EX-99.1 2 d37947exv99w1.htm PRESS RELEASE exv99w1
 

       
(CENTEX LOGO)     www.centex.com
P.O. Box 199000
Dallas, Texas 75219-9000

 

2728 North Harwood
Dallas, Texas 75201-1516

 

Phone: (214) 981-5000
N e w s R e l e a s e
 
FOR IMMEDIATE RELEASE
For additional information, contact at (214) 981-5000:
Matthew G. Moyer, Vice President—Investor Relations
http://www.centex.com
CENTEX REPORTS FIRST QUARTER RESULTS
First quarter earnings per diluted share from continuing operations of $1.39
DALLAS — July 24, 2006: Centex Corporation (NYSE: CTX) today announced results, including operating earnings and diluted earnings per share, for the quarter ended June 30, 2006.
Highlights of the quarter ended June 30, 2006 (compared to last year’s first quarter):
  •   Home closings increased 1% to 8,318
 
  •   Revenues grew 13% to $3.27 billion
 
  •   Home Building operating earnings decreased 17% to $281 million
 
  •   Earnings per diluted share from continuing operations declined 11% to $1.39
 
  •   Unit backlog declined 17% on a decrease in sales (orders) of 21%
     Tim Eller, Centex Corporation Chairman and CEO, said, “We have responded to the significant variations in local market conditions with a strategy that balances sales pace with margin performance, and this is reflected in our results for our first fiscal quarter of 2007. We are placing emphasis on the development of balance sheet capacity over growth in our land position. This investment capacity, along with our geographic and segment diversification, will enable us to capitalize on growth and consolidation opportunities as individual markets rebound.”
HOME BUILDING
     Fiscal 2007’s first quarter revenues were $2.65 billion, 10% higher than the same quarter last year. Operating earnings were $281 million for the quarter, 17% lower than the same quarter a year ago.
     The 17% decrease in operating earnings reflected a 360 basis point decline in total home building operating margin in this year’s first quarter, a 1% increase in closings to 8,318 homes and an 8% increase in the average sales prices of homes delivered.
     The total home building operating margin, including land sales, was 10.6% mainly due to a 260 basis point decline in housing operating margin, primarily related to increased sales incentives. Also affecting the home building operating margin was a $23 million loss from land related

 

 

Centex Corporation, Page 2 of 3
operations, including the write off of $36 million of option deposits and pre-acquisition costs.
OTHER BUSINESSES
Financial Services
     Operating earnings from Financial Services totaled $23 million for the first quarter of fiscal 2007, 9% higher than the same quarter a year ago. CTX Mortgage originated loans for 77% of Centex Homes’ buyers during the first quarter, up two percentage points versus last year’s first quarter. Centex’s Financial Services operations provide Centex home buyers with a streamlined home-closing and settlement process, key to ensuring customer satisfaction and quality.
Construction Services
     Operating earnings from Construction Services were $7 million for the first quarter this year, resulting in an operating margin of 1.4%, up 62 basis points from last year’s first quarter. New contracts for the quarter were approximately $442 million, increasing the backlog of uncompleted construction contracts at June 30, 2006 to $2.90 billion, 23% more than a year ago.
ADDITIONAL DEVELOPMENTS
     As previously announced, Centex Corporation completed the sale of its sub-prime home equity lending operation, Centex Home Equity Company, LLC (CHEC), to an affiliate of Fortress Investment Group, LLC. Centex estimates total, net after-tax proceeds will approximate $540 million, subject to certain ordinary post-closing adjustments. The purchase price consisted of a payment based on the book value of the company, plus a premium calculated in accordance with agreed upon procedures. Additionally, Centex has the potential to receive an additional payment based on the volume of mortgage loans originated by CHEC during the two-year period after the closing.
     In the first fiscal quarter, Centex repurchased 3,500,000 shares at an average price of $53.46 per share. Additionally, since July 1, 2006, the company repurchased another 1,000,000 shares at an average price of $50.80. There are 10,000,000 shares remaining in the current repurchase authorization.
OUTLOOK
     Taking into consideration its current backlog and the uncertainty of the current housing market conditions, Centex’s full year 2007 earnings guidance is now $7.00 per fully diluted share from continuing operations. Additionally, Centex’s guidance for its second fiscal quarter ending September 30, 2006 is $1.40 per fully diluted share from continuing operations.
     Despite the supply-driven correction occurring now, the company believes that the fundamentals driving industry demand remain strong and that Centex is poised to extend its leadership position in key markets in this environment.

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Centex Corporation, Page 3 of 3
     Centex’s senior management will conduct a conference call to discuss the first quarter fiscal year 2007 financial results at 10 a.m. Eastern Time (9 a.m. Central Time) on Tuesday, July 25. The conference call, accompanied by a slide presentation, will be webcast simultaneously on the Centex Web site at http://www.centex.com. A replay of the call, as well as the presentation, will be archived on that site.
# # #
Forward-Looking Statements. This press release contains 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 Centex is discussing its beliefs, estimates or expectations. Such statements include projections, forecasts, and plans and objectives of management for future operations and operating and financial performance, as well as any related assumptions. These statements are not historical facts or guarantees of future performance but instead represent only Centex’s belief at the time the statements were made regarding future events, which are subject to significant risks, uncertainties and other factors, many of which are outside of Centex’s control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. These risks and uncertainties are described in greater detail in Centex’s most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2006 (including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), which is on file with the SEC and may be obtained free of charge through the Web site maintained by the SEC at http://www.sec.gov. The factors discussed in these reports include, but are not limited to, changes in national or regional economic or business conditions, including employment levels and interest rates, competition, customer cancellations, shortages or price changes in raw materials or labor, and other factors that could affect demand for our homes, mortgage loans or construction services or the profitability of our operations. Centex’s earnings guidance assumes that share repurchases will be made during the fiscal year. If repurchases are not made as anticipated, our earnings per share will be affected and may be lower. All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this press release will increase with the passage of time. Centex makes no commitment, and disclaims any duty, to update or revise any forward-looking statement to reflect future events or changes in Centex’s expectations.
NOTE ATTACHMENTS:
(1) Revenues and Earnings by Lines of Business
(2) Condensed Consolidated Balance Sheets
(3) Condensed Consolidated Cash Flows
(4) Supplemental Home Building Data
(5) Housing Activity by Geographic Area
(6) Housing Activity Dollar Values by Geographic Area
(7) Supplemental Financial Services Data
(8) Supplemental Financial Data

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Attachment 1
Centex Corporation and Subsidiaries
Revenues and Earnings by Lines of Business
(Dollars in thousands, except per share data)
                         
    Quarter Ended  
    June 30,  
    (unaudited)  
    2006     2005 (B)     Change  
Revenues
                        
Home Building
   $ 2,649,837     $ 2,399,177       10 %
Financial Services (A)
     122,741       109,988       12 %
Construction Services
     501,460       366,055       37 %
Other (Including Intersegment Eliminations)
     (615 )     24,690       (102 %)
 
                    
Total
   $ 3,273,423     $ 2,899,910       13 %
 
                    
 
                        
Operating Earnings
                        
Home Building
   $ 281,376     $ 340,904       (17 %)
Financial Services (A)
     23,087       21,277       9 %
Construction Services
     6,811       2,696       153 %
Other (Including Intersegment Eliminations)
     (3,420 )     (2,761 )     (24 %)
 
                    
Total Operating Earnings
     307,854       362,116       (15 %)
 
                        
Corporate General Expenses
     (24,233 )     (20,602 )        
Interest Expense
     —       (2,624 )        
 
                    
 
                        
Earnings from Continuing Operations Before Income Taxes
     283,621       338,890       (16 %)
Income Taxes
     (108,054 )     (128,051 )        
 
                    
Earnings from Continuing Operations
     175,567       210,839       (17 %)
(Loss) Earnings from Discontinued Operations, net (A)
     (15,310 )     22,831          
 
                    
 
                        
Net Earnings
   $ 160,257     $ 233,670       (31 %)
 
                    
 
                        
Earnings Per Share — Basic
                        
Earnings per Share — Continuing Operations
   $ 1.44     $ 1.64       (12 %)
(Loss) Earnings per Share — Discontinued Operations
     (0.13 )     0.18          
 
                    
Earnings Per Share — Basic
   $ 1.31     $ 1.82       (28 %)
 
                    
 
                        
Earnings Per Share — Diluted
                        
Earnings per Share — Continuing Operations
   $ 1.39     $ 1.57       (11 %)
(Loss) Earnings per Share — Discontinued Operations
     (0.12 )     0.17          
 
                    
Earnings Per Share — Diluted
   $ 1.27     $ 1.74       (27 %)
 
                    
 
                        
Average Shares Outstanding:
                        
Basic
     121,969,085       128,672,028       (5 %)
Diluted
     126,233,469       134,584,442       (6 %)
 
(A)   Financial Services excludes the Centex Home Equity operation which was sold in July, 2006 and is reflected in discontinued operations.
 
(B)   Certain prior year items have been reclassified to conform to current period classifications.

 

 

Attachment 2
Centex Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in millions)
(unaudited)
                                                 
    Centex Corporation and Subsidiaries     Centex Corporation (A)     Financial Services  
    June 30,     March 31,     June 30,     March 31,     June 30,     March 31,  
    2006     2006     2006     2006     2006     2006  
Assets
                                                
Cash -
                                                
Unrestricted
   $ 86     $ 47     $ 75     $ 37     $ 11     $ 10  
Restricted
     132       135       71       71       61       64  
Receivables -
                                                
Residential Mortgage Loans Held for Sale
     1,773       2,130       —       —       1,773       2,130  
Other Receivables
     660       704       620       660       40       44  
Inventories -
                                                
Homebuilding
     9,604       8,828       9,604       8,828       —       —  
Land Held Under Option Agreements not Owned
     479       818       479       818       —       —  
Other
     11       12       5       6       6       6  
Investments
     287       310       905       965       —       —  
Property and Equipment, net
     171       183       150       161       21       22  
Goodwill
     221       219       209       207       12       12  
Deferred Charges and Other Assets
     498       469       463       430       35       39  
Assets of Discontinued Operations
     7,851       7,510       —       —       7,851       7,510  
 
                                    
 
   $ 21,773     $ 21,365     $ 12,581     $ 12,183     $ 9,810     $ 9,837  
 
                                    
 
                                                
Liabilities and Stockholders’ Equity
                                                
Accounts Payable and Accrued Liabilities
   $ 2,388     $ 2,760     $ 2,295     $ 2,658     $ 53     $ 93  
Debt
                                                
Non-Financial Services
     4,842       3,982       4,842       3,982       —       —  
Financial Services
     1,706       2,077       —       —       1,706       2,077  
Liabilities of Discontinued Operations
     7,392       7,002       —       —       7,392       7,002  
Minority Interests
     422       532       421       531       1       1  
Stockholders’ Equity
     5,023       5,012       5,023       5,012       658       664  
 
                                    
 
   $ 21,773     $ 21,365     $ 12,581     $ 12,183     $ 9,810     $ 9,837  
 
                                    
 
(A)   In the supplemental data presented above, “Centex Corporation” represents the consolidation of all subsidiaries other than those included in Financial Services. Transactions between Centex Corporation and Financial Services have been eliminated from the Centex Corporation and Subsidiaries balance sheets. We believe that separate disclosure of the consolidating information is useful because: the Financial Services subsidiaries operate in a distinctly different financial environment that generally requires significantly less equity to support their higher debt levels compared to the operations of our other subsidiaries; the Financial Services subsidiaries have structured their financing programs substantially on a stand-alone basis; and Centex Corporation has limited obligations with respect to the indebtedness of its Financial Services subsidiaries. Management uses this information in its financial and strategic planning.

 

 

Attachment 3
Centex Corporation and Subsidiaries
Condensed Consolidated Cash Flows
(Dollars in millions)
(unaudited)
                                                 
    Centex Corporation and Subsidiaries (A)     Centex Corporation (B)     Financial Services (A)  
    For the Quarter Ended June 30,     For the Quarter Ended June 30,     For the Quarter Ended June 30,  
    2006     2005     2006     2005     2006     2005  
Cash Flows — Operating Activities
                                                
Net Earnings
   $ 160     $ 234     $ 160     $ 234     $ (1 )   $ 29  
Adjustments -
                                                
Depreciation and Amortization
     16       16       12       12       4       4  
Other Noncash Adjustments
     66       (82 )     23       (12 )     58       (75 )
Decrease (Increase) in Loans Held for Sale
     357       (245 )     —       —       357       (245 )
(Increase) Decrease in Inventories
     (737 )     (755 )     (737 )     (757 )     —       2  
Other Operating Activities
     (411 )     (141 )     (308 )     (167 )     (125 )     72  
 
                                    
 
     (549 )     (973 )     (850 )     (690 )     293       (213 )
 
                                    
Cash Flows — Investing Activities
                                                
Increase in Loans Held for Investment
     (287 )     (318 )     —       —       (287 )     (318 )
Other Investing Activities
     22       (14 )     45       (55 )     (1 )     (4 )
 
                                    
 
     (265 )     (332 )     45       (55 )     (288 )     (322 )
 
                                    
Cash Flows — Financing Activities
                                                
Increase (Decrease) in Short-Term Debt, net
     444       421       624       181       (180 )     240  
Issuance of Long-Term Debt, net
     612       488       397       164       215       324  
Other Financing Activities
     (178 )     (43 )     (178 )     (43 )     (14 )     (25 )
 
                                    
 
     878       866       843       302       21       539  
 
                                    
 
                                                
Effect of Exchange Rate on Cash
     —       (1 )     —       (1 )     —       —  
 
                                    
 
                                                
Net Increase (Decrease) in Cash and Cash Equivalents
     64       (440 )     38       (444 )     26       4  
Cash and Cash Equivalents at Beginning of Period
     48       503       37       491       11       12  
 
                                    
Cash and Cash Equivalents at End of Period
   $ 112     $ 63     $ 75     $ 47     $ 37     $ 16  
 
                                    
 
(A)   Beginning and ending cash balances include cash from the discontinued operations of Financial Services’ Home Equity operations — approximately $1 million as of March 31, 2006 and 2005, $26 million as of June 30, 2006, and $1 million as of June 30, 2005.
 
(B)   In the supplemental data presented above, “Centex Corporation” represents the consolidation of all subsidiaries other than those included in Financial Services. Transactions between Centex Corporation and Financial Services have been eliminated from the Centex Corporation and Subsidiaries cash flows. We believe that separate disclosure of the consolidating information is useful because: the Financial Services subsidiaries operate in a distinctly different financial environment that generally requires significantly less equity to support their higher debt levels compared to the operations of our other subsidiaries; the Financial Services subsidiaries have structured their financing programs substantially on a stand-alone basis; and Centex Corporation has limited obligations with respect to the indebtedness of its Financial Services subsidiaries. Management uses this information in its financial and strategic planning.

 

 

Attachment 4
Centex Corporation and Subsidiaries
Supplemental Home Building Data
(Dollars in thousands, except per unit data)
(unaudited)
                                 
    Quarter Ended June 30,  
    2006     2005  
HOME BUILDING
                                
Revenues — Housing
   $ 2,562,058       100.0 %   $ 2,358,128       100.0 %
Cost of Sales — Housing
     (1,866,511 )     (72.9 %)     (1,673,604 )     (71.0 %)
 
                        
Gross Margin — Housing
     695,547       27.1 %     684,524       29.0 %
 
                        
 
                                
Revenues — Land Sales & Other
     87,779               41,049          
Cost of Sales — Land Sales & Other
     (104,777 )             (37,116 )        
 
                            
Gross Margin — Land Sales & Other
     (16,998 )             3,933          
 
                            
Total Gross Margin
     678,549       25.6 %     688,457       28.7 %
 
                                
Selling, General & Administrative
     (407,841 )     (15.4 %)     (359,967 )     (15.0 %)
 
                                
Other Income
     10,668       0.4 %     12,414       0.5 %
 
                                
 
                        
Operating Earnings
   $ 281,376       10.6 %   $ 340,904       14.2 %
 
                            
Units Closed
     8,318               8,235          
 
                                
Average Unit Sales Price
   $ 308,014             $ 286,354          
% Change
     7.6 %             12.9 %        
 
                                
Operating Earnings per Unit
   $ 33,827             $ 41,397          
% Change
     (18.3 %)             36.7 %        
 
                                
Average Neighborhoods
     669               605          
% Change
     10.6 %             6.1 %        
LOT POSITION
                         
    As of June 30,
    2006   2005   Change
Lot Owned and Controlled:
                        
 
                        
Lots Owned
     112,976       106,584       6 %
 
                        
Lots Controlled
     169,614       179,186       (5 %)
 
                        
 
                        
Total
     282,590       285,770       (1 %)
 
                        

 

 

Attachment 5
Centex Corporation and Subsidiaries
Supplemental Home Building Data
Housing Activity (Units) by Geographic Area
                         
    Closings
    Quarter Ended June 30,
    2006   2005   Change
Mid-Atlantic
     1,653       1,545       7 %
 
                        
Southeast
     1,298       1,453       (11 %)
 
                        
Midwest
     1,551       1,565       (1 %)
 
                        
Southwest
     2,314       2,188       6 %
 
                        
West Coast
     1,502       1,484       1 %
 
                        
 
                        
 
     8,318       8,235       1 %
 
                        
                         
    Sales (Orders) Backlog
    As of June 30,
    2006   2005   Change
Mid-Atlantic
     2,969       3,887       (24 %)
 
                        
Southeast
     3,857       5,388       (28 %)
 
                        
Midwest
     2,684       3,382       (21 %)
 
                        
Southwest
     4,343       4,513       (4 %)
 
                        
West Coast
     3,466       3,603       (4 %)
 
                        
 
                        
 
     17,319       20,773       (17 %)
 
                        
                         
    Sales (Orders)
    Quarter Ended June 30,
    2006   2005   Change
Mid-Atlantic
     1,549       2,010       (23 %)
 
                        
Southeast
     1,039       1,835       (43 %)
 
                        
Midwest
     1,480       1,635       (9 %)
 
                        
Southwest
     2,563       3,013       (15 %)
 
                        
West Coast
     1,619       1,926       (16 %)
 
                        
 
                        
 
     8,250       10,419       (21 %)
 
                        

 

 

Attachment 6
Centex Corporation and Subsidiaries
Supplemental Home Building Data
Housing Activity (Values) by Geographic Area
                         
    Housing Revenues - Closings  
    (Dollars in thousands)  
    Quarter Ended June 30,  
    2006     2005     Change  
Mid-Atlantic
   $ 543,973     $ 497,278       9 %
 
                        
Southeast
     397,938       395,195       1 %
 
                        
Midwest
     354,759       334,608       6 %
 
                        
Southwest
     487,390       379,236       29 %
 
                        
West Coast
     777,998       751,811       3 %
 
                    
 
                        
 
   $ 2,562,058     $ 2,358,128       9 %
 
                    
                         
    Sales (Orders) Backlog Value  
    (Dollars in thousands)  
    As of June 30,  
    2006     2005     Change  
Mid-Atlantic
   $ 1,013,154     $ 1,399,791       (28 %)
 
                        
Southeast
     1,291,278       1,530,299       (16 %)
 
                        
Midwest
     631,916       738,951       (14 %)
 
                        
Southwest
     992,334       1,024,717       (3 %)
 
                        
West Coast
     1,817,644       1,885,245       (4 %)
 
                    
 
                        
 
   $ 5,746,326     $ 6,579,003       (13 %)
 
                    

 

 

Attachment 7
Centex Corporation and Subsidiaries
Supplemental Financial Services Data
CTX Mortgage Company
                         
    Quarter Ended June 30,  
    2006     2005     Change  
Originations
                        
Builder
     6,065       5,619       8 %
Retail
     8,917       12,311       (28 %)
 
                    
 
                        
Total
     14,982       17,930       (16 %)
 
                    
 
                        
Loan Volume (in billions)
   $ 3.49     $ 3.82       (9 %)
 
                    
 
                        
Average Loan Size
   $ 232,800     $ 213,100       9 %
 
                    
 
                        
Operating Profit per Loan
   $ 1,541     $ 1,187       30 %
 
                    

 

 

Attachment 8
Centex Corporation and Subsidiaries
Supplemental Financial Data — Debt-to-Capitalization Ratio
(Dollars in millions)
                         
    As of June 30, 2006     As of March 31, 2006     As of June 30, 2005  
Debt/Capitalization *
                        
Debt
   $ 4,842     $ 3,982     $ 3,438  
Minority Interests
     421       531       598  
Less Minority Interests on Lot Options
     (386 )     (492 )     (557 )
Stockholders’ Equity
     5,023       5,012       4,483  
 
                  
Capitalization
     9,900       9,033       7,962  
Less Unrestricted Cash
     (75 )     (37 )     (47 )
 
                  
Net Capitalization
   $ 9,825     $ 8,996     $ 7,915  
 
                  
 
                        
Debt-to-Capitalization Ratio
     48.9 %     44.1 %     43.2 %
 
                  
Net Debt-to-Capitalization Ratio
     48.5 %     43.9 %     42.8 %
 
                  
Consolidated Debt/Capitalization **
                        
Debt
   $ 6,548     $ 6,059     $ 5,383  
Minority Interests
     422       532       600  
Less Minority Interests on Lot Options
     (386 )     (492 )     (557 )
Stockholders’ Equity
     5,023       5,012       4,483  
 
                  
Capitalization
     11,607       11,111       9,909  
Less Unrestricted Cash
     (86 )     (47 )     (63 )
 
                  
Net Capitalization
   $ 11,521     $ 11,064     $ 9,846  
 
                  
 
                        
Consolidated Debt-to-Capitalization Ratio
     56.4 %     54.5 %     54.3 %
 
                  
Consolidated Net Debt-to-Capitalization Ratio
     56.1 %     54.3 %     54.0 %
 
                  
 
*   Capitalization includes debt, minority interest (excluding lot options), and stockholders’ equity. Capitalization presented above reflects Financial Services on an equity basis and does not include debt attributable to Financial Services.
 
**   Consolidated capitalization includes debt, minority interest (excluding lot options), and stockholders’ equity, including Financial Services.
 
    Net debt-to-capitalization ratios are provided reflecting net capitalization, including net debt (debt less unrestricted cash), minority interest (excluding lot options), and stockholders’ equity. See Attachments 2 and 3 of the Earnings Release for more information.