this Note is duly surrendered for conversion, as described above, regardless of when the Company actually issues and delivers the shares to the Holder. No adjustment shall be made in respect of any dividends (except common stock dividends, as hereinafter provided) or distributions paid prior to the effective conversion date, or payable after the effective conversion date, to holders of record as of a date prior to the effective conversion date. - 2 - 3 No fractional shares shall be issuable on conversion of this Note, and if the Holder designates an amount of Vested Principal which would result in issuance of a fractional share, the amount of Vested Principal to be converted shall be reduced to eliminate the issuance of such fractional shares. One Hundred Percent (100%) of the principal amount of this Note shall be "Vested Principal" on May 28, 1999, the date of issuance of this Note (it being acknowledged by the Company that One Hundred Percent (100%) of the Vested Principal of the Original Note (as hereinafter defined) became Vested Principal prior to the date of issuance of this Note, which is being issued to renew, extend, modify, and replace the Original Note as provided in the antepenultimate paragraph of this Note). Notwithstanding the foregoing, if the Holder is discharged as an employee by the Company's or an Affiliate's (defined as any parent or subsidiary of the Company, within the meaning of subsections 425(e) and (f) of the Internal Revenue Code of 1986, as amended) board of directors for Cause (defined as acts constituting theft, dishonesty, fraud or embezzlement, as determined in good faith by the Company's board of directors), then any part of the principal of this Note which is Vested Principal shall, upon such discharge, cease to be Vested Principal. For purposes of this Note, the term "Common Stock" shall mean the common stock, par value $.25 per share, of Centex Corporation as constituted on the date of this Note and any stock, securities, or other property (including cash), whether of Centex Corporation or some other corporation or entity, into which the outstanding shares of such common stock may hereafter be changed pursuant to any merger, consolidation, recapitalization, or similar transaction (collectively, a "Reorganization"). In furtherance of the preceding sentence, (i) if the outstanding shares of Common Stock of the Company shall be subdivided into a greater number of shares or combined into a lesser number of shares (by stock split, reverse stock split, stock dividend, or otherwise), the number of shares of Common Stock issuable upon conversion of this Note shall be appropriately adjusted to give effect to such subdivision or combination, and (ii) if any Reorganization should occur, there shall be delivered to the Holder, upon conversion of any portion of the Vested Principal of this Note subsequent to such Reorganization, the stock, securities, or other property (including cash) that the Holder would have received if he had converted such Vested Principal into Common Stock prior to such Reorganization and participated therein as a holder of such Common Stock. No Reorganization shall be effected unless, under the express terms thereof, the resulting or surviving entity assumes the obligations of the Company under this Note. 4. Prepayment. The Company shall not be entitled to prepay all or any part of this Note, except that this Note shall be prepaid, in full (but not in part): (a) on the first anniversary of the date the Holder ceases to be employed by at least one of the employers in the group of employers consisting of the Company and its Affiliates for any reason other than (i) the Holder's voluntary termination of employment with the Company or an Affiliate or (ii) the Holder's discharge by the Company's or an Affiliate's board of directors for Cause; - 3 - 4 (b) within thirty (30) days after the Holder, as a result of his voluntary termination of employment, is no longer employed by any of the employers in the group of employers consisting of the Company and its Affiliates or is discharged as an employee by the Company's or an Affiliate's board of directors for Cause; and (c) within thirty (30) days following the approval by the shareholders of the Company of a plan of complete liquidation and dissolution of the Company, other than such a plan adopted in connection with a Reorganization. 5. Default. If any one or more of the following events (herein called "Events of Default") shall occur and be continuing: (a) Default shall be made in the payment of any principal of or interest on this Note when due and shall continue for more than 10 days after written notice from the Holder to the Company; or (b) The Company shall (i) apply for or consent to the appointment of a receiver, trustee, or liquidator of the Company or all or substantially all the assets of the Company, (ii) make a general assignment for the benefit of creditors, (iii) be adjudicated bankrupt or insolvent, or (iv) file a voluntary petition in bankruptcy, or a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, moratorium, dissolution, liquidation, or debtor relief law, or any chapter of any such law, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or chapter; or an order, judgement, or decree shall be entered, without the application, approval, or consent of the Company by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or of all or substantially all of the assets of the Company and such order, judgment, or decree shall not have been dismissed within 120 days after it was so entered; then and in each and every such case the Holder may, subject to the subordination provisions previously stated in this Note, by notice in writing to the Company declare the unpaid principal of this Note, with accrued interest thereon, to be forthwith due and payable and thereon such principal and interest shall be due and payable without presentment, protest, or further demand or notice of any kind, all of which are hereby expressly waived. 6. Transfer. This Note may not be transferred, voluntarily or involuntarily, by the Holder to any person or entity whatsoever without the written consent of the Company; provided, however, that such transfer restriction shall not apply (i) to a transfer, by will or by the laws of descent and distribution, to the executor or estate of the Holder upon his death, (ii) to the pledge of, or grant of a security interest in, this Note by the Holder to a bank (or other financial institution) approved by the Company - 4 - 5 in writing as security for the indebtedness of the Holder to such bank or institution in connection with the Holder's purchase of this Note, or (iii) to the foreclosure of any such pledge or security interest so long as only such bank or financial institution is the purchaser at such sale. In no event may the conversion privileges of this Note be exercised by any person or entity to whom this Note is transferred (including the Holder), voluntarily or involuntarily, in violation of the preceding sentence, or by any transferee of such person or entity (including the Holder), or by any purchaser (including the bank or other financial institution that may be the pledgee of or holder of a security interest in this Note) at a foreclosure sale (even if such foreclosure is permitted under the preceding sentence). Subject to the immediately preceding paragraph, this Note is transferable only on the books of the Company by the Holder or the Holder's duly authorized attorney-in-fact. The Company shall be entitled to treat the registered holder of this Note as the true and lawful owner hereof for all purposes, including payment, notwithstanding any actual knowledge of the Company to the contrary. 7. Miscellaneous. Except as otherwise expressly specified in this Note, the Company and each surety, guarantor, endorser, or other party liable for payment on this Note hereby waive diligence, presentment, demand, protest, and notice of any kind whatsoever, and agree that their liability on this Note shall not be affected by any renewal or extension in the time of payment hereof, by any indulgences, or by any release or change in any security for payment of this Note. In no event shall the Company be obligated to issue any Common Stock on conversion of this Note if, in the opinion of counsel for the Company, such issuance would violate the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any State Laws. The Holder shall, as a condition precedent to his right to convert Vested Principal to Common Stock, make such written representations to, and agreements with, the Company concerning the Holder's financial position, business and investment experience, intentions as to resale or other disposition of the shares, and such other matters as counsel for the Company may deem necessary in order to assure compliance with the Securities Act, Exchange Act, and applicable State Laws. The certificates evidencing the shares issued on conversion of this Note shall bear such legends as counsel for the Company may deem necessary to ensure compliance with the Securities Act, Exchange Act, and applicable State Laws. In no event shall the existence of this Note be deemed to create any right of continued employment of the Holder by the Company or any Affiliate. The Company is entitled to offset against this Note (whether or not this Note is then due), (i) any amounts due and owing by the Holder to the Company or any Affiliate and (ii) any amounts which the Company may owe to Bank of America, N.A. (the "Bank") arising under the Company's guarantee of the Holder's obligations under the Bank Note. Any such offset shall be applied first to accrued and unpaid interest, next to principal that is not Vested Principal, and then to Vested Principal. Upon any such offset, the offset principal shall be deemed paid and shall cease to bear interest. - 5 - 6 If this Note is placed in the hands of an attorney for collection after occurrence of an Event of Default, or if it is collected through legal or bankruptcy proceedings, the Company agrees to pay all costs of collection, including but not limited to court costs and reasonable attorneys' fees. It is the intention of the Holder and the Company that this Note conform in all respects to applicable law so that no payment of interest or other sum construed to be interest shall exceed the Highest Lawful Rate. In determining the rate of interest paid or payable under this Note, all funds paid or to be paid as interest or construed to be interest shall be prorated, allocated, or spread as permitted under applicable law. If, through any circumstances, the provisions of this Note would result in the Company's paying or agreeing to pay interest on this Note in excess of the Highest Lawful Rate, or if the Company pays any sum as interest or any amount which is construed to be interest in excess of such rate, then (1) the amount of interest contracted for shall be automatically reduced to the amount permitted by the Highest Lawful Rate and (2) the amount of excess interest paid shall be applied to the reduction of the principal balance of this Note, if any, and if the principal balance has been fully paid, the excess interest shall be refunded to the Company. This Note renews, extends, modifies, and replaces, but does not extinguish the indebtedness evidenced by, that certain Centex Corporation Convertible Subordinated Note dated March 1, 1995, in the original principal amount of $2,100,000, executed by the Company and payable to the Holder (the "Original Note"). THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE COMPANY AND THE HOLDER AND THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE COMPANY AND THE HOLDER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE COMPANY AND THE HOLDER. THIS NOTE MAY NOT BE MODIFIED OR AMENDED, EXCEPT IN WRITING SIGNED BY THE COMPANY AND THE HOLDER AND SPECIFICALLY REFERENCING THIS NOTE. This Note shall be governed by, and construed and interpreted in accordance with, the substantive laws of the State of Texas without giving effect to any conflict-of-laws rule or principle that would result in the application of the laws of any other jurisdiction. CENTEX CORPORATION By: /s/ David W. Quinn ------------------- David W. Quinn Vice Chairman and Chief Financial Officer - 6 - EX-10.9 3 0003.txt AMENDED/RESTATED SUPPLEMENTAL EXEC RETIREMENT PLAN 1 EXHIBIT 10.9 1 February 2000 SERP CENTEX CORPORATION AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PURPOSE Under the Internal Revenue Code (the "Code") the federal government sets a limit (currently $170,000) on the amount of annual compensation which may be considered in determining, for the account of an eligible participant, a company's contribution to a tax-qualified defined contribution plan, including the Profit Sharing and Retirement Plan of Centex Corporation (the "Plan"). The purpose of this non-qualified Supplemental Executive Retirement Plan ("SERP") is to establish balances for each participant in this SERP in an amount substantially equal to the additional contribution which he or she would have received under the Plan had 100% of his or her annual salary been eligible for a profit sharing contribution. The first SERP contribution was for the Plan year ended March 31, 1995. The Plan year was changed to a calendar year basis in 1999. ELIGIBILITY All current participants in the Plan whose employer's contribution, other than a 401(k) contribution, is reduced either by the compensation limit under Section 401(k)(17) of the Code (currently $170,000) or in order to satisfy any of the non-discrimination tests applicable to the Plan, such as Section 410(b)(2) of the Code, which is commonly referred to as the "average benefits test". Those provisions of the Code which so limit the employer's contribution are herein called the "Limitations". New employees paid annual compensation in excess of the Limitations (including an employee who does not yet qualify for participation in the Plan, provided that he or she does subscribe to the Plan when he or she becomes eligible to do so), and participants in the Plan who first meet the eligibility standards after subscribing to the Plan, may be added to this SERP at the sole discretion of either the Chairman and Chief Executive Officer or the Vice Chairman and Chief Financial Officer of Centex Corporation (the "Company"). FUNDING This is an unfunded, non-qualified plan. The amounts to be allocated to each participant for both contributions and earnings will be reflected only as accrued 2 liabilities on the books and records of the Company. The participants will thus be unsecured creditors of the Company. From time to time the Company may, in its sole and absolute discretion, create and administer separate accounts for one or more participants which the Company may fund, from time to time, in amounts which are equivalent to the total account of the participant. CONTRIBUTIONS The annual SERP accrual for the account of each participant will be calculated using the total compensation which, but for the Limitations, would be eligible for a profit sharing contribution under the Plan ("Total Compensation") less the amount which has been considered for the Plan contribution (this amount will be $170,000 for the Plan year ending December 31, 2000, and is subject to upward adjustment in future years as permitted by law). The difference between Total Compensation and that considered in the Plan is herein called "Excess Salary". The accrual contribution to be allocated to the account of a participant in the SERP will be the product of his or her Excess Salary times the percent of salary used by his or her employer in calculating the Plan contribution. Should the Plan formula be changed in future years such that the contribution is not calculated exclusively as a percentage of compensation, then the percentage to be used for the SERP shall represent the percentage derived by dividing the total profit sharing contribution for the applicable employer by the sum of all of Total Compensation for all of that employer's Plan participants. EARNINGS Each participant may designate how his or her SERP account balance is to be invested by the Company and will have a "phantom" account whose results will match the result of the investments made by the Company. Each participant may so designate how his or her SERP balance is to be invested by the Company by selecting among the various investment options available to him or her as a participant in the Plan. If a participant does not notify Fidelity, the offeror of such various investment options, as to which investment options he or she selects, then such account balance will be invested in the Fidelity Freedom 2000 Fund, which is heavily invested in fixed income securities, or its successor. -2- 3 PAYOUT Upon termination of employment, including retirement from the Company and all its subsidiaries and affiliates (including Centex Construction Products, Inc. and its subsidiaries) the Company will become obligated to pay to an employee the entire vested balance in his or her account in the SERP. Payout will be made on the same basis as payout to the employee under the Plan, subject to the following: 1. The Company may, in its sole and absolute discretion, pay out the entire SERP balance to such participant, regardless of whether or not such participant has elected to maintain his or her balance in the Plan, at any time upon 90 days prior written notice. 2. If the balance of the SERP account at the time of termination of employment is less than $5,000, then within thirty (30) days following termination of employment the vested portion of his or her account balance will be disbursed to such participant, and thereafter he or she will have no further interest in the SERP. 3. Following termination of employment upon retirement, if the participant is entitled to and, with the consent of the Company, does leave his or her SERP account balance in place, then the account will be credited with earnings at the same rate as active participants, depending upon the investment selections made by the retired participant. 4. Following termination of employment for any reason other than retirement, if the participant is entitled to and, with the consent of the Company, does leave his or her SERP account balance in place, then the account will be credited with earnings at the lesser of the rate earned by the participant's Plan account for the year or 80% of the average Bank of America prime interest rate for the year. Such participant will not have the option of using the phantom accounts offered by Fidelity for active participants. 5. Vesting of SERP balances will be identical to vesting of employer contributions to the Plan. Thus, if a terminated employee is only 60% vested in the Plan, the vesting in the SERP balance and accumulated earnings will also be 60%. No participant will be entitled to borrow or withdraw early any part of his or her vested balance. - 3- 4 MODIFICATION, SUSPENSION OR TERMINATION OF SERP The Company may at any time amend, suspend or terminate the SERP. However, the amount accrued in the account of a participant in the SERP will not be reduced. If the SERP is suspended or terminated, the amount accrued in each account but not paid to the participant will continue to accrue interest at a rate equal to 80% of the prime rate charged from time to time by Bank of America until payout of such sum to the participant. - 4- EX-21.1 4 0004.txt SUBSIDIARIES OF CENTEX 1 CENTEX EXHIBIT 21.1 The following is a list of subsidiaries of the Company, wholly-owned unless otherwise stated. This list of subsidiaries includes all of the significant subsidiaries of the Company as of May 31, 2000.
JURISDICTION OF ENTITY NAME ORGANIZATION - ----------- ------------ 21 Housing Corporation Nevada d/b/a Cavco Community Development Company d/b/a Cavtex Homes d/b/a Centex Community Development d/b/a Centex Community Development Company d/b/a Integrity Homes d/b/a Integrity Homes of Utah d/b/a Vista Homes 900 Development Corporation Cayman Islands AAA Holdings, Inc. Delaware Adfinet, Inc. Nevada Advanced Financial Technology, Inc. Nevada d/b/a Affiliated Advanced Technology, Inc. Advanced Protection Systems, Inc. Nevada d/b/a Apartment Protection Systems d/b/a Apartment Protection Systems, Inc. d/b/a Centex HomeTeam Security d/b/a Centex HomeTeam Services d/b/a Centex Security d/b/a Centex Security, Inc. d/b/a HomeTeam Alarms, Inc. d/b/a HomeTeam Security d/b/a HomeTeam Security, Inc. d/b/a HomeTeam Services, Inc. d/b/a Protection Systems, Inc. American Gypsum Company * New Mexico d/b/a American Gypsum Company, Inc. d/b/a Centex American Gypsum Company Armor Insurance Company Vermont Benefit Land Title Company California Benefit Land Title Insurance Company California Bonair Hills, LLC Virginia BP Sand & Gravel, Inc. * Delaware Braewood Development Corp. Nevada Calton Homes, Inc. New Jersey
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is approximately 64.4% owned by Centex Corporation. Page 1 of 6 2 Cavco Industries, LLC Delaware d/b/a Cavco Texas, LLC CCP Cement Company * Nevada CCP Concrete/Aggregates Company * Nevada CCP Gypsum Company * Nevada CCP Land Company * Nevada CDMC Holding, Inc. Nevada CEGC Holding Company * Delaware Centex Cement Corporation * Nevada Centex Construction Company, Inc. Nevada d/b/a Centex Bateson Construction Company, Inc. Centex Construction Group, Inc. Nevada Centex Construction Group Services, LLC Delaware Centex Construction Products, Inc. (64.4%) Delaware d/b/a Texas-Lehigh Cement Company Centex Credit Corporation Nevada d/b/a Centex Home Equity d/b/a Centex Home Equity Corporation d/b/a Nova Mortgage Credit Corporation Centex Eagle Gypsum Company * Delaware Centex Eagle Gypsum Company, L.L.C. * Delaware d/b/a American Gypsum Company Centex Equity Corporation Nevada Centex Finance Company Nevada Centex Financial Services, Inc. Nevada Centex Forcum Lannom, Inc. Nevada d/b/a 3333 Construction Corporation Centex Golden Construction Company Nevada Centex Home Services Company Nevada d/b/a HomeTeam Services, Inc. Centex Homes International Funding Company Nevada Centex Homes Nevada d/b/a Centex Development Company d/b/a Centex-Draper 162 Partnership d/b/a CTX Builders Supply d/b/a Fox & Jacobs d/b/a Fox & Jacobs Homes d/b/a Marquis Resort Homes d/b/a New Homes Research Group d/b/a Riverwood Golf Club d/b/a Teal Homes d/b/a Timbercreek Forest Products d/b/a Vista Homes d/b/a Vista Properties Company Centex Homes International B.V. (93.5%) Netherlands
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is approximately 64.4% owned by Centex Corporation. Page 2 of 6 3 Centex Homes International Limited United Kingdom Centex Homes of California, LLC Delaware Centex HomeTeam Lawn Care, LLC Delaware d/b/a HomeTeam Lawn Care Centex International, Inc. Nevada Centex Landis Construction Co., Inc. Louisiana Centex Latin America, Inc. Nevada Centex Materials GP LTD, LLC * Delaware Centex Materials, LP * Texas Centex Materials LP LTD, LLC * Delaware Centex Mortgage Company UK Limited UK Centex Real Estate Construction Company Nevada d/b/a CTX Builders Supply Centex Real Estate Corporation Nevada d/b/a Centex Custom Homes d/b/a Centex Engle Joint Venture d/b/a Centex Homes d/b/a Centex Homes Corporation d/b/a Centex Homes, a Nevada General Partnership d/b/a Centex-Crosland Company d/b/a Centex-Crosland Homes d/b/a CTX Builders Supply d/b/a Fox & Jacobs d/b/a Fox & Jacobs Homes d/b/a New Home Research Group d/b/a Timbercreek Forest Products d/b/a Vista Homes Centex Rodgers, Inc. Nevada d/b/a Centex Resource Group Centex Rodgers No. 1, LLC (99%) Tennessee Centex Rodgers No. 2, LLC Delaware Centex Rooney Marine, Inc. Florida Centex Seismic Services, Inc. (95%) Nevada Centex Senior Services Corporation Nevada d/b/a Kensington Cottages at Chandler Creek d/b/a Kensington Cottages at Clear Lake d/b/a Kensington Cottages at Quail Creek d/b/a Kensington Cottages by Centex Centex Service Company Nevada Centex Technology, Inc. Nevada Centex Title & Ancillary Services, Inc. Nevada Centex-Rooney Construction Co., Inc. Florida d/b/a Centex Rooney Facilities Group Centex-Rooney Construction Co. of Georgia, LLC Delaware Centex/F&S, L.L.C. Delaware
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is approximately 64.4% owned by Centex Corporation. Page 3 of 6 4 Centex/FPC, L.L.C. Delaware Centex/HKS II, L.L.C. Delaware Centex/HKS Canyon, L.L.C. Delaware Centex/HKS, L.L.C. Delaware Centex/Morris II, L.L.C. Delaware Centex/Morris, L.L.C. Delaware Centex/Omniplan, L.L.C. Delaware Centex/SHG, L.L.C. Delaware CHEC Asset Receivable Corporation Nevada CHEC Conduit Funding, LLC Delaware CHEC Funding, LLC Delaware CHEC Industrial Loan Company Tennessee CHEC Residual Corporation Nevada Commerce Land Title, Inc. Nevada CRG Holdings, LLC Delaware d/b/a AAA Homes d/b/a AAA Park Model & RV d/b/a Boerne Homes d/b/a Cavco Home Center d/b/a Cavco Homes d/b/a Cavco Homes Supercenter d/b/a Cavco Supercenter Crosland Acceptance Associates V N. Carolina CTX Consulting Group, LLC Delaware CTX Mortgage Company Nevada d/b/a CTX Capital Corporation d/b/a CTX Mortgage Homeownership Club d/b/a CTX Mortgage Company, Inc. d/b/a Houston Appraisal, Inc. d/b/a LendersWholesale CTX Mortgage Funding II, LLC Delaware CTX Mortgage Funding, LLC Delaware CTX Mortgage Ventures Corporation Nevada Enhanced Safetysystems, Inc. Nevada d/b/a Apache HomeTeam Services d/b/a Cactus Valley Pest Control d/b/a Centex HomeTeam Pest Control d/b/a Centex HomeTeam Services d/b/a Environmental Safetysystems, Inc. d/b/a HomeTeam Environmental d/b/a HomeTeam Pest Control d/b/a HomeTeam Services d/b/a HomeTeam Services, Inc. d/b/a Ivies HomeTeam Services d/b/a Pest Defense System
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is approximately 64.4% owned by Centex Corporation. Page 4 of 6 5 d/b/a Pest Defense System of Austin d/b/a Pest Defense System of Central Florida d/b/a Pest Defense System of Greater Houston d/b/a Pest Defense System of Northwest Florida d/b/a Pest Defense System of San Antonio d/b/a Pest Defense System of South Florida d/b/a Pest Defense System of Southeast Florida d/b/a Pest Defense System of Southwest Florida d/b/a Pest Defense System of the First Coast d/b/a Pest Defense System of the Gold Coast d/b/a Pest Defense System of the Gulf Coast d/b/a Pest Defense System of the Space Coast d/b/a Pest Defense System of the Treasure Coast d/b/a Radar HomeTeam Services d/b/a Results Pest Control d/b/a Rodger's HomeTeam Services GHQ Company, Inc. Nevada Independent General Agency, Inc. Texas Illinois Cement Company * Illinois d/b/a Wisconsin Cement Company Illinois Cement Company, joint venture * Texas Integrated Project Solutions, Inc. Nevada IPS Group No. 1, LLC Texas Loan Processing Technologies, Inc. Nevada M & W Drywall Supply Company * Nevada Mathews Readymix, Inc. * California Meadow Vista Company, LLC Delaware d/b/a Ocotillo Meadows, LLC Metropolitan Tax Service, Inc. Nevada d/b/a Metropolitan Tax & Abstract Services, Inc. Metropolitan Title & Guaranty Company Florida Mortgage Acceptance Associates No. 2 N. Carolina Mortgage Collateral Associates No. 1 N. Carolina Mortgage Collateral Associates No. 3 N. Carolina Mountain Cement Company * Nevada Nevada Cement Company * Nevada Panoramic Land, Inc. Nevada Texas Cement Company * Nevada d/b/a C & C Properties, Inc. d/b/a C P Service Company d/b/a Texas-Lehigh Cement Company Texas-Lehigh Cement Company * Texas Texas Lehigh Cement Company, general partnership * Texas Wayne Homes, LLC (97%) Delaware d/b/a Wayne Homes Michigan, LLC
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is approximately 64.4% owned by Centex Corporation. Page 5 of 6 6 Western Cement Company of California * California Westwood Insurance Agency, a California corporation California d/b/a HomeAdvantage Insurance Agency Services d/b/a HomeAdvantage Insurance Services d/b/a Westwood Insurance Agency, Inc. d/b/a WMC Insurance Agency d/b/a WMC Insurance Agency Services d/b/a WMC Insurance Services d/b/a WMC Insurance Services Insurance Agency Wisconsin Cement Company * Wisconsin
* Owned, directly or indirectly, by Centex Construction Products, Inc. which is approximately 64.4% owned by Centex Corporation. Page 6 of 6 EX-21.2 5 0005.txt SUBSIDIARIES OF 3333 HOLDING CORPORATION 1 EXHIBIT 21.2 The following is a list of subsidiaries of 3333 Holding Corporation, wholly-owned unless otherwise stated. This list of subsidiaries includes all of the significant subsidiaries of 3333 Holding Corporation as of May 31, 2000.
JURISDICTION OF ENTITY NAME ORGANIZATION - ----------- ------------ 3333 Development Corporation Nevada CDC General Partner, Inc. Nevada Centex Multi-Family Company Nevada d/b/a Centex Multi-Family Development Company Centex Multi-Family II Joint Venture (50%) Texas
EX-23 6 0006.txt CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in the previously filed registration statements on Form S-3 (Nos. 33-61223; 333-65217; 333-72893; 333-94221; and 333-96229) and on Form S-8 (Nos. 33-29174; 33-44575; 33-55083; 33-55083-01; 33-55083-02; 333-28229; 333-28229-01; 333-28229-02; 333-37956; 333-55717; 333-55717-01; 333-55717-02; 333-74185; 333-74185-01; 333-74185-02; 333-86041; 333-86041-01; and 333-86041-02) of our report dated May 16, 2000, for Centex Corporation and Subsidiaries, 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. and Subsidiaries on Form 10-K for the years ended March 31, 2000, and to all references to our Firm included in these registration statements. ARTHUR ANDERSEN LLP Dallas, Texas, May 30, 2000 EX-24.1 7 0007.txt CENTEX CORPORATION POWER OF ATTORNEY 1 CENTEX EXHIBIT 24.1 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and David W. Quinn, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in her capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Barbara T. Alexander ------------------------------- Barbara T. Alexander Director Centex Corporation 2 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and David W. Quinn, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Dan W. Cook III --------------------------------- Dan W. Cook III Director Centex Corporation 3 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and David W. Quinn, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Juan L. Elek --------------------------------- Juan L. Elek Director Centex Corporation 4 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and David W. Quinn, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Clint W. Murchison, III --------------------------------- Clint W. Murchison, III Director Centex Corporation 5 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and David W. Quinn, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Charles H. Pistor, Jr. -------------------------------------- Charles H. Pistor, Jr. Director Centex Corporation 6 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ David W. Quinn --------------------------------- David W. Quinn Director Centex Corporation 7 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and David W. Quinn, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Paul R. Seegers -------------------------------- Paul R. Seegers Director Centex Corporation 8 CENTEX CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Laurence E. Hirsch and David W. Quinn, or either of such individuals, with full power of substitution in the premises, as the undersigned's true and lawful agents and attorneys-in-fact (the "Attorneys-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of Centex Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorneys-in-Fact, may not be revoked until the Attorneys-in-Fact have received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Paul T. Stoffel --------------------------------- Paul T. Stoffel Director Centex Corporation EX-24.2 8 0008.txt 3333 HOLDING CORPORATION POWER OF ATTORNEY 1 HOLDING EXHIBIT 24.2 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Holding Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Richard C. Decker ----------------------------------- Richard C. Decker Director 3333 Holding Corporation 2 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Holding Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Josiah O. Low, III ------------------------------ Josiah O. Low, III Director 3333 Holding Corporation 3 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Holding Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ David M. Sherer ------------------------------ David M. Sherer Director 3333 Holding Corporation 4 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Holding Corporation (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Roger O. West ------------------------------ Roger O. West Director 3333 Holding Corporation EX-24.3 9 0009.txt CENTEX DEVELOPMENT COMPANY L.P. POWER OF ATTORNEY 1 PARTNERSHIP EXHIBIT 24.3 CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Development Corporation, General Partner of Centex Development Company, L.P. (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Richard C. Decker -------------------------------- Richard C. Decker Director 3333 Development Corporation, General Partner of Centex Development Company, L.P. 2 CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Development Corporation, General Partner of Centex Development Company, L.P. (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Josiah O. Low, III ---------------------------------- Josiah O. Low, III Director 3333 Development Corporation, General Partner of Centex Development Company, L.P. 3 CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Development Corporation, General Partner of Centex Development Company, L.P. (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ David M. Sherer ---------------------------------- David M. Sherer Director 3333 Development Corporation, General Partner of Centex Development Company, L.P. 4 CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints Stephen M. Weinberg, with full power of substitution in the premises, as the undersigned's true and lawful agent and attorney-in-fact (the "Attorney-in-Fact"), with full power and authority in the name and on behalf of the undersigned, in his capacity as a Director of 3333 Development Corporation, General Partner of Centex Development Company, L.P. (the "Company"), to execute and file with the Securities and Exchange Commission the Company's Annual Report on Form 10-K for the Company's fiscal year ended March 31, 2000, together with any and all amendments thereto. This Power of Attorney and all authority granted and conferred hereby shall continue indefinitely and, unless waived by the Attorney-in-Fact, may not be revoked until the Attorney-in-Fact has received five days' written notice of such revocation. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 30th day of May, 2000. /s/ Roger O. West ---------------------------------- Roger O. West Director 3333 Development Corporation, General Partner of Centex Development Company, L.P. EX-27.1 10 0010.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX CORPORATION'S MARCH 31, 2000, FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000018532 CENTEX CORPORATION 1,000 12-MOS MAR-31-2000 APR-01-1999 MAR-31-2000 139,563 0 893,078 0 1,954,037 0 631,819 271,215 4,038,740 0 751,160 0 0 14,702 1,404,647 4,038,740 5,956,366 5,956,366 5,374,874 5,374,874 97,787 0 66,844 416,861 159,729 257,132 0 0 0 257,132 4.34 4.22
EX-27.2 11 0011.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3333 HOLDING CORPORATION'S MARCH 31, 2000, FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000818762 3333 HOLDING CORPORATION 1,000 12-MOS MAR-31-2000 APR-01-1999 MAR-31-2000 16 0 6 0 1,013 0 191 94 3,023 0 0 0 0 1 (1,960) 3,023 607 607 1,734 1,734 0 0 0 (1,127) 0 (1,127) 0 0 0 (1,127) 0.00 0.00
EX-27.3 12 0012.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX DEVELOPMENT COMPANY, L.P.'S MARCH 31, 2000, FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000818764 CENTEX DEVELOPMENT COMPANY, L.P. 1,000 12-MOS MAR-31-2000 APR-01-1999 MAR-31-2000 58,298 0 21,079 0 328,928 0 3,970 489 515,188 0 0 0 0 0 72,286 515,188 378,199 378,199 372,782 372,782 0 0 0 5,417 3,834 1,583 0 0 0 1,583 0.00 0.00
EX-99.1 13 0013.txt REAL ESTATE & ACCUMULATED DEPRECIATION SCHEDULE 1 CENTEX DEVELOPMENT COMPANY, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III MARCH 31, 2000 (dollars in thousands)
Column A Column B Column C Column D Column E ----------- ------------ --------------------- ------------ ---------------------- Cost Capitalized Gross Amount at Subsequent to Which Carried at Initial Cost to Company Acquisition Close of Period ----------------------- ----------- --------------- Buildings & Land & Buildings & Description Encumbrances Land Improvements Improvements Land Improvements ----------- ------------ ---- ------------ ------------ ---- ------------ Charlotte, North Carolina Westlake I - Industrial Building $ 1,724 $ 341 $ -- $ 1,790 $ 341 $ 1,790 Westlake II - Industrial Building 4,842 486 -- 5,198 486 5,198 Camarillo, California Camarillo I - Industrial Building 5,459 1,300 -- 5,085 1,300 5,085 Pinellas Park, Florida Gateway I - Industrial Building -- 760 -- 3,222 760 3,222 Plantation, Florida Southpointe I - Office Building 17,213 1,787 -- 15,459 1,787 15,459 Gardner, Massachusetts Summit I - Industrial Building 2,081 205 -- 2,293 205 2,293 Dallas, Texas Citymark I - Office Building 19,759 5,677 18,988 45 5,677 19,033 ------- ------- ------- ------- ------- ------- $51,078 $10,556 $18,988 $33,092 $10,556 $52,080 ======= ======= ======= ======= ======= ======= Column A Column F Column G Column H Column I ----------- -------------------------------------------------- Life on Which Depreciation in Latest Income Accumulated Year Date Statements is Description Depreciation Constructed Acquired is Computed ----------- ------------ ----------- -------- --------------- Charlotte, North Carolina Westlake I - Industrial Building $ 104 1999 35 years Westlake II - Industrial Building 118 2000 35 years Camarillo, California Camarillo I - Industrial Building 206 2000 35 years Pinellas Park, Florida Gateway I - Industrial Building 28 2000 35 years Plantation, Florida Southpointe I - Office Building 554 2000 35 years Gardner, Massachusetts Summit I - Industrial Building 15 2000 35 years Dallas, Texas Citymark I - Office Building 191 2000 35 years ------- $ 1,216 =======
2 CENTEX DEVELOPMENT COMPANY, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION NOTE TO SCHEDULE III MARCH 31, 2000 (dollars in thousands)
Balance at beginning of period $ 1,899 Additions during period: Acquisitions through foreclosure $ -- Other acquisitions 29,203 Improvements etc. 31,538 Other -- ---------- $ 60,741 ---------- Deductions during period: Cost of real estate sold $ -- Other -- ---------- -- ---------- Balance at close of period $ 62,640 ==========
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