EX-99.1 2 d53373exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
     
 
   www.centex.com
 
   P.O. Box 199000
 
   Dallas, Texas 75219-9000
(CENTEX LOGO)
  
 
 
   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
Eric Bruner, Director—Public Relations
http://www.centex.com
CENTEX REPORTS THIRD QUARTER RESULTS
DALLAS — January 29, 2008: Centex Corporation (NYSE: CTX) today reported financial results for its fiscal third quarter ended December 31, 2007.
Highlights of the quarter ended December 31, 2007 (compared to last year’s third quarter):
  •   Loss from continuing operations of $7.94 per diluted share
 
  •   Sales (orders) decreased 10% to 5,537 (down 2% on a per neighborhood basis)
 
  •   Reduced homebuilding SG&A expenses by 31% or $116 million
 
  •   Reduced inventory of unsold homes by 33% to 4,259
 
  •   Homebuilding cancellation rate decreased 550 bps to 33.0%
     “The housing market continues to correct and tighter mortgage underwriting standards are affecting home prices,” said Tim Eller, Centex Corporation Chairman and CEO. “Our strategy and execution remain consistent, even as we expect economic conditions to soften in the near term. In our fiscal third quarter, we generated about $100 million in cash flow from housing operations, lowered our G&A expenses and reduced our unsold inventory. Our focus continues to be on selling homes, generating cash and structuring for profitability.”
CORPORATE RESULTS
     Fiscal 2008’s third quarter revenues were $1.91 billion, 30% lower than the same quarter last year. The loss from continuing operations for the third quarter was $975 million, or a loss of $7.94 per diluted share, down from a loss of $242 million, or $2.02 per diluted share, in the previous year’s fiscal third quarter.
HOME BUILDING
     Fiscal 2008’s third quarter revenues were $1.81 billion, 30% lower than the same quarter last year as a result of a 20% decrease in closings to 6,657 homes and an 11% decrease in average sales price to $268,588. Home building reported an operating loss of $625 million for the quarter, after $554 million, or $2.79 per diluted share, in impairments and other land charges. The loss from housing operating earnings (housing revenues less housing cost of sales and SG&A) was $32 million, down from earnings of $125 million in the previous year. The decrease is a result of a 20% decrease in unit volume, an 11.0% decrease in the unit average sales price and higher sales incentives.

 

 

Centex Corporation, Page 2 of 3
Discounts and sales incentives as a percentage of housing revenue climbed 690 basis points to 15.2% in the quarter.
     For the current nine months, revenues were $5.72 billion, 28% lower than the same period last year. The reported homebuilding operating loss was $1.75 billion for the nine-month period this year versus earnings of $218 million in the same period last year.
FINANCIAL SERVICES
     Financial Services reported an operating loss of $60 million this quarter, down from earnings of $16 million in the third quarter of fiscal 2007, due principally to a $65 million increase in provisions for losses on its discontinued mortgage loan inventory. This increase in loan loss reserves reduced earnings from continuing operations by $0.33 per diluted share in the quarter. CTX Mortgage originated loans for 79% of Centex Homes’ buyers during the third quarter, 100 basis points lower than last year’s third quarter.
     The operating loss was $100 million for the nine-month period this year, down from earnings of $66 million in the same period last year. Centex’s Financial Services operations provide Centex home buyers with a streamlined home-closing and settlement process.
OTHER
     During the fiscal third quarter, the Company recorded a non-cash charge of $500 million to establish a valuation allowance related to its deferred tax assets in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” The valuation allowance was reflected as a charge to income tax expense and a reduction of the Company’s deferred tax assets and reduced earnings from continuing operations by $4.07 per diluted share.
NON-GAAP FINANCIAL MEASURES
     Explanations of non-GAAP financial measures used in this press release and the accompanying attachments, and reconciliations of the non-GAAP financial measures to the comparable GAAP financial measures, are given in the applicable attachments.
     Centex’s senior management will conduct a conference call to discuss the third quarter fiscal year 2008 financial results at 10 a.m. Eastern Time (9 a.m. Central Time) on Wednesday, January 30th. 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
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Centex Corporation, Page 3 of 3
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, 2007 (including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), as well as recent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are 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, the effects of the current downturn in the homebuilding industry, including reductions in the value of our land portfolio and revisions to our business plans to address changing market conditions; 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; the effects of recent disruptions in the mortgage finance industry, including tightening of credit and reduction in liquidity; the availability of adequate sources of financing to continue to implement our business strategy, particularly in view of recent downgrades in our credit rating, write downs in asset values and tightening of credit available to the homebuilding industry; our ability to generate cash from sales of assets and other sources that supplement our existing capital resources; and other factors that could affect demand for our homes or mortgage loans, the profitability of our operations or our access to financing. 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) Consolidated Balance Sheet
(3) Home Building Revenues and Earnings
(4) Supplemental Home Building Data
(5) Supplemental Home Building Segment Data
(6) Supplemental Financial Services Data
(7) Supplemental Financial Data
(8) Reconciliation of Housing/Home Building Operating Earnings
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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     Nine Months Ended  
    December 31,     December 31,  
    (unaudited)     (unaudited)  
    2007     2006 (C)     Change     2007     2006 (C)     Change  
Revenues
                                                
Home Building (A)
   $ 1,811,084     $ 2,587,251       (30 %)   $ 5,720,388     $ 7,895,135       (28 %)
Financial Services
     62,203       107,577       (42 %)     240,869       350,896       (31 %)
Other
     32,800       31,388       4 %     102,247       99,673       3 %
 
                                        
Total
   $ 1,906,087     $ 2,726,216       (30 %)   $ 6,063,504     $ 8,345,704       (27 %)
 
                                        
 
                                                
Operating Earnings (Loss)
                                                
Home Building (A)
   $ (625,265 )   $ (242,402 )           $ (1,749,737 )   $ 218,246          
Financial Services
     (60,484 )     16,496               (99,597 )     65,747          
Other
     2,903       (1,293 )             28,659       (1,792 )        
 
                                        
Total Operating Earnings (Loss)
     (682,846 )     (227,199 )             (1,820,675 )     282,201          
 
                                                
Corporate General and Administrative Expenses (B)
     (37,850 )     (72,369 )             (117,371 )     (172,137 )        
 
                                        
 
                                                
Earnings (Loss) from Continuing Operations Before Income Taxes
     (720,696 )     (299,568 )             (1,938,046 )     110,064          
 
                                                
Income Tax (Provision) Benefit (D)
     (254,492 )     57,223               187,690       (99,559 )        
 
                                        
 
                                                
Earnings (Loss) from Continuing Operations
     (975,188 )     (242,345 )             (1,750,356 )     10,505          
 
                                                
Earnings from Discontinued Operations, net
     —       14,199               3,376       59,006          
 
                                        
 
                                                
Net Earnings (Loss)
   $ (975,188 )   $ (228,146 )           $ (1,746,980 )   $ 69,511          
 
                                        
 
                                                
Earnings (Loss) Per Share — Basic
                                                
Continuing Operations
   $ (7.94 )   $ (2.02 )           $ (14.32 )   $ 0.09          
Discontinued Operations
     —       0.12               0.02       0.49          
 
                                        
Earnings (Loss) Per Share — Basic
   $ (7.94 )   $ (1.90 )           $ (14.30 )   $ 0.58          
 
                                        
 
                                                
Earnings (Loss) Per Share — Diluted
                                                
Continuing Operations
   $ (7.94 )   $ (2.02 )           $ (14.32 )   $ 0.09          
Discontinued Operations
     —       0.12               0.02     $ 0.47          
 
                                        
Earnings (Loss) Per Share — Diluted
   $ (7.94 )   $ (1.90 )           $ (14.30 )   $ 0.56          
 
                                        
 
                                                
Average Shares Outstanding:
                                                
Basic
     122,787,414       119,935,522               122,188,922       120,507,675          
Diluted
     122,787,414       119,935,522               122,188,922       124,524,863          
 
(A)  See Attachment 3 for detailed home building segment revenues and earnings.
 
(B)  In connection with the change in the Company’s reporting segments at March 31, 2007, home building corporate general and administrative expenses have been reclassified to Corporate General and Administrative Expenses consistent with the structure of the internal organization. Prior periods have been restated accordingly.
 
(C)  Certain prior year items have been reclassified to conform to current period classifications.
 
(D)  Current periods include a $500 million valuation allowance related to the deferred tax assets.

 

 

Attachment 2
Centex Corporation and Subsidiaries
Condensed Consolidated Balance Sheet
(Dollars in millions)
(unaudited)
                 
    December 31,     March 31,  
    2007     2007  
Assets
                
Cash -
                
Unrestricted
   $ 62     $ 883  
Restricted
     71       146  
Receivables -
                
Residential Mortgage Loans Held for Sale, net
     748       1,688  
Other Receivables
     431       228  
Inventories -
                
Homebuilding
     6,809       8,633  
Land Held Under Option Agreements not Owned
     178       282  
Other
     31       36  
Investments
     241       282  
Property and Equipment, net
     91       136  
Goodwill
     158       219  
Deferred Tax Asset, Deferred Charges and Other Assets
     811       667  
 
            
 
   $ 9,631     $ 13,200  
 
            
 
                
Liabilities and Stockholders’ Equity
                
Accounts Payable and Accrued Liabilities
   $ 2,161     $ 2,344  
Debt -
                
Non-Financial Services
     3,623       3,904  
Financial Services
     569       1,663  
Minority Interests
     81       177  
Stockholders’ Equity (A)
     3,197       5,112  
 
            
 
   $ 9,631     $ 13,200  
 
            
 
(A)   Effective April 1, 2007, the Company adopted Financial Accounting Standards FIN 48, “Accounting for Uncertainty in Income Taxes.” The change in accounting for income taxes reduced retained earnings by $208 and stockholders’ equity by $213.
     

 

 

Attachment 3
Centex Corporation and Subsidiaries
Home Building Revenues and Earnings
(Dollars in thousands)
                                                 
    Quarter Ended     Nine Months Ended  
    December 31,     December 31,  
    (unaudited)     (unaudited)  
    2007     2006     Change     2007     2006     Change  
Home Building Revenues
                                                
East
   $ 376,321     $ 518,342       (27 %)   $ 1,225,327     $ 1,635,305       (25 %)
Southeast
     206,755       340,574       (39 %)     680,734       1,120,665       (39 %)
Central
     184,376       246,275       (25 %)     591,384       819,717       (28 %)
Texas
     225,290       276,819       (19 %)     716,329       788,872       (9 %)
Northwest
     373,234       507,520       (26 %)     1,164,610       1,549,103       (25 %)
Southwest
     411,110       603,057       (32 %)     1,208,604       1,744,098       (31 %)
Other Home Building
     33,998       94,664       (64 %)     133,400       237,375       (44 %)
 
                                        
Total Home Building
   $ 1,811,084     $ 2,587,251       (30 %)   $ 5,720,388     $ 7,895,135       (28 %)
 
                                        
 
                                                
Home Building Operating Earnings (Loss) (A)
                                                
East
   $ (47,892 )   $ (31,231 )           $ (12,830 )   $ 127,304          
Southeast
     (127,261 )     9,615               (293,366 )     93,337          
Central
     (39,877 )     (27,940 )             (98,345 )     (18,119 )        
Texas
     9,343       22,595               43,187       66,490          
Northwest
     (199,612 )     (81,885 )             (427,460 )     69,246          
Southwest
     (186,447 )     (128,047 )             (782,190 )     (136,083 )        
Other Home Building
     (33,519 )     (5,509 )             (178,733 )     16,071          
 
                                        
Total Home Building
   $ (625,265 )   $ (242,402 )           $ (1,749,737 )   $ 218,246          
 
                                        
 
(A)   Operating Earnings above exclude home building corporate general and administrative expenses which have been reclassified to Corporate General and Administrative Expenses in connection with the change in the Company’s reporting segments at March 31, 2007. Further information regarding the home building reporting segments shown above may be found in Part 1, Item 1 (Business) of Centex’s Form 10-K for the fiscal year ended March 31, 2007. Prior periods have been restated accordingly.

 

 

Attachment 4
Centex Corporation and Subsidiaries
Supplemental Home Building Data
(Dollars in thousands, except per unit data)
(unaudited)
MARGIN DATA
                                                                 
    Quarter Ended December 31,     Nine Months Ended December 31,  
    2007     2006     2007     2006  
Revenues — Housing
   $ 1,787,990       100.0 %   $ 2,516,089       100.0 %   $ 5,626,727       100.0 %   $ 7,679,986       100.0 %
Cost of Sales — Housing
     (1,564,552 )     (87.5 %)     (2,020,158 )     (80.3 %)     (4,787,106 )     (85.1 %)     (5,854,303 )     (76.2 %)
 
                                                
Gross Margin — Housing
     223,438       12.5 %     495,931       19.7 %     839,621       14.9 %     1,825,683       23.8 %
 
                                                
 
                                                                
Revenues — Land Sales & Other
     23,094               71,162               93,661               215,149          
Cost of Sales — Land Sales & Other
     (556,320 )             (392,758 )             (1,659,126 )             (662,605 )        
 
                                                        
Gross Margin — Land Sales & Other
     (533,226 )             (321,596 )             (1,565,465 )             (447,456 )        
 
                                                        
 
                                                                
Total Gross Margin
     (309,788 )     (17.1 %)     174,335       6.7 %     (725,844 )     (12.7 %)     1,378,227       17.5 %
 
                                                                
Selling, General & Administrative (A)
     (254,952 )     (14.1 %)     (370,572 )     (14.3 %)     (850,211 )     (14.8 %)     (1,123,505 )     (14.2 %)
 
                                                                
Goodwill Impairment
     —       — %     —       — %     (61,322 )     (1.1 %)     —       — %
 
                                                                
Losses from Unconsolidated Entities and Other (B)
     (60,525 )     (3.3 %)     (46,165 )     (1.8 %)     (112,360 )     (2.0 %)     (36,476 )     (0.5 %)
 
                                                
 
                                                                
Operating Earnings (Loss)
   $ (625,265 )     (34.5 %)   $ (242,402 )     (9.4 %)   $ (1,749,737 )     (30.6 %)   $ 218,246       2.8 %
 
                                                        
 
                                                                
Units Closed
     6,657               8,360               20,102               25,203          
Average Unit Sales Price
   $ 268,588             $ 300,968             $ 279,909             $ 304,725          
% Change
     (10.8 %)             (3.2 %)             (8.1 %)             2.1 %        
Average Neighborhoods
     644               699               659               686          
% Change
     (7.9 %)             10.1 %             (3.9 %)             11.0 %        
 
(A)   Selling, General & Administrative expenses above are those associated with field operations. As noted on Attachments 1 and 3, home building corporate general and administrative expenses have been reclassified to Corporate General and Administrative Expense and are no longer included in the calculation of home building operating earnings.
 
(B)   Includes losses from unconsolidated entities of $63,140, $59,383, $125,333 and $59,584, respectively.
IMPAIRMENTS AND WRITE-OFFS
                                 
    Quarter Ended December 31,     Nine Months Ended December 31,  
    2007     2006     2007     2006  
Impairment Charges
   $ 502,949     $ 205,365     $ 1,492,428     $ 235,389  
Write-offs of Land Deposits and Pre-Acquisition Costs
     26,366       138,002       87,554       263,788  
Goodwill Impairment
     —       —       61,322       —  
Share of Joint Venture Impairments
     24,850       96,369       88,512       106,869  
 
                        
 
                                
Total Impairments and Write-offs
   $ 554,165     $ 439,736     $ 1,729,816     $ 606,046  
 
                        
LOT POSITION
                         
    As of December 31,  
    2007     2006     Change  
Lot Owned and Controlled:
                        
 
                        
Lots Owned
     87,601       104,186       (16 %)
 
                        
Lots Controlled
     31,061       81,891       (62 %)
 
                    
 
                        
Total
     118,662       186,077       (36 %)
 
                    

 

 

Attachment 5
Centex Corporation and Subsidiaries
Supplemental Home Building Data
Housing Activity by Geographic Area
(Unaudited)
                                                 
    Closings (Units)  
    Quarter Ended December 31,     Nine Months Ended December 31,  
    2007     2006     Change     2007     2006     Change  
East
     1,229       1,604       (23 %)     3,901       4,982       (22 %)
Southeast
     820       1,144       (28 %)     2,501       3,642       (31 %)
Central
     932       1,128       (17 %)     2,879       3,722       (23 %)
Texas
     1,355       1,704       (20 %)     4,245       4,818       (12 %)
Northwest
     980       1,140       (14 %)     2,976       3,391       (12 %)
Southwest
     1,252       1,472       (15 %)     3,284       4,111       (20 %)
Other Home Building
     89       168       (47 %)     316       537       (41 %)
 
                                        
 
 
     6,657       8,360       (20 %)     20,102       25,203       (20 %)
 
                                        
                                                 
    Housing Revenues (Dollars in thousands)  
    Quarter Ended December 31,     Nine Months Ended December 31,  
    2007     2006     Change     2007     2006     Change  
East
   $ 368,181     $ 516,038       (29 %)   $ 1,197,720     $ 1,631,032       (27 %)
Southeast
     203,053       332,650       (39 %)     664,237       1,073,225       (38 %)
Central
     182,989       243,597       (25 %)     586,736       810,773       (28 %)
Texas
     223,912       273,993       (18 %)     708,616       761,841       (7 %)
Northwest
     373,051       493,336       (24 %)     1,160,764       1,522,049       (24 %)
Southwest
     409,116       588,880       (31 %)     1,200,191       1,702,292       (29 %)
Other Home Building
     27,688       67,595       (59 %)     108,463       178,774       (39 %)
 
                                        
 
 
   $ 1,787,990     $ 2,516,089       (29 %)   $ 5,626,727     $ 7,679,986       (27 %)
 
                                        
                                                 
    Sales (Orders) Backlog     Sales (Orders) Backlog  
    (Units)     (Dollars in thousands)  
    As of December 31,     As of December 31,  
    2007     2006     Change     2007     2006     Change  
East
     1,280       2,066       (38 %)   $ 413,400     $ 665,833       (38 %)
Southeast
     1,197       2,245       (47 %)     314,114       715,821       (56 %)
Central
     1,432       1,689       (15 %)     271,927       356,214       (24 %)
Texas
     1,685       2,475       (32 %)     278,212       397,937       (30 %)
Northwest
     1,406       1,985       (29 %)     533,132       924,326       (42 %)
Southwest
     1,471       2,354       (38 %)     442,597       1,008,902       (56 %)
Other Home Building
     42       587       (93 %)     13,510       245,027       (94 %)
 
                                        
 
 
     8,513       13,401       (36 %)   $ 2,266,892     $ 4,314,060       (47 %)
 
                                        
                                                 
    Sales (Orders) (Units)  
    Quarter Ended December 31,     Nine Months Ended December 31,  
    2007     2006     Change     2007     2006     Change  
East
     934       1,209       (23 %)     3,333       3,975       (16 %)
Southeast
     707       587       20 %     2,179       2,419       (10 %)
Central
     687       814       (16 %)     2,567       3,149       (18 %)
Texas
     1,208       1,560       (23 %)     3,910       5,104       (23 %)
Northwest
     872       1,020       (15 %)     2,577       3,162       (19 %)
Southwest
     1,070       911       17 %     3,252       3,292       (1 %)
Other Home Building
     59       38       55 %     146       116       26 %
 
                                        
 
 
     5,537       6,139       (10 %)     17,964       21,217       (15 %)
 
                                        

 

 

Attachment 6
Centex Corporation and Subsidiaries
Supplemental Financial Services Data
(Unaudited)
CTX Mortgage Company
                                                 
    Quarter Ended December 31,     Nine Months Ended December 31,  
    2007     2006     Change     2007     2006     Change  
Originations
                                                
Builder
     4,991       6,393       (22 %)     14,977       18,887       (21 %)
 
                                                
Retail
     5,045       7,212       (30 %)     19,098       23,868       (20 %)
 
                                        
 
                                                
Total
     10,036       13,605       (26 %)     34,075       42,755       (20 %)
 
                                        
 
                                                
Loan Volume (in billions)
   $ 2.18     $ 3.29       (34 %)   $ 7.64     $ 10.14       (25 %)
 
                                        
 
                                                
Average Loan Size
   $ 217,500     $ 241,900       (10 %)   $ 224,200     $ 237,100       (5 %)
 
                                        

 

 

Attachment 7
Centex Corporation and Subsidiaries
Supplemental Financial Data — Debt-to-Capitalization Ratio
(Dollars in millions)
(Unaudited)
                         
    As of December 31, 2007     As of March 31, 2007     As of December 31, 2006  
Consolidated Debt/Capitalization (A)
Debt
   $ 4,192     $ 5,567     $ 6,308  
Minority Interests
     81       177       292  
Less Minority Interests on Lot Options (C)
     (71 )     (153 )     (262 )
Stockholders’ Equity
     3,197       5,112       4,901  
 
                  
Capitalization
     7,399       10,703       11,239  
Less Unrestricted Cash
     (62 )     (883 )     (58 )
 
                  
Net Capitalization
   $ 7,337     $ 9,820     $ 11,181  
 
                  
 
                        
Consolidated Debt-to-Capitalization Ratio
     56.7 %     52.0 %     56.1 %
 
                  
Consolidated Net Debt-to-Capitalization Ratio (D)
     56.3 %     47.7 %     55.9 %
 
                  
 
                        
Debt/Capitalization, Excluding Financial Services (B)
Debt
   $ 3,623     $ 3,904     $ 4,309  
Minority Interests
     80       176       291  
Less Minority Interests on Lot Options (C)
     (71 )     (153 )     (262 )
Stockholders’ Equity
     3,197       5,112       4,901  
 
                  
Capitalization
     6,829       9,039       9,239  
Less Unrestricted Cash
     (54 )     (871 )     (50 )
 
                  
Net Capitalization
   $ 6,775     $ 8,168     $ 9,189  
 
                  
 
                        
Debt-to-Capitalization Ratio
     53.1 %     43.2 %     46.6 %
 
                  
Net Debt-to-Capitalization Ratio (D)
     52.7 %     37.1 %     46.3 %
 
                  
 
(A)   Consolidated capitalization includes debt, minority interest (excluding lot options), and stockholders’ equity, including Financial Services.
 
(B)   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 or minority interests attributable to Financial Services.
 
(C)   Pursuant to the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised (“FIN 46”), the Company consolidates certain lot option agreements and records the deposit and remaining purchase price related to these options as land held under option agreements not owned with a corresponding increase in minority interests. These minority interests are excluded from the debt-to-capitalization ratio as the Company is not obligated to purchase the properties and pay these amounts.
 
(D)   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. We believe this ratio reflects the debt/capitalization structure in a more inclusive manner as unrestricted cash could be applied to reduce debt at quarter end.
Debt-to-capitalization is a common financial ratio used in the homebuilding industry to evaluate debt capacity and leverage.

 

 

Attachment 8
Centex Corporation and Subsidiaries
Reconciliation of Housing/Home Building Operating Earnings
(Dollars in thousands)
(unaudited)
                                                                 
    Quarter Ended December 31,     Nine Months Ended December 31,  
    2007     2006     2007     2006  
HOME BUILDING
                                                                
 
                                                                
Revenues — Housing
   $ 1,787,990       100.0 %   $ 2,516,089       100.0 %   $ 5,626,727       100.0 %   $ 7,679,986       100.0 %
Cost of Sales — Housing
     (1,564,552 )     (87.5 %)     (2,020,158 )     (80.3 %)     (4,787,106 )     (85.1 %)     (5,854,303 )     (76.2 %)
 
                                                
Gross Margin — Housing
     223,438       12.5 %     495,931       19.7 %     839,621       14.9 %     1,825,683       23.8 %
 
                                                                
Selling, General & Administrative
     (254,952 )     (14.3 %)     (370,572 )     (14.7 %)     (850,211 )     (15.1 %)     (1,123,505 )     (14.7 %)
 
                                                
 
                                                                
Housing Operating Earnings (Loss) (A)
     (31,514 )     (1.8 %)     125,359       5.0 %     (10,590 )     (0.2 %)     702,178       9.1 %
 
                                                                
Revenues — Land Sales & Other
     23,094               71,162               93,661               215,149          
Cost of Sales — Land Sales & Other
     (556,320 )             (392,758 )             (1,659,126 )             (662,605 )        
 
                                                        
Gross Margin — Land Sales & Other
     (533,226 )             (321,596 )             (1,565,465 )             (447,456 )        
 
                                                                
Goodwill Impairment
     —               —               (61,322 )             —          
 
                                                                
Losses from Unconsolidated Entities and Other
     (60,525 )             (46,165 )             (112,360 )             (36,476 )        
 
                                                        
 
                                                                
Operating Earnings (Loss)
   $ (625,265 )     (34.5 %)   $ (242,402 )     (9.4 %)   $ (1,749,737 )     (30.6 %)   $ 218,246       2.8 %
 
                                                
 
(A)   Housing Operating Earnings is defined as housing revenues less housing cost of sales less selling, general & administrative expenses. Housing Operating Margin is defined as housing operating earnings divided by total housing revenues.