-----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, VkhT6g12l29tEIwbk2m8VOgfaLgM6+1F7G2qm87s9EdqSOk0jrN4L4ONVAIklbfO a6AVViuAWyG58VVTEM31Ig== 0000950134-97-004983.txt : 19970711 0000950134-97-004983.hdr.sgml : 19970711 ACCESSION NUMBER: 0000950134-97-004983 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970627 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-06776 FILM NUMBER: 97631702 BUSINESS ADDRESS: STREET 1: 3333 LEE PARKWAY SUITE 1200 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2145596500 MAIL ADDRESS: STREET 1: PO BOX 19000 STREET 2: PO BOX 19000 CITY: DALLAS STATE: TX ZIP: 75219 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: 1934 Act SEC FILE NUMBER: 001-09624 FILM NUMBER: 97631703 BUSINESS ADDRESS: STREET 1: 3333 LEE PKWY STREET 2: SUITE 500 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2145596700 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: 1934 Act SEC FILE NUMBER: 001-09625 FILM NUMBER: 97631704 BUSINESS ADDRESS: STREET 1: PO BOX 19000 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2145596700 MAIL ADDRESS: STREET 1: PO BOX 19000 STREET 2: PO BOX 19000 CITY: DALLAS STATE: TX ZIP: 75219 10-K405 1 FORM 10-K FOR YEAR ENDED MARCH 31, 1997 1 ================================================================================ 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, 1997 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) 981-6700 (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 COMMON STOCK NEW YORK STOCK ($.25 PAR VALUE) EXCHANGE ($.01 PAR VALUE) EXCHANGE CENTEX DEVELOPMENT COMPANY, L.P. WARRANTS TO PURCHASE NEW YORK STOCK CLASS B UNITS OF EXCHANGE LIMITED PARTNERSHIP INTEREST EXPIRING 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 30, 1997 was approximately $1.1 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 30, 1997: Centex Corporation Common Stock 29,088,120 shares 3333 Holding Corporation Common Stock 1,000 shares Centex Development Company, L.P. Class A Units of Limited Partnership Interest 1,000 units
DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference in Parts A.I, A.II, A.III, B.I, B.II and B.III of this Report: (a) 1997 Annual Report to Stockholders of Centex Corporation for the fiscal year ended March 31, 1997; (b) 1997 Annual Report to Stockholders of 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. for the fiscal year ended March 31, 1997; and (c) Proxy statements for the annual meetings of stockholders of Centex Corporation and 3333 Holding Corporation to be held on July 24, 1997. =============================================================================== 2 JOINT ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1997 CENTEX CORPORATION AND SUBSIDIARIES AND 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. 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, ("CDC" or the "Partnership"). Pursuant to an agreement with the Nominee (the "Nominee Agreement"), the Nominee is the record holder of the Stockholder Warrants and 1,000 shares of Holding Common Stock, which constitutes 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 International Stock Exchange of the United Kingdom and the Republic of Ireland, Ltd. 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 CDC were each organized in 1987 in connection with the distribution. 3333 Development Corporation, a wholly-owned subsidiary of Holding ("Development"), is the sole general partner of CDC. At present, Centex, Holding and CDC 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, 1997 (the "Report") relates to Centex and its subsidiaries. PART B of this Report relates to Holding (and its subsidiary, Development) and to CDC. This Report should be read in conjunction with the proxy statements of Centex and Holding in connection with their respective 1997 annual meetings of stockholders, the Annual Report to Stockholders of Centex for the fiscal year ended March 31, 1997 (the "Centex 1997 Annual Report") and the Annual Report to Stockholders of Holding and CDC for the fiscal year ended March 31, 1997 (the "Holding/CDC 1997 Annual Report"), portions of which are incorporated by reference into this Report. Portions of the Centex 1997 Annual Report and the Holding/CDC 1997 Annual Report are filed as an Exhibit to this Report. For a complete understanding of the tandem traded securities, PART A and PART B of this Report should be read in combination. Information concerning the earnings and financial condition of the three companies, on an aggregate basis, is included in Note (H) of the Notes to Consolidated Financial Statements of Centex Corporation and subsidiaries on pages 33-35 of the Centex 1997 Annual Report. 2 3 FORM 10-K TABLE OF CONTENTS PAGE ---- JOINT EXPLANATORY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Part A. CENTEX CORPORATION AND SUBSIDIARIES PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . 19 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . 20 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . 21 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . 21 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . 22 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . 22 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . 22 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ------------------------------------------------- PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. PART I PAGE ---- Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . 28
3 4 TABLE OF CONTENTS (CONTINUED) PART II PAGE ---- Item 5. Market for Registrants' Common Equity and Related Stockholder Matters . . . . . . 29 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . 31 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . 31 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . 34 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . 37 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . 39 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-41 ------------------------------------ INDICES TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42-44 3333 HOLDING CORPORATION AND SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45-46 CENTEX DEVELOPMENT COMPANY, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47-49
4 5 PART A. CENTEX CORPORATION AND SUBSIDIARIES PREFATORY STATEMENT PART A of this Report includes information relating to Centex Corporation and subsidiaries ("Centex" or the "Company"), File No. 1-6776. See Joint Explanatory Statement on page 2 of this Report. References to Centex or the Company in this Report shall include Centex and its subsidiaries unless the context otherwise requires. Reference is made to PART B of this Report for information relating separately to 3333 Holding Corporation ("Holding") and its subsidiary, 3333 Development Corporation ("Development"), and to Centex Development Company, L.P. ("CDC" or the "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 30, 1997, 29,088,120 shares of Centex Common Stock, which are traded on the New York Stock Exchange ("NYSE") and The International Stock Exchange of the United Kingdom and the Republic of Ireland, Ltd., 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. Centex's Home Building business has expanded to include both Housing and Manufactured Housing. Centex is one of the nation's largest home builders, having built and delivered, through its subsidiary Centex Homes, 13,107 homes during its fiscal year ended March 31, 1997. Centex's Housing operations currently involve the construction and sale of single-family and multi-family homes in 269 neighborhoods in 52 different markets. These activities also include the purchase and development of land. Centex has participated in the home building business since 1950. Centex entered into the Manufactured Housing business during March 1997 when Centex Real Estate Corporation ("CREC") acquired 78% of Cavco Industries, Inc.'s ("Cavco") outstanding common stock. Cavco is the largest producer of manufactured housing in Arizona as well as the nation's largest producer of park model homes, having delivered 4,893 manufactured housing units during its most recent fiscal year ended September 30, 1996. Centex operates its Investment Real Estate business segment under the Vista Properties Company name. During the quarter ended June 30, 1996, Centex's Housing subsidiary completed a business combination transaction and reorganization with Vista Properties, Inc. ("Vista"), increasing Centex's ownership of Vista's common stock from approximately 53% to 99.975%. Vista has changed its name to Centex Real Estate Corporation. Centex's Financial Services operations in fiscal 1997 included mortgage origination and other related services on homes sold by Centex subsidiaries and by third parties, including recent expansion into home equity lending. Centex has been in the mortgage banking business since 1973. Centex is a leading retail mortgage originator (originating approximately $5.4 billion of residential mortgages in fiscal 1997). In 1988 the Company acquired a savings and loan operation in Central Texas. The savings and loan deposits and branch operations were sold in December 1994. 5 6 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 facilities and the production, distribution and sale of gypsum wallboard, readymix concrete and aggregates. During the quarter ended June 30, 1994, Centex Construction Products, Inc. ("CXP") completed an initial public offering of 51% of its stock and began trading on the NYSE under the symbol "CXP". As a result of CXP's repurchase of its own stock during the quarter ended June 30, 1996, Centex's ownership interest in CXP has increased to more than 50% (51.4% as of March 31, 1997). Accordingly, CXP's fiscal 1997 financial results have been consolidated with those of Centex. Centex entered the contracting and construction services business in 1966 with the acquisition of a Dallas-based contractor which had been in business since 1936. Additional significant acquisitions of construction companies were made in 1978, 1982 and 1990. Centex currently ranks among the nation's largest general building contractors. The contracting and construction activities of the Company 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 CDC. Reference is made to PART B of this Report for a discussion of the business of CDC. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Note (K) of the Notes to Consolidated Financial Statements of Centex on pages 36-39 of the Centex 1997 Annual Report contain additional information about the Company's business segments for years ended March 31, 1997, 1996 and 1995 and are incorporated herein by reference. NARRATIVE DESCRIPTION OF BUSINESS HOME BUILDING HOUSING The Company's Housing operations primarily involve the purchase and development of land or lots as well as the construction and sale of single- family and multi-family homes. The Company has been one of the leading U.S. builders of single-family detached homes, by the number of units produced in a calendar year, from 1989 to 1996. Centex is also the only company to rank among Professional Builder's top 10 home builders for each of the past 28 years. Centex sells to both first time and move-up buyers. Approximately 93% of the houses Centex sells are single-family detached homes and the remainder are townhomes and low-rise condominiums. Markets Centex follows a strategy of reducing exposure to local market volatility by spreading operations across geographically and economically diverse markets. Centex presently builds in 52 market areas in 20 states. The markets are listed below by geographic areas. WEST California - Vallejo/Fairfield/Napa Visalia/Tulare Oakland Riverside/San Bernardino Stockton/Lodi Orange County San Francisco Los Angeles/Long Beach Sacramento Ventura Bakersfield San Diego Fresno
6 7 Washington State - Reno, Nevada Tacoma Portland, Oregon Seattle MIDWEST Chicago, Illinois Indianapolis, Indiana Minneapolis/St. Paul, Minnesota Columbus, Ohio Colorado - Denver Boulder/Longmont EAST Nashville, Tennessee North Carolina - Virginia - Charlotte/Gastonia Washington, D.C. Raleigh/Durham Norfolk/Virginia Beach South Carolina - Baltimore, Maryland Charleston Trenton, New Jersey Columbia Atlanta, Georgia Greenville/Spartanburg SOUTHEAST Florida - Jacksonville Naples Daytona Beach Ft. Myers/Cape Coral Tampa/St. Petersburg West Palm Beach/Boca Raton Sarasota/Bradenton Melbourne/Titusville Orlando Ft. Lauderdale Lakeland/Winter Haven SOUTHWEST Texas - Phoenix/Mesa, Arizona Dallas Albuquerque, New Mexico Ft. Worth/Arlington Houston Austin San Antonio
In fiscal 1997, Centex closed 13,107 houses, including first time, move-up and, in some markets, custom homes, ranging in price from approximately $70,000 to about $890,000 with the average sale price being approximately $172,000. In the Dallas and San Antonio locations, Centex has custom home divisions which offer higher-end homes. Summarized below by geographic area are Centex's home closings, sales (orders) backlog and sales (orders) for each of the five fiscal years ended March 31, 1997.
For the Fiscal Years Ended March 31, ------------------------------------------------- 1997 1996 1995 1994 1993 ------ ------ ------ ------ ------ CLOSINGS (IN UNITS): West 2,955 2,347 2,454 1,973 1,358 Midwest 1,337 1,276 1,283 1,114 1,118 East 2,875 2,804 2,921 2,599 2,118 Southeast 2,334 2,241 2,632 2,895 2,433 Southwest 3,606 3,302 3,674 3,982 3,252 ------ ------ ------ ------ ------ 13,107 11,970 12,964 12,563 10,279 ====== ====== ====== ====== ======
7 8 AVERAGE SALES PRICE (000'S) $ 172 $ 164 $ 159 $ 147 $ 138 ======= ======= ====== ====== ====== SALES (ORDERS) BACKLOG, AT THE END OF PERIOD (IN UNITS): West 968 980 603 756 663 Midwest 441 652 442 622 461 East 861 1,121 918 1,279 1,192 Southeast 919 1,106 892 1,387 1,260 Southwest 1,119 1,674 1,132 1,751 1,575 ------ ------ ------ ------ ------ 4,308 5,533 3,987 5,795 5,151 ====== ====== ====== ====== ====== SALES (ORDERS) (IN UNITS): West 2,943 2,724 2,301 2,066 1,440 Midwest 1,126 1,486 1,103 1,275 1,092 East 2,615 3,007 2,560 2,686 2,522 Southeast 2,147 2,455 2,137 3,022 2,671 Southwest 3,051 3,844 3,055 4,158 3,696 ------ ------ ------ ------ ------ 11,882 13,516 11,156 13,207 11,421 ====== ====== ====== ====== ======
Inventory Turnover The Company's policy has been to acquire land with the intent to complete the sale of housing units within approximately 24 - 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. The Company has acquired a substantial amount of its finished and partially improved lots and land under option agreements which are exercised over specified time periods, or in certain cases, as the lots are needed. The purchase of finished lots generally allows the Company to shorten the lead time to commence construction and reduces the risks of unforeseen improvement costs and volatile market conditions. Competition and Other Factors The housing industry is essentially a "local" business and is highly competitive. Centex competes in each of its market areas with numerous other home builders. The Company's Housing operations account for approximately 1% of the total housing starts in the United States. The main competitive factors affecting Centex's Housing 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 the Company 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 environment affects both the demand for housing constructed by the Company and the Company's 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. The Company 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 protection of endangered species. The Company is also subject to other rules and regulations in connection with its manufacturing and sales activities, including requirements as to building materials to be used and building designs. The Company's homes are inspected by local authorities. All of the foregoing regulatory requirements are applicable to all home building companies, 8 9 and to date, compliance with the foregoing requirements has not had a material impact on the Company. The Company believes that it is in material compliance with all such requirements. 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 and services as well as land. MANUFACTURED HOUSING Manufactured Housing operations involve the manufacture of quality residential and recreational homes and the sale thereof through a network of independent dealers. The Company entered the Manufactured Housing industry in March 1997 when CREC acquired 78% of Cavco's outstanding common stock at $26.75 per share for a total of $74.3 million. Prior to the acquisition, Cavco's common stock was publicly traded on the NASDAQ National Market. Markets Cavco is the largest producer of manufactured housing in Arizona as well as the nation's largest producer of park model homes, having delivered 4,893 manufactured housing units during its most recent fiscal year ended September 30, 1996. The Company currently operates three manufactured housing plants in the Phoenix area and is building a plant near Albuquerque, New Mexico, which will be that state's first manufactured housing operation. The Company sells its manufactured homes through a network of independent dealers and generally does not sell products directly to the general public. The retail prices of the Company's manufactured homes are set by individual dealers and not by the Company. Many of the Company's independent dealers operate more than one retail outlet. As of September 30, 1996, the Company had approximately 200 outlets in 10 states, Canada and Japan, of which there were approximately 103 in Arizona, 27 in New Mexico, 20 in Colorado, 15 in Utah, 6 in Texas, 4 each in Nevada and Washington, 3 in California, 2 in Idaho, 1 in Oregon, 7 in Canada and 8 in Japan. Most of the Company's dealers sell competing products, although from time to time the Company also may enter into exclusive agreements with certain dealers. The Company's dealers finance their purchase of manufactured homes through floor plan financing arrangements with third-party lenders. Generally, the Company receives a commitment from the dealer's lender for each order, which is earmarked for the home ordered, identified by its serial number. The Company then manufactures the home and ships it to the dealer at the dealer's expense. Payment is due from the third-party floor plan 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 the Company's backlog. The Company is contingently liable under terms of repurchase agreements with the third-party 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 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. The Company has not incurred any significant losses from these arrangements since its inception. The Company extends a limited warranty to original retail purchasers of manufactured housing products. The Company warrants structural components for 12 months and nonstructural components for 90 days. The Company's warranty does not extend to installation, setup or appliances. Appliances are warranted by their original manufacturer. The Company's backlog of firm orders for manufactured homes as of March 31, 1997 was approximately $5.7 million (350 floors). The Company currently requires approximately six to eight weeks to fill an order. The Company presently anticipates that the entire backlog at March 31, 1997 will be filled during the next fiscal year. 9 10 Competition and Other Factors The Company estimates that there are approximately seven other manufacturers competing for a significant share of the Arizona market. The Company believes that its business represents an approximate 31% share of the Arizona market and a small share of the market in such other states. The Company believes the principal factors affecting competition in the manufactured housing market are price, design, product quality and reliability, reputation and service. The Company has not experienced any material difficulty in purchasing its raw materials or component parts. The Company buys wood, wood products, aluminum, steel, tires, hardware, windows and doors from manufacturers and distributors located primarily in California and Arizona. Approximately 39% of the unit cost of the Company's manufactured homes is attributable to raw wood products. The majority of the other component parts of the Company's homes are purchased manufactured components. The Company believes that compliance with federal, state and local environmental protection regulations will not have a material adverse effect on its capital expenditures, earnings or competitive position. INVESTMENT REAL ESTATE During the quarter ended September 30, 1995, the Company acquired certain equity interests in Vista for a net investment of approximately $85 million in cash. The acquisition by the Company of equity interests in Vista was a part of a pre-packaged bankruptcy plan which was approved by the Unites States Bankruptcy Court for the District of Delaware. In June 1996, Centex's Housing subsidiary completed a business combination transaction and reorganization with Vista that increased Centex's ownership of Vista's common stock from approximately 53% to 99.975%. Under the terms of the combination transaction, Centex's Housing assets and operations were contributed to Vista in exchange for 12.4 million shares of Vista's common stock. As a result of the combination, Centex's Investment Real Estate portfolio, valued in excess of $125 million, was reduced to a nominal "book basis" after recording certain Vista-related tax benefits. Accordingly, as these properties are developed or sold, the net sales proceeds will be reported as operating margin. "Negative Goodwill" recorded as a result of the business combination is being amortized to earnings over approximately seven years which represents the estimated period over which the land will be developed and/or sold. As of March 31, 1997, the Investment Real Estate Group's property portfolio consisted of land located in nine states: Texas, Florida, California, Georgia, New Jersey, North Carolina, Virginia, Tennessee and Colorado. The Company has major Housing operations in each of the markets where Vista owns substantial property. Vista's real property portfolio generally consists of land that is zoned, planned or developed for single-family and multi-family residential, office, retail, industrial and other commercial uses. FINANCIAL SERVICES Financial Services operations involve the financing of housing, home equity lending and the sale of title and other insurance coverages. These activities include mortgage origination, the sale of title and other insurance coverages and other related services for homes sold by subsidiaries and by others. The Savings and Loan included the operations of CTX Holding and its subsidiary, Texas Trust Savings Bank, FSB ("Texas Trust") which were sold in December 1994. 10 11 MORTGAGE BANKING CTX Mortgage Company ("CTX") was established in 1973 to provide mortgage financing for homes built by Centex Homes. The opening of CTX mortgage offices in substantially all of Centex Homes' housing markets has enabled it to consistently provide mortgage financing for an average of 71% of the homes built by Centex Homes ("Builder Loans") over the past five years. In 1985, CTX expanded its operations to include third-party loans ("Spot Loans") that are not associated with the sale of homes built by Centex. At March 31, 1997, Mortgage Banking had 196 offices located in 31 states. The offices vary in size depending on volume in each locality. The unit breakdown of Builder and Spot Loans for the five years ended March 31, 1997 are set forth in the following table:
For the Fiscal Years Ended March 31, ----------------------------------------------- 1997 1996 1995 1994 1993 ------ ------ ------ ------ ------ LOAN TYPES: Builder 9,489 8,445 8,503 9,289 7,758 Spot 37,673 33,151 28,548 49,254 30,543 ------ ------ ------ ------ ------ 47,162 41,596 37,051 58,543 38,301 ====== ====== ====== ====== ====== ORIGINATION VOLUME (IN BILLIONS) $5.4 $4.9 $4.2 $6.4 $4.2 PERCENT OF CENTEX CLOSINGS FINANCED 72% 71% 66% 74% 75%
CTX provides mortgage origination and other mortgage related services for 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 loans are first-lien mortgages secured by one- to four-family residences. A majority of the conventional loans are conforming loans which qualify for inclusion in guaranteed programs sponsored by the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"). The remainder of the conventional loans are pre-approved and individually underwritten by private investors who purchase such loans on a whole-loan basis for their investment portfolios. CTX'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 sells its right to service the mortgage loans to various loan servicing companies, and therefore retains no mortgage servicing rights. Accordingly, CTX avoids the servicing risk associated with early payoffs and foreclosures. CTX 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, the interest rate risk is minimized. CTX 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 such loan to the purchaser, CTX 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 one of the important sources of income. 11 12 Competition and Other Factors The mortgage banking industry in the United States is highly competitive. CTX 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. During fiscal 1997, Mortgage Banking continued to operate in a very competitive environment. CTX is subject to the rules and regulations of, and examinations by, the FNMA, FHLMC, 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 residential mortgage 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 CTX, 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. CTX is required to maintain specified net worth levels by, and submit annual audited financial statements to HUD, VA, FNMA, FHLMC and GNMA and certain state regulators. CTX's affairs are also subject to examination by the Federal Housing Commissioner at all times to assure 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 Federal Truth-In-Lending Act, the Real Estate Settlement Procedures Act and the regulations promulgated under such statutes, which 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 mortgage loan by the mortgagor. During fiscal 1995, Centex Home Equity Corporation ("CHEC"), formerly known as Nova Credit Corporation (through March 31, 1997), entered the "B & C" (sub-prime) mortgage and second lien markets, originating "B & C" first mortgages and second mortgages for home improvements and home equity lines of credit. The Company's mortgage lending activities consist of originating and selling home equity loans. These loans are primarily secured by one- to four-family residential properties, including low- and high-rise condominiums, single-family detached homes, single-family attached homes and planned unit developments. Home equity lending is made to borrowers for the purpose of refinancing existing mortgage loans, debt consolidation, home improvements and a variety of other purposes. Other financial-related services provided by CTX affiliates include acting as an agent for the issuance of homeowners' insurance policies and title insurance policies. Since the beginning of fiscal year 1995, CTX has entered into joint venture agreements with nine third-party home builders to provide mortgage origination for homes built by such home builders. At March 31, 1997, these operations had 36 offices in 4 states. In April 1996, Centex acquired substantially all of the assets of Advanced Financial Technology, Inc. ("Adfitech") and Loan Processing Technologies, Inc. ("LPT"), both headquartered in Oklahoma City, Oklahoma. Adfitech is one of the largest and lowest cost providers of mortgage quality control services, and LPT owns and operates an automated mortgage processing system. The acquisitions should expand and create more flexible mortgage processing capacity for Financial Services, enhancing Financial Services' existing systems capabilities. LPT is also offering these processing services to other mortgage companies. SAVINGS AND LOAN In December 1988, Centex acquired the operations of four Texas savings and loan associations under the Federal Savings and Loan Insurance Corporation's (the "FSLIC") assisted transactions process commonly known as the "Southwest Plan". The acquisition was made by Texas Trust, a federal stock savings bank and an indirect wholly-owned subsidiary of Centex. 12 13 In December 1994, Texas Trust negotiated an early termination of various agreements with the Federal Deposit Insurance Corporation (as successor to the FSLIC), and in December 1994 sold Texas Trust's branch operations to a financial institution and all deposit liabilities were assumed by the purchaser. Immediately following the branch sale, Texas Trust was dissolved, thereby completing Centex's exit from the savings and loan industry. CONSTRUCTION PRODUCTS Centex's Construction Products operations include the manufacture, production, distribution and sale of portland 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, CXP completed an initial public offering of 51% of its stock and began trading on the NYSE under the symbol "CXP". As a result of CXP's repurchase of its own stock during the quarter ended June 30, 1996, Centex's ownership interest in CXP has increased to more than 50% (51.4% as of March 31, 1997). Accordingly, CXP's financial statements for the year ended March 31, 1997 have been consolidated with those of Centex. References to CXP include its subsidiaries unless the context otherwise requires. CEMENT CXP operates cement plants in Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. The plants in Buda and LaSalle are owned by separate joint ventures in which CXP 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. The Company's net cement production, excluding the joint venture partners' 50% interest in the Buda and LaSalle plants, totaled 1.9 million tons both in fiscal 1997 and 1996. Total net cement sales were 2.1 million tons both in fiscal 1997 and 1996, as all four cement plants sold all of the product they produced. During the past two years, the Company purchased minimal amounts of cement from others to be resold. 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 from the quarries owned or leased by CXP or the 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 CXP or the joint ventures or are purchased from outside suppliers and are readily available. CXP's management estimates that its primary raw material reserves, either owned, leased or available, will be adequate to permit production at present capacities for the foreseeable future at all four of the existing plants. The Company's cement plants use coal as their primary fuel, but are equipped to burn natural gas as an alternative. The Company has not used hazardous waste-derived fuels in its plants. The Buda and LaSalle plants have been permitted to burn, and are burning, scrap tires as a partial fuel alternative. Electric power is also a major cost component in the manufacture of cement. The Company has sought to diminish overall power costs by adopting interruptible power supply agreements which may expose CXP to some production interruptions during periods of power curtailment. Markets and Distribution The principal markets for CXP's 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, Southern Idaho, Northern Colorado and Western Nebraska (serviced by the Laramie, Wyoming plant). 13 14 Distribution of cement is generally made by common carriers or customer pickup and, to a lesser degree, by trucks owned and operated by CXP. In addition, the Company transports cement principally by rail to its storage and distribution terminals located in Roanoke (D/FW), Waco, Corpus Christi, Houston and Orange, Texas; Hartland, Wisconsin; Sacramento, California; Denver, Colorado; Salt Lake City, Utah; Rock Springs, Wyoming; North Platte, Nebraska and Bliss, Idaho, from which further distribution occurs. Cement produced by the Company's cement plants is sold primarily to readymix concrete producers and paving contractors. No single customer accounts for as much as 10% of the Company's total cement sales. Competition and Other Factors The cement business is highly competitive. In every regional market in which Centex sells cement, one or more other domestic producers compete for the available business. In addition, foreign companies compete in most of the Company's markets by importing cement into the U.S. CXP competes by operating efficient cement plants, merchandising a high quality product and providing good service and competitive pricing. The Company also sells cement from terminals to expand each cement plant's marketing area. Demand for cement is highly cyclical and is closely related to the general level of the economy, new housing starts, government construction programs and other construction activities. The cement business is seasonal and requires some build-up of inventory during the winter, particularly in northern states, to meet peak demands from spring into the fall. GYPSUM WALLBOARD CXP owns and operates three gypsum wallboard manufacturing facilities, two located in Albuquerque and nearby Bernalillo, New Mexico and one located near Vail, Colorado. The Albuquerque plant was acquired in 1985 and was operated until early 1991. Following the start-up of the Bernalillo plant in the spring of 1990, the Company elected to discontinue operations at the Albuquerque plant due to weak market conditions. Operations at the Albuquerque plant were recommenced in May 1993 due to improvements in wallboard demand and higher prices. On February 26, 1997, CXP purchased the equity interest of a company that owned the gypsum wallboard plant and accompanying electric power cogeneration facility near Vail, Colorado. The plant originally commenced production in early 1990 and had been operated by an independent producer until the acquisition by CXP. The Company 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 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 The Company 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 the Company and located near its plants. The New Mexico and Colorado mines and quarries are estimated to contain approximately 60 million tons and 7 million tons of proved and probable gypsum reserves, respectively. Based on its current production capacity, the Company estimates that the life of its existing gypsum rock reserves is approximately 100 years and 20 years, respectively. The Colorado plant controls 99 unpatented placer mining claims on 1,980 acres of land under the jurisdiction of the U.S. Bureau of Land Management. The land, which is adjacent to the present quarry, has not been drilled and therefore, the reserves cannot be classified as proven or probable. Management believes that these claims contain substantial quantities of gypsum rock. 14 15 Paper used in manufacturing gypsum wallboard is purchased by the Company from third party suppliers. Approximately 40% of the Company's requirements are under contract for a two year period with an annual automatic renewal. The remainder of the paper requirements are purchased on the open market from various suppliers. The Company does not believe that the loss of a supplier would have a material, adverse effect on its business. The Company's wallboard plants use large quantities of natural gas and electrical power. The Vail, Colorado plant's power is supplied by the cogeneration power facility acquired along with the gypsum wallboard plant in February, 1997. Markets and Distribution The Company markets wallboard to numerous building materials dealers, wallboard specialty distributors, home center chains and other customers located throughout the U.S. No single customer accounted for as much as 10% of the Company's total gypsum wallboard sales during fiscal 1997. Although wallboard is distributed principally in regional markets, the Company and certain other producers have the ability to ship wallboard by rail outside their usual regional distribution area to take advantage of these other regional increases in demand. The Company's rail distribution capabilities permit it to reach customers in all states west of the Mississippi River and many eastern states. In addition, the Company maintains a distribution center in Albuquerque, New Mexico and four reload yards in Florida, Alabama and Illinois. Competition and Other Factors The gypsum wallboard industry is highly competitive. There are nine principal manufacturers of wallboard operating a total of 73 plants. The Company estimates that the three largest producers, none of which is the Company, account for 80% of wallboard sales in the U.S. 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 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. The principal sources for demand for gypsum wallboard are residential construction, repair and remodeling and non-residential construction. While the gypsum wallboard industry is highly cyclical, recent growth in the repair and remodeling segment, together with certain trends in new residential construction activity, have partially mitigated the impact of fluctuations in overall levels of new construction. READYMIX CONCRETE AND AGGREGATES CXP's readymix concrete and aggregates operations are located in Austin, Texas and Northern California. During fiscal 1996, CXP sold its aggregates-only, marginally profitable, nonstrategic production facility near Fort Worth, Texas. In addition, CXP has a 10,000 acre aggregates deposit in Northern California which contains in excess of 2 billion tons of reserves. The Company sells aggregates from this deposit in the Sacramento, California area and nearby counties. ENVIRONMENTAL MATTERS The construction products industry, including the operations of the Company's Construction Products Group, 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 15 16 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 the Company's sites are listed as a "Superfund site." The Company's 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 nonhazardous solid waste which may include cement kiln dust ("CKD"). Because of a RCRA exemption, known as the Bevill Amendment, CKD generated in the Company's 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, such 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, the Company collected and stored CKD on-site at its cement plants. The Company 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. The Company's cement kilns utilize coal, natural gas, minimal amounts of self-generated waste oil, and scrap tires in the Illinois and Texas plants, as fuel. Currently, the Company recycles substantially all CKD related to present operations at all of its cement facilities. When the U.S. EPA removes the CKD exemption and develops particular CKD management standards in the future, the Company might 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. 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. The Company 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 the Company in the future, the amounts of which are not presently determinable. The Company's U.S. operations have 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 the Company at a competitive disadvantage. The Federal Water Pollution Control Act, commonly known as the Clean Water Act ("Clean Water Act"), provides comprehensive federal regulation of all sources of water pollution. In September 1992, the Company filed a number of applications under the Clean Water Act for National Pollutant Discharge Elimination System ("NPDES") stormwater permits. Management believes that the Company's 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, the Company cannot predict what Environmental Laws will be enacted or adopted in the future or how such future Environmental Laws 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. 16 17 With respect to some of the Company's 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, the Company 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. The Company 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 nationwide. As a group, Centex's Contracting and Construction Services subsidiaries rank 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 40% of its business mix during recent years. New contracts for fiscal 1997 totaled $981 million versus $857 million for fiscal 1996. The backlog of uncompleted contracts at March 31, 1997 was $1.11 billion, compared to $1.20 billion at March 31, 1996. 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., Centex-Simpson Construction Company, Inc., and Centex Landis Construction Co., Inc., is headquartered in Dallas, Texas with operational offices in Virginia and Louisiana. This company will pursue competitively bid projects nationwide, in addition to negotiated work in its regional market areas. CENTEX-RODGERS CONSTRUCTION COMPANY - This nationwide healthcare construction specialist is headquartered in Nashville, Tennessee with operational offices in San Diego and Sacramento, California; Detroit, Michigan and West Palm Beach, Florida. CENTEX-ROONEY CONSTRUCTION COMPANY, INC. - This Ft. Lauderdale-based subsidiary performs all types of work, principally within the state of Florida. 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. As a general contractor or construction manager, Centex provides the supervisory personnel for the construction of the building or facility. In addition, Centex may perform varying amounts of the actual construction work on a project, but will generally hire subcontractors to perform the majority of the work. As a result, the Company's Contracting and Construction Services operations require a relatively small asset base. Construction contracts are primarily entered into under two formats: competitively-bid and negotiated jobs. In a competitively-bid format, Centex 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. The Company's highest margins in contracting operations have historically been on competitively-bid jobs. Currently, the margins on competitively-bid and negotiated jobs are about equal. On average, about half of Centex's projects are competitively-bid, public jobs and the other half are negotiated contracts with private owners. The Company's public work for federal, state and local governments includes hospitals, jails, airports, parking garages, office buildings, military facilities, post offices and convention and performing arts centers. Most of Centex's private owner contracts are for hotels, medical facilities and office buildings, plus some correctional facilities and shopping centers. 17 18 Competition and Other Factors The construction industry is very competitive, and Centex competes with numerous other companies. With respect to competitively-bid projects and negotiated healthcare work, Centex 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, Centex's subsidiaries compete primarily in the general geographical area where they are located and with other local, regional and national contractors. Centex solicits new projects by attending project bid meetings and meeting with builders and owners and through existing customers. Centex competes successfully on the basis of its reputation, financial strength, knowledge and understanding of its clients' needs. The Company's Contracting and Construction Services operations are affected by federal, state and local laws and regulations relating to worker health and workplace safety as well as Environmental Laws. With respect to health and safety matters, the Company believes that appropriate precautions are taken to protect employees and others from workplace hazards. Current Environmental Laws may require the Company'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 Company's Contracting and Construction Services 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 that compliance by the Construction Group 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. EMPLOYEES The breakdown of employees by line of business as of March 31, 1997 is presented in the following table:
Line of Business Employees ---------------- --------- Home Building Housing 2,385 Manufactured Housing 1,042 Investment Real Estate 15 Financial Services 2,360 Construction Products 1,053 Contracting and Construction Services 1,544 Other Operations 453 Corporate 74 ----- 8,926 =====
18 19 ITEM 2. PROPERTIES The Company, in connection with its Construction Products operations, operates cement plants, quarries and related facilities at Buda, Texas; LaSalle, Illinois; Fernley, Nevada and Laramie, Wyoming. The Buda and LaSalle plants are owned by separate joint ventures in which CXP has a 50% interest. The Company's principal aggregate plants and quarries are located in Austin, Texas and Marysville, California. In addition, the Company operates gypsum wallboard plants in Albuquerque and nearby Bernalillo, New Mexico and near Vail, Colorado. In April, 1994, the Company's formerly wholly-owned subsidiary, Centex Construction Products, Inc., completed the sale of 51% of its stock through an initial public offering. As a result of repurchases during fiscal year 1997 by CXP of its common stock from the public, Centex now owns approximately 51.4% of the outstanding shares of CXP Common Stock. The Company, through its Manufactured Housing operations, owns two of its three facilities in the Phoenix, Arizona area, renting the third facility, and will lease a fourth facility currently under construction in Belen, New Mexico. Except for encumbrances on the Company's leasehold interest in the Belen, New Mexico facility (which is not material to the Company), none of the Company's facilities are pledged as security on its debts. See "Item 1. Business" on pages 5-18 of this Report for additional information relating to the Company's properties. ITEM 3. LEGAL PROCEEDINGS The management of the Company 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 Harrah's New Orleans Casino contract was suspended on November 22, 1995 due to a bankruptcy filing by the Harrah's Jazz Company partnership, the developer of the casino. Centex Landis Construction Co., Inc. ("Centex Landis") and its subcontractors filed claims against the partnership for completed but unpaid work. Centex Landis also filed a lawsuit against Harrah's Entertainment, Inc., parent company of the major partner in the partnership, to recover its claims. In late November 1996, Centex Landis and Harrah's reached a settlement which is conditioned upon Harrah's plan of reorganization becoming effective. It appears possible that the plan may become effective in the summer of 1997, assuming approval by the legislature of Louisiana of pending changes to the license agreement between the State and Harrah's. Approval by the legislature is by no means certain. If the plan does go into effect, Harrah's will pay $34 million in settlement of the claims of Centex Landis and its subcontractors. Upon payment of such sum, Centex Landis will resume construction of the casino. If the plan does not become effective, no assurance can be given as to how the claims of Centex and its subcontractors will be ultimately resolved. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 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. All of these executive officers except for John T. Egeland have been employed by the Company and/or one or more subsidiary of the Company for at least the past five years. All of these executive officers except for John T. Egeland were elected by the Board of Directors of the Company at its Annual Meeting on July 25, 1996, 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. 19 20
NAME AGE POSITIONS WITH CENTEX ----------------------------------- --- ------------------------------------------------------------------- John T. Egeland 42 Executive Vice President (since May 1997); Associates First Capital Corporation--Senior Vice President (from August 1995 to April 1997); Gemini Exploration Company--President (from August 1993 to August 1995); Northpark National Bank (Currently Comerica Bank-Texas)--Executive Vice President and Chief Investment Officer (from September 1989 to August 1993) Timothy R. Eller 48 President, Chief Executive Officer and Chief Operating Officer of Centex Real Estate Corporation (President and Chief Operating Officer since January 1990; Chief Executive Officer since July 1991; Executive Vice President from July 1987 to January 1990) William J Gillilan III 51 Chairman, Centex Housing Group (since January 1997); President and Chief Operating Officer (President from July 1991; until January 1997; Chief Operating Officer from January 1990 until January 1997; Executive Vice President from July 1989 until July 1991) Laurence E. Hirsch 51 Chairman of the Board and Chief Executive Officer (Chairman of the Board since July 1991; Chief Executive Officer since July 1988; President from March 1985 until July 1991) David W. Quinn 55 Vice Chairman of the Board and Chief Financial Officer (Vice Chairman of the Board since May 1996; Chief Financial Officer since February 1987; Executive Vice President from February 1987 until May 1996) Raymond G. Smerge 53 Vice President, Chief Legal Officer, General Counsel and Secretary (Vice President and Chief Legal Officer since September 1985; General Counsel and Secretary since April 1993) Barry G. Wilson 38 Controller (Controller since July 1996; Assistant Controller from April 1990 to July 1996)
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (See Item 7 below.) ITEM 6. SELECTED FINANCIAL DATA (See Item 7 below.) 20 21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information called for by Items 5, 6 and 7 is incorporated herein by reference to the information set forth under the following captions (on the page or pages indicated) in the Centex 1997 Annual Report:
ITEMS CAPTION IN THE CENTEX 1997 ANNUAL REPORT Pages ----- ---------------------------------------- ----- 5 Stock Prices and Dividends 2 5 Indebtedness (Note (E) to Consolidated Financial Statements of Centex) 28-29 6 Summary of Selected Financial Data 50-51 7 Short-term Debt and Long-term Debt (Note (E) to Consolidated Financial Statements of Centex) 28-29 7 Management's Discussion and Analysis of Results of Operations and Financial Condition 42-48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by this Item 8 is incorporated herein by reference to the Centex 1997 Annual Report as set forth in the Index to Consolidated Financial Statements and Schedules on page 22 of this Report (see Item 14). 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 24, 1997 Annual Meeting of Stockholders (the "1997 Centex Proxy Statement"):
ITEM CAPTION IN THE 1997 CENTEX 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
21 22 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.) 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) and (2) See the Index to Consolidated Financial Statements and Schedules below for a list of the Financial Statements and Financial Statement schedules filed herewith. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CENTEX 1997 ANNUAL REPORT PAGES ------------- CENTEX CORPORATION AND SUBSIDIARIES Data incorporated by reference to the Centex 1997 Annual Report: Report of Independent Public Accountants . . . . . . . . . . . . . 41 Statements of Consolidated Earnings for the Years Ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . 19 Consolidated Balance Sheets as of March 31, 1997 and 1996 . . . . . 20-21 Statements of Consolidated Cash Flows for the Years Ended March 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . 22 Statements of Consolidated Stockholders' Equity for the Years Ended March 31, 1997, 1996 and 1995 23 Notes to Consolidated Financial Statements . . . . . . . . . . . . . 24-40 Quarterly Results (Unaudited) . . . . . . . . . . . . . . . . . . . 49
Consolidated supporting schedules have been omitted either because the required information is contained in notes to the consolidated financial statements or because such schedules are not required or are not applicable. (3) EXHIBITS The information on exhibits required by this Item 14 is set forth in the Centex Index to Exhibits appearing on pages 42-44 of this Report. (b) Reports on Form 8-K: None. 22 23 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 June 27, 1997 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. June 27, 1997 /s/ LAURENCE E. HIRSCH ------------------------------------------- Laurence E. Hirsch, Chairman of the Board and Chief Executive Officer (principal executive officer) June 27, 1997 /s/ DAVID W. QUINN -------------------------------------------- David W. Quinn, Vice Chairman of the Board and Chief Financial Officer (principal financial officer) June 27, 1997 /s/ BARRY G. WILSON -------------------------------------------- Barry G. Wilson, Controller (principal accounting officer) Directors: Alan B. Coleman, Dan W. Cook III, William J Gillilan III, Laurence E. Hirsch, Clint W. Murchison, III, Charles H. Pistor, David W. Quinn, Paul R. Seegers, Paul T. Stoffel June 27, 1997 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. 23 24 PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. 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. ("CDC" or the "Partnership"), File No. 1-9625. See the Joint Explanatory Statement on page 2 of this Report. References to Holding in this Report shall include references to its subsidiary, 3333 Development Corporation, a Nevada corporation and the sole general partner of CDC ("Development"), unless the context otherwise requires. Because CDC is a separate reporting entity under the Exchange Act, the information required by Form 10-K is separately included even though CDC 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 CDC should be deemed provided with respect to Holding to the extent appropriate. Information relating to both Holding and CDC is included herein as a single disclosure where applicable or appropriate; all other information is set forth separately. Reference is made 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) 981-6700. 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 CDC, 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 (A) of the Notes to Combining Financial Statements of Holding and CDC (the "Holding/CDC Combining Financial Statements") included on page 57 of the Holding/CDC 1997 Annual Report, which Note (A) is incorporated herein by this reference. The principal liability of Holding is a note payable to Centex which had an unpaid balance of $7,000,000 at March 31, 1997. See "Item 13. Certain Relationships and Related Transactions". Presently, Holding is not engaged in any business other than its ownership and control of Development. The Amended and Restated Agreement of Limited Partnership of Centex Development Company, L.P. (the "Partnership Agreement"), which governs the operations of CDC, 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 CDC. Were Holding to engage in any other business activities, the Partnership Agreement would need to be amended to provide for the same. (b) CDC GENERAL DEVELOPMENT OF BUSINESS CDC 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 homebuilding 24 25 operations, and typically involves substantial acquisition and development indebtedness, Centex concluded that this new line of business could best be conducted through CDC, an independent, publicly traded entity which is not consolidated with Centex for financial reporting purposes. Development, a wholly-owned subsidiary of Holding, is the sole general partner of CDC. CDC's executive offices are located at 2728 N. Harwood, Suite 800, Dallas, Texas 75201; telephone (214) 981-6700. CDC was formed to manage, develop and sell (i) certain real estate, principally nonresidential, undeveloped land (the "Original Properties"), contributed to CDC by certain wholly-owned subsidiaries of Centex (the "Original Limited Partners"), and (ii) other properties acquired by CDC in the ordinary course of business (the "Additional Properties"). Pursuant to the initial issuance of Partnership units (the "Distribution"), the Original Limited Partners received an aggregate of 1,000 Class A Units of limited partnership interest in CDC (the "Class A Units") in exchange for the Original Properties, which at the time of their contribution to CDC, had a market value of approximately $76 million. All of the 1,000 Class A Units are currently owned by Centex affiliates. Under the Partnership Agreement, the holders of the Class A Units of limited partnership interest are entitled to a 9% preferred return (the "Preferred Return") on their unrecovered capital and certain other distributions of cash and other property and allocations of income and loss in preference to other limited partners. See Note (F) of the Notes to the Holding/CDC Combining Financial Statements included on pages 61-62 of the Holding/CDC 1997 Annual Report, which Note (F) is incorporated herein by this reference. Shortly after March 1987, when CDC was formed, the market for real estate development of the type contemplated for CDC at its formation began to deteriorate, and for several years was not particularly attractive. In fact, soon after CDC was formed, this market suffered a recession and was heavily saturated for an extended period of time with depressed properties being disposed of by the Resolution Trust Corporation, banks and other financial institutions. Accordingly, new development opportunities were limited and certain of CDC's properties did not reach the potential necessary to achieve the originally targeted objectives. Notwithstanding the foregoing, Centex management continues to believe that the original purposes for the formation of CDC remain valid. CDC has actively been developing and selling the Original Properties. Of the twenty-four Original Properties contributed to the Partnership, only four remain. CDC has also acquired, developed, sold, or otherwise disposed of Additional Properties, including two projects in the Orlando, Florida area which were developed into nearly 1,150 residential lots, a portion of a 1,077 acre development in San Clemente, California zoned for residential and commercial development, and the Timberhill Shopping Center in Sonora, California. Most recently, CDC joint ventured the development of an apartment project in College Station, Texas. The project is currently being marketed for sale. During fiscal 1997 CDC formed a limited partnership with Centex Multi-Family Company, a Centex affiliate, to design and develop pre-sold apartment complexes. The initial areas targeted for development include land owned by CDC and Centex affiliates. Given recent improvement in certain real estate markets and the economy in general, CDC management is evaluating the potential for development of retail facilities and other types of real estate for investment or sale in certain strategic markets, either directly or through partnerships or joint ventures with others. Management of Centex and CDC and Holding believe that the existing relationships between them, including development and general management assistance, are necessary in order to maximize the potential for these additional development activities. DESCRIPTION OF CDC SECURITIES Pursuant to the terms of a nominee agreement among Centex Holding, CDC 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. 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 25 26 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 In general, the Partnership Agreement authorizes CDC to engage in all aspects of the real estate business, provided that all activities related to the Original Properties must be conducted pursuant to the Plan for Original Properties, which is an exhibit to the Partnership Agreement (the "Plan"). The Plan prescribes in general terms the manner by which CDC will conduct its activities in respect to the Original Properties, including guidelines as to sales, maintenance and zoning of the Original Properties, and places restrictions on these and other types of activities, including, in certain instances, the sale of any Original Property without the consent of its limited partners. CDC continues to analyze potential uses for certain of the remaining Original Properties in order to determine the highest and best use that can be made of the tracts. CDC will decide whether to seek zoning changes to accommodate a higher use, further develop these properties, or to seek the sale of all or a portion thereof. If not developed sooner, the Plan provides that CDC will generally endeavor to sell the remaining Original Properties over time for the best price available, taking into account the condition of the marketplace and CDC's cash flow requirements. The Partnership had a backlog of land sales of approximately $14 million as of March 31, 1997, and $6 million as of March 31, 1996. The ultimate sales prices may vary due to contractual clauses that adjust the price depending upon the closing date. Pursuant to an agreement with CDC (the "Management Agreement"), Holding is obligated to provide property management and development assistance and expertise to CDC, including seeking zoning changes and special use permits, negotiating utility agreements, and securing necessary rights of way and access on behalf of CDC, and, consistent with the Plan, to develop and/or contract for sale and sell on behalf of CDC some or all of such properties in exchange for compensation for its efforts. Since Holding currently does not have any employees, it contracts with Centex subsidiaries to provide such services to CDC. Management of CDC believes that CDC receives these services at a cost below that which unaffiliated third parties would charge for similar services. See "Item 10. Directors and Executive Officers of the Registrant--Management Agreement". Centex and its affiliates continue to conduct many facets of real estate development and, for this reason, may be in competition with CDC in certain activities and projects. Because the relationship between Centex and its affiliates, on the one hand, and Holding, Development and CDC, on the other hand, involve decisions by Centex and its affiliates, directly or indirectly, on behalf of Holding, Development and CDC, the transactions and activities of Holding, Development and/or CDC may lack the benefit of arm's length bargaining and may involve conflicts of interest. Holding, Development and CDC believe, however, that adequate safeguards, including Boards of Directors of Holding and Development consisting of a majority of independent directors, sufficiently prevent any such conflicts from adversely affecting the business of Holding, Development or CDC. 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 CDC 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" below in this Item 1. CDC is not a real estate investment trust, and therefore CDC'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 CDC at March 31, 1997, see "Item 2. Properties". 26 27 COMPETITION AND REGULATION Within the geographical areas where the remaining Original Properties and the Additional Properties are located, CDC 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 CDC, or may have greater financial resources and longer operating histories than CDC. CDC 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. CDC's properties are generally located in geographical areas where there is moderate to good demand for land suitable for development, including Florida, New Jersey and Texas. Management believes the CDC properties are well positioned to compete with similar properties within each of these geographic areas. Ownership and development of each of CDC'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 Original Properties and the Additional Properties may be subject to zoning limitations that may not permit development of such properties for their highest and best use. The ability of CDC to obtain favorable zoning changes may affect the ultimate value of such properties to CDC or to a third-party purchaser. 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) CDC The remaining Original Properties and the Additional Properties consist of properties located in Texas, New Jersey and Florida. Such properties predominantly consist of undeveloped sites zoned for light industrial, agricultural, general retail, office industrial, business park, research and development and single-family and multi-family residential property purposes. At March 31, 1997, there were four remaining Original Properties owned by CDC. None of the Additional Properties are considered material. Set forth below is a brief description of such properties, including the present zoning. Colony South Planning Unit. Colony South Planning Unit is located in suburban Dallas, Texas in the cities of The Colony (approximately 272 acres) and Lewisville (approximately 121 acres). The Colony acreage is zoned office, general retail, and business park. The Lewisville acreage is zoned light industrial. East Windsor. East Windsor is a development 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, 1997 there were 485 remaining acres owned by CDC. One hundred seventy-four quarter acre lots and 46 half acre lots have been sold to Centex Homes, a general partnership wholly-owned by Centex Real Estate Corporation ("CREC") and subsidiaries of CREC. Zoning is in place for an additional 274 quarter acre lots and 76 half acre lots. Bryan Place. Bryan Place is located in Dallas, Texas just east of downtown and Central Expressway. It is comprised of 20 non-contiguous parcels, zoned office, commercial, retail and residential ranging from approximately 2,000 square feet to 154,000 square feet. The total area of the property is approximately 674,000 square feet of which 578,000 square feet are Original Properties and the balance are Additional Properties. 27 28 Carrollton Property. The Carrollton Property is located in the City of Carrollton, a suburb of Dallas, Texas. This property consists of one office and five fabrication-warehouse buildings on approximately 17 acres, zoned industrial, with a rail spur. This property is leased to Centex Homes through March 31, 1998; however, subsequent to year end this property was sold to Centex Homes for $2,866,000. See "Item 13. Certain Relationships and Related Transactions." ITEM 3. LEGAL PROCEEDINGS Holding is not a party to, and its assets are not the subject of, any material pending legal proceedings. CDC 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 CDC, would not have a material adverse effect on the financial condition or operations of CDC. 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. All of such officers have served in their capacities since the organization of Holding, except as indicated. CDC has no executive officers. The executive officers of Holding set forth below hold the same offices in Development, the general partner of CDC, as disclosed in "Item 10. Directors and Executive Officers of the Registrant--Directors and Executive Officers of Development".
NAME POSITION AGE ---- -------- --- J. Stephen Bilheimer President (1) 65 Kimberly A. Pinson Vice President and Treasurer (2) 32
(1) Mr. Bilheimer is an employee of Centex Development Management Company ("CDMC"), a wholly-owned subsidiary of Centex, and served as Executive Vice President of CREC from April 1987 until March 31, 1988. Mr. Bilheimer was a director of Development from its date of incorporation until his resignation as of June 1, 1987 and was re-elected to the Board of Directors of Development on May 24, 1989. Since April 1, 1988, Mr. Bilheimer has devoted a majority of his time to the business and affairs of Holding and Development. (2) Ms. Pinson is an employee of Vista Properties Company, a division of Centex Homes, and serves as Vice President, Treasurer, and Controller of Vista as well as of Holding. Ms. Pinson joined Vista Properties, Inc. (now CREC) in March 1993 and was elected to her present positions with Holding as of July 23, 1996. Prior thereto, Ms. Pinson was employed by MBNA Information Services, a Dallas-based credit card processing company, from 1990 to 1993. Positions held include Manager of Finance and Accounting and Manager of Administrative Planning. 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 the conduct of 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 Registrant--Services Agreement". 28 29 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 2 of this Report, (2) the information included and referenced under the caption "Stock Prices and Dividends" on page 2 of the Centex 1997 Annual Report and (3) the information included in Notes (F) and (G) of the Notes to the Holding/CDC Combining Financial Statements on pages 61-63 of the Holding/CDC 1997 Annual 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. The provisions of the loan agreement and pledge and security agreement relating to Holding's $7,700,000 note to Centex (the "Holding Note"), which had a balance of $7,000,000 at March 31, 1997, include certain restrictive covenants that limit the extent to which Holding and its subsidiaries (including Development but not CDC or any Operating Partnership) may create, assume or guarantee additional indebtedness, pledge or encumber certain of their assets or otherwise take certain corporate actions. These covenants include limitations on (a) incurring, assuming or guaranteeing any other indebtedness, except indebtedness which provided for all payments of principal to be made after April 1, 1998, indebtedness that is fully and completely subordinated on terms satisfactory to Centex, and certain trade debt, (b) creating any additional liens other than statutory liens for taxes, certain mechanics' and materialmen's liens and other similar liens, (c) effecting a merger or consolidation, (d) selling property and (e) declaring any dividends or making certain other shareholder payments, as defined. Holding's obligations under the Holding Note are secured by a pledge of all of the issued and outstanding shares of the common stock of Development pursuant to a pledge and security agreement under which a default by Holding in the performance of its obligations could give Centex the right to vote such shares, to seek the registration under the Securities Act of 1933, as amended, of all or a portion thereof, and to sell such shares to satisfy Holding's obligations. See "Item 13. Certain Relationships and Related Transactions" and Note (G) of the Notes to the Holding/CDC Combining Financial Statements included on pages 62-63 of the Holding/CDC 1997 Annual Report, which Note (G) is incorporated herein by reference. (b) CDC Except as additionally provided below, the information called for by this Item 5 with respect to CDC is incorporated herein by reference to (1) the Joint Explanatory Statement on page 2 of this Report, (2) the information included and referenced under the caption "Stock Prices And Dividends" on page 2 of the Centex 1997 Annual Report and (3) the information included in Notes (F) and (G) of the Notes to the Holding/CDC Combining Financial Statements on pages 61-63 of the Holding/CDC 1997 Annual Report. 29 30 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, CDC 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 affiliates are the present holders of all of the Class A Units, and accordingly, at this time there is no public market for such securities. 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, CREC (now 2728 Holding Corporation), 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. Preference payments in arrears at March 31, 1997 amounted to $5,736,000. ITEM 6. SELECTED FINANCIAL DATA (a) Holding The information called for by this Item 6 with respect to Holding is incorporated herein by reference to the Combining Balance Sheets and the Combining Statements of Operations included in the Holding/CDC Combining Financial Statements on pages 55-56 of the Holding/CDC 1997 Annual Report. (b) CDC The information called for by this Item 6 with respect to CDC is incorporated herein by reference to the Combining Balance Sheets and the Combining Statements of Operations included in the Holding/CDC Combining Financial Statements on pages 55-56 of the Holding/CDC 1997 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Holding The information called for by this Item 7 with respect to Holding is incorporated herein by reference to the information included and referenced under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" on page 65 of the Holding/CDC 1997 Annual Report. (b) CDC The information called for by this Item 7 with respect to CDC is incorporated herein by reference to the information included and referenced under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" on page 65 of the Holding/CDC 1997 Annual Report. 30 31 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by this Item 8 is incorporated herein by reference to portions of the Holding/CDC 1997 Annual Report indicated in the Index to Financial Statements on page 39 of this Report (see Item 14). 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 (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 caption "Election of Directors" and the information included under the caption "Section 16(a) Compliance" in Holding's proxy statement for the 1997 Annual Meeting of Stockholders of Holding to be held on July 24, 1997 (the "1997 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" 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 ("CSC"). See "Item 13. Certain Relationships and Related Transactions". The term of the Services Agreement is 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 CSC constituting gross negligence or willful or wanton misconduct) prior to the payment in full of the Holding Note, the full and complete detachment of the Stockholder Warrants from Centex Common Stock or the occurrence of Payout. Service fees of $30,000 were paid pursuant to the Services Agreement during fiscal 1997. (b) CDC GENERAL PARTNER AND MANAGEMENT CDC has no directors, officers or employees and, instead, is managed by Development, its sole general partner. Directors and officers of Development perform all executive management functions required for CDC. Except as provided in the Plan with respect to the Original Properties, the limited partners of CDC have no power to direct or participate in the control of CDC, and Development makes all decisions regarding the acquisition, disposition or development of real estate belonging to CDC and all other decisions regarding CDC's business or operations. See "Item 1. Business". CDC has entered into a management agreement pursuant to which Holding will operate, manage and develop the properties of CDC for and on behalf of CDC. 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, 31 32 and except for the right to be reimbursed for certain expenses, Development does not receive any compensation from CDC in respect of its duties and obligations as general partner of CDC. 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. All of such persons have served in their capacities since the organization of Development, except as indicated.
NAME POSITION AGE ---- -------- --- J. Stephen Bilheimer . . . . . . . . . Director and President (1) 65 Josiah O. Low, III . . . . . . . . . . Director (2)* 58 David M. Sherer . . . . . . . . . . . . Director (3)* 60 Kimberly A. Pinson . . . . . . . . . . Vice President and Treasurer (4) 32
------------- *Member of the audit committee of the Board of Directors. (1) Mr. Bilheimer is an employee of CDMC and served as Executive Vice President of CREC from April 1987 until March 31, 1988. Mr. Bilheimer was a director of Development from its date of incorporation until his resignation as of June 1, 1987. Mr. Bilheimer was re-elected to the Board of Directors on May 24, 1989. (2) Mr. Low serves as Senior Vice President of Donaldson, Lufkin & Jenrette Securities Corporation (since February 1988). Mr. Low is also a director of Holding. 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, investment and brokerage firm, for 18 years. Mr. Sherer is also a director of Holding. Mr. Sherer was elected as a director of Development as of June 1, 1987. (4) Ms. Pinson is an employee of Vista Properties Company, a division of Centex Homes, and serves as Vice President, Treasurer and Controller of Vista Properties Company, as well as Holding. Ms. Pinson joined Vista Properties, Inc. (now CREC) in March 1993 and was elected to her present positions with Holding as of July 23, 1996. Prior thereto, Ms. Pinson was employed by MBNA Information Services, a Dallas-based credit card processing company, from 1990 to 1993. Positions held include Manager of Finance and Accounting and Manager of Administrative Planning. All directors are elected annually by the shareholders 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 Centex or one of its subsidiaries, 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 CDC's business are provided to CDC pursuant to a management agreement (the "Management Agreement") entered into with Holding. Under the Management Agreement, Holding keeps 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 CDC'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 32 33 CDC'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 Centex subsidiaries to provide such services to CDC. Holding is entitled to reimbursement from CDC 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 1997, Holding received $951,000 from CDC for its services. The Management Agreement also provides that Holding will provide, consistent with the Plan, pre-development and development services on behalf of CDC, and the Management Agreement specifically provides that Holding is delegated full authority to carry out and perform on behalf of CDC 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 CDC (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. From time to time, Holding delegates the performance of certain of its responsibilities to CSC and CREC, upon terms and conditions to be determined. These responsibilities may include enhancement of properties owned or controlled by CDC, for which reasonable additional compensation may be paid by CDC 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 CSC or CREC. ITEM 11. EXECUTIVE COMPENSATION Holding and CDC The information called for by this Item 11 with respect to Holding and CDC is incorporated herein by reference to the information included and referenced under the caption "Executive Compensation" in the 1997 Holding Proxy Statement. CDC 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 CDC in respect of its duties and obligations as general partner for CDC. As general partner, Development is entitled to be allocated certain items of income and loss of CDC and to receive certain distributions of cash from CDC 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 will receive distributions are set forth in the Partnership Agreement. For a summary of these rights and benefits, see Note (F) of the Notes to the Holding/CDC Combining Financial Statements included on pages 61-62 of the Holding/CDC 1997 Annual Report, which Note (F) is incorporated herein by this reference. The directors and executive officers of Development perform all executive management functions for CDC. See "Item 10. Directors and Executive Officers of the Registrant". Services required by CDC in its operations are also provided pursuant to a Management Agreement with Holding pursuant to which Holding operates, manages and develops the properties of CDC for and on behalf of CDC. See "Item 10. Directors and Executive Officers of the Registrant--Management Agreement". The executive officers of Development did not receive any remuneration from Development or CDC for the year ended March 31, 1997. 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 the 1997 fiscal year, 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 CDC during the 1997 fiscal year. 33 34 During fiscal 1997, J. Stephen Bilheimer, a Director and the President of Development, and Kimberly A. Pinson, Vice President and Treasurer 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. Bilheimer 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 CDC. 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 annually in the form of directors' and committee members' fees in their capacities as directors and/or committee members of Development ($10,000) and Holding ($10,000). In addition, Development reimburses these directors for the reasonable expenses incurred in attending directors' and committee meetings. 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 1997 Holding Proxy Statement. (b) CDC The following table sets forth certain information with respect to the ownership of the equity securities of CDC as of May 30, 1997 by Development, the directors of Development, individually itemized, all directors and executive officers of Development as a group, and any person known to CDC to be the beneficial owner of more than 5% of any class of CDC'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. 34 35
NAME OF NUMBER OF UNITS PERCENT TITLE OF CLASS* BENEFICIAL OWNER** OR WARRANTS OWNED OF CLASS --------------- ------------------ ----------------- -------- General Partner Interest (1) 3333 Development Corporation . . . . . . . . All 100% 2728 N. Harwood Dallas, Texas 75201 Class A Units (2) 2728 Holding Corporation . . . . . . . . . . 500 50% 2728 N. Harwood Dallas, Texas 75201 Centex Homes . . . . . . . . . . . . . . . . 500 50% 2728 N. Harwood Dallas, Texas 75201 Stockholder Warrants (3) 3333 Development Corporation . . . . . . . . -- *** J. Stephen Bilheimer . . . . . . . . . . . . -- *** Josiah O. Low, III . . . . . . . . . . . . . -- *** David M. Sherer . . . . . . . . . . . . . . . -- *** All directors and executive officers of Development as a group (4 persons) . . . . . -- *** Barclays Global Investors, NA and Barclays Global Fund Advisor (4) . . . . 58 5.82% 45 Fremont Street San Francisco, California 94105 Sanford C. Bernstein & Co., Inc. (5) . . . . 91 9.08% 767 Fifth Avenue New York, New York 10153 FMR Corp. (6) . . . . . . . . . . . . . . . . 131 13.07% 82 Devonshire Street Boston, Massachusetts 02109 The Prudential Insurance Company of America (7). . . . . . . . . . . . . . . . 56 5.64% Prudential Plaza Newark, New Jersey 07102-3777 Centex Class B Unit Centex Corporation . . . . . . . . . . . . . 100 100% Warrants (8) 2728 N. Harwood Dallas, Texas 75201 Class B Units (9) Centex Corporation (10) . . . . . . . . . . . 350 (11) 28% (10) 2728 N. Harwood Dallas, Texas 75201
- - -------------------- *Under the terms of the Partnership Agreement, CDC is managed by a sole corporate general partner and none of the present classes of CDC'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 CDC's equity securities has been set forth in accordance with such rules and regulations. 35 36 **The address of any person who is the beneficial owner of more than five percent of a class of CDC's securities is also included. ***Less than 1%. (1) In connection with the formation of CDC, Development made a capital contribution to CDC of $767,182, in exchange for Development's general partner interest in CDC. As general partner, Development is entitled to receive allocations of income and loss and distributions of property from CDC. (2) The Class A Units were issued to the Original Limited Partners in exchange for the contribution to CDC of the Original Properties. Record title to the Class A Units presently is held by Centex affiliates. 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 will be automatically converted 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. The Class A 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 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) Based solely upon information contained in the Schedule 13G of Barclays Global Investors, NA ("BGI"), reporting the ownership of 1,584,882 shares of Centex Common Stock (and therefore to own a beneficial interest in 54 Stockholder Warrants), and Barclays Global Fund Advisors ("BGFA"), reporting the ownership of 108,488 shares of Centex Common Stock (and therefore to own a beneficial interest in four Stockholder Warrants) filed with the SEC on February 14, 1997 (the "Barclays 13G"), with respect to Centex Common Stock owned as of December 31, 1996. According to the Barclays 13G, such number includes 1,473,715 shares (and therefore to own a beneficial interest in 50 Stockholder Warrants) over which BGI had sole voting power, 1,584,882 shares (and therefore to own a beneficial interest in 54 Stockholder Warrants) over which BGI had sole dispositive power and 108,488 shares (and therefore to own a beneficial interest in four Stockholder Warrants) over which BGFA had sole voting and dispositive power. (5) Based solely upon information contained in the Schedule 13G of Sanford C. Bernstein & Co., Inc. ("Bernstein") filed with the SEC on January 30, 1997 (the "Bernstein 13G") with respect to Centex Common Stock owned as of December 31, 1996. According to the Bernstein 13G, such number includes 1,417,121 shares (and therefore to own a beneficial interest in 49 Stockholder Warrants) over which Bernstein had the sole power to direct the vote, 292,208 shares (and therefore to own a beneficial interest in ten Stockholder Warrants) over which Bernstein had shared voting power and 2,641,957 shares (and therefore to own a beneficial interest in 91 Stockholder Warrants) over which Bernstein had sole dispositive power. (6) Based solely upon information contained in the Schedule 13G/A (Amendment No. 10) of FMR Corp. filed with the SEC on February 10, 1997 with respect to Centex Common Stock owned as of December 31, 1996 (the "FMR 13G"). According to the FMR 13G, such number includes 16,784 shares (and therefore to own a beneficial interest in one Stockholder Warrant) over which FMR Corp. had the sole power to vote or direct the vote and 3,802,072 36 37 shares (and therefore to own a beneficial interest in 131 Stockholder Warrants) over which FMR Corp. had sole dispositive power. The ownership interest of one investment company, Fidelity Magellan Fund, amounted to 1,487,700 shares of Centex Common Stock. (7) Based solely upon information contained in the Schedule 13G/A (Amendment No. 2) of The Prudential Insurance Company of America ("Prudential") filed with the SEC on February 6, 1997 with respect to Centex Common Stock owned as of December 31, 1996 (the "Prudential 13G"). According to the Prudential 13G, such number includes 231,400 shares (and therefore to own a beneficial interest in eight Stockholder Warrants) over which Prudential had sole voting or dispositive power, 1,391,320 shares (and therefore to own a beneficial interest in 48 Stockholder Warrants) over which Prudential had shared voting power and 1,409,820 shares (and therefore to own a beneficial interest in 48 Stockholder Warrants) over which Prudential had shared dispositive power. (8) On November 30, 1987, Centex acquired from CDC 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 they may be subdivided (and the corresponding exercise price) and the applicable exercise period. See Note (F) of the Notes to the Holding/CDC Combining Financial Statements included on pages 61-62 of the Holding/CDC 1997 Annual Report, which Note (F) is herein incorporated by this reference. (9) Presently, there are no Class B Units issued or outstanding. (10) When issued, record title to 200 of these Class B Units will be held by the owners of the Class A Units. See footnote (2). (11) The Class B Units that may be acquired upon conversion of outstanding Class A 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, and the Class B Units that may be acquired upon exercise of the Centex Class B Unit Warrants, are included as "beneficially owned" pursuant to the rules and regulations of the Commission promulgated pursuant to the Exchange Act. See footnotes (2) and (3). 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. All of the issued and outstanding shares of Development have been pledged to secure the Holding Note. See "Item 5. Market for Registrant's Common Equity and Related Stockholder Matters". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) Holding The information called for by this Item 13 with respect to Holding is incorporated herein by reference to the information included under the caption "Certain Transactions" in the 1997 Holding Proxy Statement. (b) CDC Holding entered into a services agreement in May, 1987 with CSC, whereby CSC provides certain tax, accounting and other similar services for Holding at a fee of $2,500 per month. Service fees of $30,000 were paid pursuant to this agreement for fiscal year 1997. 37 38 CDC has entered into an agreement with Holding to provide management services to CDC in connection with the development, operation and maintenance of CDC property and other administrative services. Management fees and reimbursable costs totaling $951,000 were incurred under this agreement during fiscal 1997. 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 during 1997, bears interest, payable quarterly, at the prime rate of interest of NationsBank of Texas, N.A. ("NationsBank") plus 1% (9.5% at May 30, 1997). As of May 30, 1997, the outstanding principal balance of the Holding Note was $3,362,000. The Holding Note is secured by a pledge of all the issued and outstanding shares of Development. The Holding Note, as amended, matures on the earlier to occur of April 1, 1998 or the last detachment of Holding Common Stock and the Stockholders Warrants from Centex Common Stock pursuant to the Nominee Agreement. There was interest expense of $508,000 related to the Holding Note for the year ended March 31, 1997. In fiscal year 1997, CDC sold to Centex Homes certain tracts of land for $3,814,000 and has agreements to purchase an additional 29 lots from CDC. 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 bears interest, payable quarterly, at the prime rate of interest of NationsBank plus 7/8% (9 3/8% at May 30, 1997). As of May 30, 1997, the outstanding principal balance on the note was $7,700,000. The note, as amended, matures on April 30, 1998. Fiscal year 1997 interest income on the note totaled $713,000. Centex Homes has guaranteed a bank line of credit for CDC (currently $5,000,000) to utilize in conjunction with development of lots to be sold to Centex Homes. This line of credit, which had an outstanding balance of $-0- at May 30, 1997, bears interest at LIBOR plus 3/4% (6 7/16% at May 30, 1997), and is unsecured. CDC owns property in the City of Carrollton, a suburb of Dallas, Texas, which consists of one office and five fabrication-warehouse buildings on approximately 17 acres. CDC leases this property to Centex Homes pursuant to a five-year lease terminating on March 31, 1998. For fiscal 1997, CDC received rent from Centex Homes for this property in the amount of $200,000. Subsequent to year end, this property was sold to Centex Homes for $2,866,000. 38 39 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) and (2) See the Index to Financial Statements below for a list of the Financial Statements filed herewith. INDEX TO FINANCIAL STATEMENTS
HOLDING/CDC 1997 ANNUAL REPORT PAGES ------------ 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. Data incorporated by reference to the Holding/CDC 1997 Annual Report: Report of Independent Public Accountants . . . . . . . . . . . 53 Combining Balance Sheets as of March 31, 1997 and 1996 . . . . 55 Combining Statements of Operations and Cash Flows for the Years Ended March 31, 1997, 1996 and 1995 . . . 56 Combining Statements of Stockholders' Equity and Partners' Capital for the Years Ended March 31, 1997, 1996 and 1995 . . . . . . . . . . 57 Notes to Combining Financial Statements . . . . . . . . . . . . 57-63 Quarterly Results (Unaudited) . . . . . . . . . . . . . . . . . 64
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (3) EXHIBITS (A) Holding The information on exhibits required by this Item 14 is set forth in the Holding Index to Exhibits appearing on pages 45-46 of this Report. (B) CDC The information on exhibits required by this Item 14 is set forth in the CDC Index to Exhibits appearing on pages 47-49 of this Report. (b) Reports on Form 8-K: Neither Holding nor CDC filed any reports on Form 8-K during the quarter ended March 31, 1997. 39 40 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. 3333 HOLDING CORPORATION ------------------------------------------ Registrant June 27, 1997 By: /s/ J. STEPHEN BILHEIMER ----------------------------------------- J. Stephen Bilheimer, 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 registrant in the capacities and on the dates indicated. June 27, 1997 /s/ J. STEPHEN BILHEIMER -------------------------------------------- J. Stephen Bilheimer, President (principal executive officer) June 27, 1997 /s/ KIMBERLY PINSON -------------------------------------------- Kimberly Pinson, Vice President and Treasurer (chief accounting officer) Directors: J. Stephen Bilheimer, Josiah O. Low, III, David M. Sherer June 27, 1997 By: /s/ J. STEPHEN BILHEIMER ---------------------------------------- J. Stephen Bilheimer, Individually and as Attorney-in-Fact* -------------- *Pursuant to authority granted by powers of attorney, copies of which are filed herewith. 40 41 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 June 27, 1997 By: /s/ J. STEPHEN BILHEIMER ---------------------------------------- J. Stephen Bilheimer, 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. June 27, 1997 /s/ J. STEPHEN BILHEIMER -------------------------------------------- J. Stephen Bilheimer, President (principal executive officer) June 27, 1997 /s/ KIMBERLY PINSON -------------------------------------------- Kimberly Pinson, Vice President and Treasurer (chief accounting officer) Directors: J. Stephen Bilheimer, Josiah O. Low, III, David M. Sherer June 27, 1997 By: /s/ J. STEPHEN BILHEIMER ----------------------------------------- J. Stephen Bilheimer, Individually and as Attorney-in-Fact* - - -------------------- *Pursuant to authority granted by powers of attorney, copies of which are filed herewith. 41 42 INDEX TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE ------- ------- ------------------------- 3.1 Restated Articles of Incorporation of Exhibit 3.1 to Annual Report on Form 10-K Centex. of Centex Corporation ("Centex") (File No. 1-6776) for fiscal year ended March 31, 1993 ("Centex 1993 Form 10-K") 3.2 By-laws of Centex. Exhibit 3.2 to Centex 1993 Form 10-K 4.1 Specimen Centex common stock certificate Exhibit 4.3 to Joint Registration (with tandem trading legend and Rights Statement of Centex, 3333 Holding Agreement legend). Corporation ("Holding") and Centex Development Company, L.P. ("CDC"), on Form S-8 filed with the Securities and Exchange Commission ("the Commission") on June 2, 1997 (the "1997 Form S-8") 4.2 Nominee Agreement, dated November 30, Exhibit 4.2 to Centex 1993 Form 10-K 1987, by and between Centex, Holding and CDC, and Chemical Bank, as successor nominee. 4.3 Agreement for Purchase of Warrants, dated Exhibit 4.3 to Centex 1993 Form 10-K as of November 30, 1987, by and between Holding and Centex. 4.4 Rights Agreement, dated as of October 2, Exhibit 1 to Form 8-A Registration 1996, between Centex and ChaseMellon Statement of Centex dated October 2, 1996 Shareholder Services, LLC, as rights agent. 4.5 Instruments with respect to long-term debt N/A 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.
42 43 INDEX TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE ------ ------- ------------------------- 10.1 Centex Corporation Stock Option Plan, as Exhibit 10.1 to Centex 1993 Form 10-K amended.* 10.2 Centex Corporation 1987 Stock Option Plan, Exhibit 4.7 to the 1997 Form S-8 as filed as amended.* with the Commission on June 2, 1997 10.3 Credit Agreement, dated as of May 1, 1987, Exhibit 10.2 to Amendment No. 3, dated by and between Holding and Centex and November 24, 1987, to Registration related (i) Promissory Note, dated May 1, Statement of Holding on Form 10 (File No. 1987, executed by Holding and payable to 1-9624), dated July 12, 1987 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. 10.4 Executive Employment Agreement, dated as Exhibit 10.6 to Centex 1993 Form 10-K of September 17, 1990, between Centex and Laurence E. Hirsch.* 10.5 Executive Employment Agreement, dated as Exhibit 10.7 to Centex 1993 Form 10-K of January 18, 1991, between Centex and David W. Quinn.* 10.6 Executive Employment Agreement, dated as Exhibit 10.8 to Centex 1993 Form 10-K of January 18, 1991, between Centex and William J Gillilan III.* 10.7 Centex Corporation $2,000,000 Subordinated Exhibit 10.8 to Centex 1995 Form 10-K Convertible Note issued to Laurence E. Hirsch on March 1, 1995.* 10.8 Supplemental Executive Retirement Plan of Exhibit 10.9 to Centex 1995 Form 10-K Centex Corporation.* 13 Portions of Centex 1997 Annual Report and Filed Herewith. Holding/CDC 1997 Annual Report.** 21.1 List of Subsidiaries of Centex. Filed Herewith.
43 44 INDEX TO EXHIBITS CENTEX CORPORATION AND SUBSIDIARIES--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE ------ ------- ------------------------- 23.1 Consents 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. ** With the exception of the information expressly incorporated by reference in this Report from the Centex 1997 Annual Report and the Holding/CDC 1997 Annual Report, these two annual reports are not deemed filed with the Commission as part of this Report. 44 45 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 certificate Exhibit 4.3 to 1997 Form S-8 (with tandem trading legend and Rights Agreement legend). 4.3 Nominee Agreement, dated as of November Exhibit 4.3 to Holding Form 10-K 30, 1987, by and between Centex, Holding and CDC, and Chemical Bank, as successor nominee. 4.4 Agreement for Purchase of Warrants, dated Exhibit 4.4 to Holding Form 10-K as of November 30, 1987, by and between Holding and Centex. 10.1 Services Agreement, dated as of May 5, Exhibit 10.1 to Amendment No. 3, dated 1987, by and between Holding and Centex November 24, 1987 ("Amendment No. 3"), to Service Company. the Holding Registration Statement 10.2 Credit Agreement, dated as of May 1, 1987, Exhibit 10.2 to Amendment No. 3 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.
45 46 INDEX TO EXHIBITS 3333 HOLDING CORPORATION AND SUBSIDIARY--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE ------ ------- ------------------------- 10.3 Credit Agreement, dated as of May 1, 1987, Exhibit 10.3 to the Holding Registration by and between 3333 Development Statement Corporation ("Development") and Centex Real Estate Corporation ("CREC") 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. 13 Portions of Centex 1997 Annual Report and Exhibit 13 of Centex Exhibits filed Holding/CDC 1997 Annual Report.* herewith 21.2 Subsidiaries of Holding. Filed Herewith. 23.2 Consent of Independent Public Accountants. Filed Herewith. 24.2 Powers of Attorney. Filed Herewith. 27.2 Financial Data Schedule. Filed Herewith.
- - --------------- * With the exception of the information expressly incorporated by reference in this Report from the Centex 1997 Annual Report and the Holding/CDC 1997 Annual Report, these two annual reports are not deemed filed with the Commission as part of this report. 46 47 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P.
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE ------ ------- ------------------------- 2.1 Option Agreement, dated as of November 3, Exhibit 2.1 to Centex 1994 Form 10-K 1988, by and between CDC and Estrella Properties, Ltd. 2.2 Additional Interest Agreement, dated March Exhibit 2.2 to Centex 1994 Form 10-K 30, 1989, by and between CDC and Westinghouse Credit Corporation. 2.3 Construction Loan Agreement, dated March Exhibit 2.3 to Centex 1994 Form 10-K 30, 1989, by and among Westinghouse Credit Corporation and CDC. 2.4 Forster Ranch Development Agreement, dated Exhibit 2.4 to Centex 1994 Form 10-K March 31, 1989, by and between the City of San Clemente, California and CDC. 3.1 Articles of Incorporation, as amended, of Exhibit 3.2a to Amendment No. 1, dated Development as currently in effect. October 14, 1987 ("CDC Amendment No. 1"), to the Registration Statement of CDC on Form 10 (File No. 1-9625), dated July 12, 1987 (the "CDC Registration Statement") 3.2 By-laws of Development, as amended. Exhibit 3.2 to Annual Report on Form 10-K of CDC (File No. 1-9625) for fiscal year ended March 31, 1993 (the "CDC Form 10-K") 4.1 Certificates of Limited Partnership of Exhibit 4.1 to the CDC Registration CDC. Statement 4.2 Amended and Restated Agreement of Limited Exhibit 4.2 to Amendment No. 3, dated Partnership of CDC. November 24, 1987 ("CDC Amendment No. 3"), to the CDC Registration Statement 4.3 Specimen certificate for Class A limited Exhibit 4.3 to the CDC Registration partnership units. Statement 4.4 Specimen certificate for Class B limited Exhibit 4.4 to the CDC Registration partnership units. Statement
47 48 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P.--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE ------ ------- ------------------------- 4.5 Warrant Agreement, dated as of November Exhibit 4.5 to CDC Form 10-K 30, 1987, by and between CDC and Centex. 4.6 Specimen warrant certificate. Exhibit 4.6 to CDC Amendment No. 3 4.7 Specimen Centex common stock certificate Exhibit 4.3 to 1997 Form S-8 (with tandem trading legend and Rights Agreement legend). 4.8 Nominee Agreement, dated as of November Exhibit 4.8 to CDC Form 10-K 30, 1987, by and between Centex, Holding and CDC, and Chemical Bank, as successor nominee. 4.9 Agreement for Purchase of Warrants, dated Exhibit 4.9 to CDC Form 10-K as of November 30, 1987, by and between CDC and Centex. 4.10 Form of Operating Partnership Agreement. Exhibit 4.9 to the CDC Registration Statement 10.1 Management Agreement by and between CREC Exhibit 10.1 to CDC Amendment No. 3 and CDC. 10.2 Supplement to Management Agreement by and Exhibit 10.1a to CDC Amendment No. 3 between CREC and CDC. 10.3 Documents of Conveyance of Property from Exhibit 10.2 to CDC Amendment No. 1 Centex Land Corporation to CDC. 10.4 Documents of Conveyance of Property from Exhibit 10.3 to the CDC Registration Centex Homes Corporation to CDC. Statement 10.5 Documents of Conveyance of Property from Exhibit 10.4 to the CDC Registration Fox & Jacobs, Inc. to CDC. Statement 10.6 Documents of Conveyance of Property from Exhibit 10.5 to the CDC Registration Great Lakes Development Co., Inc. to CDC. Statement 10.7 Agreement, dated as of April 1, 1987, by Exhibit 10.6 to the CDC Registration and among CDC, CREC, Centex Homes Statement Corporation and Centex Land Company.
48 49 INDEX TO EXHIBITS CENTEX DEVELOPMENT COMPANY, L.P.--CONTINUED
EXHIBIT FILED HEREWITH OR NUMBER EXHIBIT INCORPORATED BY REFERENCE ------ ------- ------------------------- 10.8 Agreement, dated as of April 1, 1987, by Exhibit 10.7 to the CDC Registration and between CDC and Centex Homes of New Statement Jersey, Inc. 10.9 Waiver Agreement, dated as of July 28, Exhibit 10.9 to Annual Report on Form 10- 1995, by and between CDC, CREC and K of CDC (File No. 1-9625) for the fiscal Development. year ended March 31, 1996 (the "1996 CDC 10-K") 10.10 Waiver Agreement, dated as of September Exhibit 10.10 to 1996 CDC 10-K 13, 1995, but effective as of July 1, 1995, by and between CDC, CREC and Development. 10.11 Waiver Agreement, dated as of September Exhibit 10.11 to 1996 CDC 10-K 27, 1995, but effective as of July 1, 1995, by and between CDC, CREC and Development. 10.12 Waiver Agreement, dated as of December 31, Exhibit 10.12 to 1996 CDC 10-K 1995, by and between CDC, CREC and Development. 10.13 Waiver Agreement, dated as of March 29, Exhibit 10.13 to 1996 CDC 10-K 1996, by and between CDC, CREC and Development. 10.14 Waiver Agreement, dated as of January 8, Exhibit 10.14 to 1996 CDC 10-K 1996, but effective as of January 1, 1996, by and between CDC, CREC and Development. 13 Portions of Centex 1997 Annual Report and Exhibit 13 of Centex Exhibits filed Holding/CDC 1997 Annual Report.* herewith 23.3 Consent of Independent Public Accountants. Filed Herewith. 24.3 Powers of Attorney. Filed Herewith. 27.3 Financial Data Schedule. Filed Herewith.
- - -------------------- * With the exception of the information expressly incorporated by reference in this Report from the Centex 1997 Annual Report and the Holding/CDC 1997 Annual Report, these two annual reports are not deemed filed with the Commission as part of this report. 49 EX-13 2 PORTIONS OF CENTEX 1997 ANNUAL REPORT & HOLDINGS 1 Centex Corporation and Subsidiaries FINANCIAL HIGHLIGHTS (Amounts in thousands, except per share data)
For the Years Ended March 31, -------------------------------------------------------------- 1977 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- Revenues $3,784,991 $3,102,987 $3,277,504 $3,039,709 $2,363,325 Earnings Before Income Taxes $ 163,743 $ 87,786 $ 145,788 $ 135,013 $ 91,759 Net Earnings Before Gain on CXP's IPO $ 106,563 $ 53,365 $ 54,753 $ 85,162 $ 61,038 Gain on CXP's IPO, net of tax -- -- 37,495 -- -- ---------- ---------- ---------- ---------- ---------- Net Earnings $ 106,563 $ 53,365 $ 92,248 $ 85,162 $ 61,038 ========== ========== ========== ========== ========== Earnings Per Share - Before Gain on CXP's IPO $ 3.62 $ 1.83 $ 1.81 2.60 $ 1.91 Gain on CXP's IPO, net of tax -- -- 1.23 -- -- ---------- ---------- ---------- ---------- ---------- Earnings Per Share $ 3.62 $ 1.83 $ 3.04 $ 2.60 $ 1.91 ========== ========== ========== ========== ========== Cash Dividends Per Share $ .20 $ .20 $ .20 $ .20 $ .20 Average Shares Outstanding 29,429 29,091 30,327 32,790 32,016 Debt $ 283,769 $ 408,253 $ 427,381 $ 429,470 $ 368,988 Stockholders' Equity $ 835,777 $ 722,836 $ 668,227 $ 668,659 $ 578,415 Book Value Per Share At Year End $ 28.80 $ 25.43 $ 23.80 $ 21.12 $ 18.57
As reflected above, Net Earnings and Earnings Per Share for fiscal 1995 include $37.5 million and $1.23, respectively, related to the April 1994 Initial Public Offering (IPO) of 51% of the stock of Centex Construction Products, Inc. See Note C to financial statements. Debt represents Centex Corporation's debt with the Financial Services Group reflected on the equity method versus consolidation. See Note A to financial statements. - - -------------------------------------------------------------------------------- STOCK PRICES AND DIVIDENDS
YEAR ENDED MARCH 31, 1997 Year Ended March 31, 1996 -------------------------------------------------------------------- PRICE Price ----------------- ------------------- QUARTER HIGH LOW DIVIDENDS High Low Dividends -------------------------------------------------------------------- First $32 3/4 $25 7/8 $.05 $30 $23 1/2 $.05 Second $33 5/8 $26 1/8 $.05 $31 $26 $.05 Third $37 5/8 $30 $.05 $35 5/8 $28 5/8 $.05 Fourth $41 3/4 $35 1/4 $.05 $35 1/4 $27 3/4 $.05
The common stock of Centex Corporation is traded on the New York Stock Exchange (ticker symbol CTX) and The International Stock Exchange (London). The approximate number of record holders of the common stock of Centex Corporation at May 9, 1997 was 2,397. On November 30, 1987, Centex Corporation distributed as a dividend to its stockholders securities relating to Centex Development Company, L.P (see Note H to the Consolidated Financial Statements of Centex Corporation and Subsidiaries). 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. 2 2 97 ANNUAL REPORT THE CENTEX STRUCTURE FINANCIAL INFORMATION Consolidated Revenues and Operating Earnings by Line of Business 18 Statements of Consolidated Earnings 19 Consolidated Balance Sheets 20 Statements of Consolidated Cash Flows 22 Statements of Consolidated Stockholders' Equity 23 Notes to Consolidated Financial Statements 24 Report of Independent Public Accountants 41 Management's Discussion and Analysis of Results of Operations and Financial Condition 42 Quarterly Results 49 Summary of Selected Financial Data 50 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. Letter to Our Stockholders 52 Report of Independent Public Accountants 53 Financial Highlights 54 Combining Balance Sheets 55 Combining Statements of Operations and Cash Flows 56 Combining Statements of Stockholders' Equity and Partners' Capital 57 Notes to Combining Financial Statements 57 Quarterly Results 64 Management's Discussion and Analysis of Results of Operations and Financial Condition 65
17 3 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- CONSOLIDATED REVENUES AND OPERATING EARNINGS BY LINE OF BUSINESS (Dollars in thousands)
For the Years Ended March 31, --------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- REVENUES Home Building $ 2,299,592 $ 1,989,929 $ 2,110,735 $ 1,869,754 $ 1,433,062 61% 64% 65% 61% 61% Investment Real Estate 9,032 -- -- -- -- --% --% --% --% --% Financial Services 168,722 129,546 106,841 203,393 147,041 5% 4% 3% 7% 6% Construction Products(A) 239,380 -- -- -- -- 6% --% --% --% --% Contracting and Construction Services 1,068,265 983,512 1,059,928 966,562 783,222 28% 32% 32% 32% 33% ----------- ----------- ----------- ----------- ----------- $ 3,784,991 $ 3,102,987 $ 3,277,504 $ 3,039,709 $ 2,363,325 =========== =========== =========== =========== =========== 100% 100% 100% 100% 100% OPERATING EARNINGS Home Building $ 144,043 $ 106,695 $ 112,149 $ 95,977 $ 79,850 59% 63% 74% 53% 62% Investment Real Estate 17,896 -- -- -- -- 7% --% --% --% --% Financial Services 24,410 17,155 9,399 73,550 50,854 10% 10% 6% 41% 40% Construction Products(A) 64,406 52,304 33,829 16,626 4,648 26% 31% 22% 9% 4% Contracting and Construction Services (2,183) (4,995) (1,790) (4,500) (4,103) (1%) (3%) (1%) (2%) (3%) Other, net (2,260) (866) (1,608) (1,799) (4,262) (1%) (1%) (1%) (1%) (3%) ----------- ----------- ----------- ----------- ----------- OPERATING EARNINGS 246,312 170,293 151,979 179,854 126,987 100% 100% 100% 100% 100% Corporate General and Administrative 16,817 14,969 15,253 15,158 13,120 Interest 34,062 40,862 33,014 29,683 22,108 Minority Interest in Construction Products (A) 31,690 26,676 17,252 -- -- ----------- ----------- ----------- ----------- ----------- Earnings Before Gain on CXP's Initial Public Offering and Income Taxes 163,743 87,786 86,460 135,013 91,759 Gain on CXP's Initial Public Offering -- -- 59,328 -- -- ----------- ----------- ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES $ 163,743 $ 87,786 $ 145,788 $ 135,013 $ 91,759 =========== =========== =========== =========== ===========
Applicable segment overhead costs have been deducted from lines of business operating earnings. (A) As a result of Centex Construction Products, Inc.'s (CXP) repurchases of its own stock during the June 30, 1996 quarter, Centex's ownership interest in CXP increased to more than 50%, (51.4% as of March 31, 1997). Accordingly, beginning with the quarter ended June 30, 1996, CXP's 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, CXP's operating earnings and the related minority interest in CXP have been reclassified to reflect the total amounts for the years ended March 31, 1996, 1995, 1994 and 1993. Had CXP's revenues been consolidated for the years ended March 31, 1996, 1995, 1994 and 1993, Centex's consolidated revenues for those years would have increased by $222,594, $194,313, $166,826 and $136,526 respectively. 18 4 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- STATEMENTS OF CONSOLIDATED EARNINGS (Dollars in thousands, except per share data)
For the Years Ended March 31, ----------------------------------------- 1997 1996 1995 ----------- ----------- ----------- REVENUES Home Building $ 2,299,592 $ 1,989,929 $ 2,110,735 Investment Real Estate 9,032 -- -- Financial Services 168,722 129,546 106,841 Construction Products (A) 239,380 -- -- Contracting and Construction Services 1,068,265 983,512 1,059,928 ----------- ----------- ----------- 3,784,991 3,102,987 3,277,504 ----------- ----------- ----------- COSTS AND EXPENSES Home Building 2,155,549 1,883,234 1,998,586 Investment Real Estate (8,864) -- -- Financial Services 144,312 112,391 97,442 Construction Products (A) 174,974 -- -- Minority Interest (Equity) in Earnings of CXP (A) 31,690 (25,628) (16,577) Contracting and Construction Services 1,070,448 988,507 1,061,718 Other, net 2,260 866 1,608 Corporate General and Administrative 16,817 14,969 15,253 Interest 34,062 40,862 33,014 ----------- ----------- ----------- 3,621,248 3,015,201 3,191,044 ----------- ----------- ----------- EARNINGS BEFORE GAIN ON CXP'S INITIAL PUBLIC OFFERING AND INCOME TAXES 163,743 87,786 86,460 Gain on CXP's Initial Public Offering -- -- 59,328 ----------- ----------- ----------- EARNINGS BEFORE INCOME TAXES 163,743 87,786 145,788 Income Taxes 57,180 34,421 53,540 ----------- ----------- ----------- NET EARNINGS $ 106,563 $ 53,365 $ 92,248 =========== =========== =========== EARNINGS PER SHARE $ 3.62 $ 1.83 $ 3.04 =========== =========== ===========
See notes to consolidated financial statements. (A) As a result of Centex Construction Products, Inc.'s (CXP) repurchases of its own stock during the June 30, 1996 quarter, Centex's ownership interest in CXP increased to more than 50%, (51.4% as of March 31, 1997). Accordingly, beginning with the quarter ended June 30, 1996, CXP's financial results have been consolidated with those of Centex and are reflected in Centex's revenues and operating earnings. Had CXP's revenues been consolidated for the years ended March 31, 1996 and 1995, Centex's consolidated revenues for those years would have increased by $222,594 and $194,313, respectively. 19 5 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
Centex Corporation and Subsidiaries ------------------------- March 31, ------------------------- 1997 1996 ----------- ----------- ASSETS Cash and Cash Equivalents $ 31,320 $ 14,042 Receivables - Residential Mortgage Loans 632,657 629,756 Construction Contracts 208,847 199,232 Trade, including Notes of $19,244 and $8,531 145,881 81,571 Affiliates -- -- Inventories - Housing Projects 944,216 1,055,478 Land Held for Development and Sale 26,061 149,972 Construction Products 31,482 -- Investments - Centex Construction Products, Inc. -- 106,504 Centex Development Company, L.P. 32,664 36,866 Joint Ventures and Other 5,277 3,804 Unconsolidated Subsidiaries -- -- Property and Equipment, net 293,143 37,139 Other Assets - Deferred Income Taxes 197,413 (16,620) Goodwill, net 103,622 3,448 Deferred Charges and Other 26,246 19,154 ----------- ----------- $ 2,678,829 $ 2,320,346 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable and Accrued Liabilities $ 737,698 $ 614,241 Short-term Debt 627,518 662,267 Long-term Debt 236,769 321,002 Minority Stockholders' Interest 142,230 -- Negative Goodwill 98,837 -- Stockholders' Equity - Preferred Stock, Authorized 5,000,000 Shares, None Issued -- -- Common Stock, $.25 Par Value; Authorized 50,000,000 Shares; Issued and Outstanding 29,016,089 and 28,425,851 Shares 7,254 7,107 Capital in Excess of Par Value 18,789 6,814 Retained Earnings 809,734 708,915 ----------- ----------- Total Stockholders' Equity 835,777 722,836 ----------- ----------- $ 2,678,829 $ 2,320,346 =========== ===========
See notes to consolidated financial statements. 20 6 Centex Corporation and Subsidiaries - - -------------------------------------------------------------------------------
Centex Corporation Financial Services - - ------------------------- -------------------------- March 31, March 31, - - ------------------------- -------------------------- 1997 1996 1997 1996 - - ----------- ----------- ----------- ----------- $ 21,679 $ 11,897 $ 9,641 $ 2,145 -- -- 632,657 629,756 208,847 199,232 -- - 122,244 59,429 23,637 22,142 -- -- (19,985) (1,267) 944,216 1,055,478 -- -- 26,061 149,972 -- -- 31,482 -- -- -- -- 106,504 -- -- 32,664 36,866 -- -- 5,277 3,804 -- -- 68,171 38,366 -- -- 276,627 25,413 16,516 11,726 195,983 (16,085) 1,430 (535) 91,442 1,854 12,180 1,594 18,233 12,913 8,013 6,241 - - ----------- ----------- ----------- ----------- $ 2,042,926 $ 1,685,643 $ 684,089 $ 671,802 =========== =========== =========== =========== $ 685,050 $ 554,554 $ 52,648 $ 59,687 47,000 87,251 580,518 575,016 236,769 321,002 -- -- 139,493 -- 2,737 -- 98,837 -- -- -- -- -- -- -- 7,254 7,107 1 2 18,789 6,814 44,075 37,917 809,734 708,915 4,110 (820) - - ----------- ----------- ----------- ----------- 835,777 722,836 48,186 37,099 - - ----------- ----------- ----------- ----------- $ 2,042,926 $ 1,685,643 $ 684,089 $ 671,802 =========== =========== =========== ===========
In the supplemental data presented above, "Centex Corporation" means the basis of presentation as described in Note A to the consolidated financial statements, and "Financial Services" means CTX Mortgage Company and Affiliates. Transactions between Centex Corporation and Financial Services have been eliminated from the Centex Corporation and Subsidiaries balance sheets. 21 7 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- STATEMENTS OF CONSOLIDATED CASH FLOWS (Dollars in thousands)
For the Years Ended March 31, ----------------------------------- 1997 1996 1995 --------- --------- --------- CASH FLOWS -- OPERATING ACTIVITIES Net Earnings $ 106,563 $ 53,365 $ 92,248 Adjustments -- Depreciation, Depletion and Amortization 13,512 12,499 6,438 Deferred Income Taxes 42,843 (6,542) (4,285) Gain Related to CXP's IPO, net of Tax -- -- (37,495) Equity in Earnings of CXP, CDC and Joint Ventures (996) (16,603) (9,827) Minority Interest in CXP 31,690 -- -- Increase in Receivables (22,834) (42,503) (10,813) (Increase) Decrease in Residential Mortgage Loans (2,901) (215,954) 263,718 Decrease (Increase) in Inventories 99,260 55,463 (92,255) Decrease in Government-Guaranteed S&L Assets -- -- 43,767 Increase (Decrease) in Payables and Accruals 12,833 46,772 (56,866) Increase in Other Assets, net (40,988) (660) (14,924) Other, net 18,526 (436) (9) --------- --------- --------- 257,508 (114,599) 179,697 --------- --------- --------- CASH FLOWS -- INVESTING ACTIVITIES Decrease in Advances to CDC and Joint Ventures 4,725 11,580 24,334 Acquisitions -- Cavco and Wallboard Facility (104,894) (85,422) -- Dividend and Other Receipts Related to CXP's IPO -- -- 186,525 Property and Equipment Additions, net (16,137) (7,025) (10,552) Decrease in Marketable Securities -- -- 78,241 --------- --------- --------- (116,306) (80,867) 278,548 --------- --------- --------- CASH FLOWS -- FINANCING ACTIVITIES Decrease in S&L Deposits and Debt -- -- (211,055) (Decrease) Increase in Debt (130,302) 184,479 (207,012) Retirement of Common Stock -- -- (89,093) Proceeds from Stock Option Exercises 12,122 6,903 2,320 Dividends Paid (5,744) (5,659) (5,907) --------- --------- --------- (123,924) 185,723 (510,747) --------- --------- --------- NET INCREASE (DECREASE) IN CASH 17,278 (9,743) (52,502) CASH AT BEGINNING OF YEAR 14,042 23,785 76,287 --------- --------- --------- CASH AT END OF YEAR $ 31,320 $ 14,042 $ 23,785 ========= ========= =========
See notes to consolidated financial statements. 22 8 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (Dollars in thousands)
Capital In Preferred Common Excess Of Retained Stock Stock Par Value Earnings Total --------- --------- ---------- --------- --------- Balance, March 31, 1994 $ -- $ 7,916 $ 26,631 $ 634,112 $ 668,659 Exercise of Stock Options -- 36 2,284 -- 2,320 Retirement of 3,737,500 Shares -- (934) (28,915) (59,244) (89,093) Net Earnings -- -- -- 92,248 92,248 Cash Dividends -- -- -- (5,907) (5,907) -------- --------- --------- --------- --------- Balance, March 31, 1995 -- 7,018 -- 661,209 668,227 Exercise of Stock Options -- 89 6,814 -- 6,903 Net Earnings -- -- -- 53,365 53,365 Cash Dividends -- -- -- (5,659) (5,659) -------- --------- --------- --------- --------- Balance, March 31, 1996 -- 7,107 6,814 708,915 722,836 EXERCISE OF STOCK OPTIONS -- 147 11,975 -- 12,122 NET EARNINGS -- -- -- 106,563 106,563 CASH DIVIDENDS -- -- -- (5,744) (5,744) -------- --------- --------- --------- --------- BALANCE, MARCH 31, 1997 $ -- $ 7,254 $ 18,789 $ 809,734 $ 835,777 ======== ========= ========= ========= =========
See notes to consolidated financial statements. 23 9 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data) (A) 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 are 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 (CTX Mortgage and Affiliates) which are presented on an equity basis of accounting. o Financial Services. This represents CTX Mortgage and Affiliates. 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. REVENUE RECOGNITION Revenues from housing projects and Investment Real Estate are recognized as homes and properties are sold and title passes. Earnings from sale of mortgage servicing rights and from loan origination fees are recognized when the related loan is sold and delivered to third-party purchasers. 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 $74 million included in construction contracts receivable and $73 million included in accounts payable at March 31, 1997 are generally receivable and payable within one year. Claims are recognized as revenue only after management is confident of collection or when agreement has been reached with the customer. Notes receivable at March 31, 1997 are collectible primarily over three years, with $10.0 million being due within one year. The weighted average interest rate at March 31, 1997 was 7.8%. 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 market. The capitalized costs, other than interest, are included in Home Building and Investment Real Estate costs and expenses in the statement of consolidated earnings as related revenues are recognized. Interest costs relieved from inventories are included as interest expense. Construction Products inventories are stated at the lower of average cost (including applicable material, labor and plant overhead) or market. 24 10 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- General operating expenses associated with each segment of business are expensed as incurred and are included in the appropriate segment of business. JOINT VENTURES Earnings or losses of joint ventures are not significant and are included in the appropriate segment of business revenues. Investments in non-controlled joint ventures are carried on the equity method in the consolidated financial statements except for Centex Construction Products, Inc.'s (CXP) 50% joint venture interests in its cement plants in Illinois and Texas. CXP has proportionately consolidated its pro rata interest in the revenues, expenses, assets and liabilities of those ventures. 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 10 years and 30 years. Goodwill and other intangibles are reassessed annually to determine whether any potential impairment exists. Negative goodwill arose in conjunction with Centex's Home Building subsidiary's combination transaction with Vista Properties, Inc. (Vista). Negative goodwill of $114.8 million was recorded and is being amortized over approximately seven years which represents the estimated period over which Vista's land will be developed and/or sold. Amortization is included in costs and expenses in the accompanying statements of consolidated earnings. EARNINGS PER SHARE Earnings per share are based on the weighted average number of common and common equivalent shares outstanding in 1997, 1996 and 1995 of 29,429,451; 29,090,919 and 30,326,906, respectively. RESIDENTIAL MORTGAGE LOANS RECEIVABLE Residential mortgage loans of $632.7 million at March 31, 1997 are stated at the lower of aggregate cost or market. Market is determined based on forward sale commitments. Substantially all of the mortgage loans are sold forward upon closing and subsequently delivered to third-party purchasers within 60 days thereafter. Due to the fact that defaults of new loans within the first 60 days are not material, no significant reserves are required. OFF-BALANCE-SHEET RISK 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, and committing to sell mortgage loans to various investors. CTX Mortgage had commitments to mortgagors of approximately $270 million and commitments to sell to investors against these loan commitments of approximately $242 million at March 31, 1997. The company does not engage in the trading of securities or other financial instruments. 25 11 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- 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, -------------------------------------- 1997 1996 1995 -------- -------- -------- Total Interest Incurred $ 65,517 $ 69,724 $ 58,771 Less -- Financial Services (31,455) (28,862) (25,757) -------- -------- -------- Interest Expense $ 34,062 $ 40,862 $ 33,014 ======== ======== ========
Net payments made for federal, state and foreign income taxes during the fiscal years ended March 31, 1997, 1996 and 1995 were $16.0 million, $28.0 million, and $49.8 million, respectively. STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 121, issued in March 1995, established methods of accounting for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. This Statement was implemented in April 1996 and did not have a material impact on the company's financial statements. Statement of Financial Accounting Standards No. 122, issued in May 1995, eliminated the accounting distinction between mortgage servicing rights acquired through loan origination and those acquired through purchase. This Statement was adopted in January 1996 and did not have a material impact on the company's financial statements. Statement of Financial Accounting Standards (SFAS) No. 123, issued in October 1995, established financial accounting and reporting standards for stock-based employee compensation plans. This Statement requires either (1) recognition of compensation cost in the financial statements for those companies that adopt the new fair value based method or (2) expanded disclosure of pro forma net income and earnings per share information for those companies that retain the current method set forth in APB Opinion 25, "Accounting for Stock Issued to Employees." This Statement became effective for Centex's fiscal 1997, ending March 31, 1997. The company continues to use APB Opinion 25 in accounting for employee stock option plans and has added the expanded disclosure in Note F to comply with SFAS No. 123. Statement of Financial Accounting Standards No. 125, issued in June 1996, superseded SFAS No. 122 in establishing standards for resolving issues relating to the accounting for continuing involvement arising from the transfer of financial assets. Under SFAS No. 125, an entity that undertakes an obligation to service financial assets recognizes a financial asset or servicing liability for that servicing contract and amortizes the estimated net servicing income or loss over the projected contract period. The servicing asset or liability is periodically reviewed for impairment or increased obligation based on its fair value. This Statement is effective for transfers and servicing of financial assets occurring after December 31, 1996. The actual effects of implementing this new Statement did not have a material effect on the company's financial position or results of operations. 26 12 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- Statement of Financial Accounting Standards No. 128, issued in February 1997, established standards for computing and presenting earnings per share (EPS). This Statement replaces the presentation of primary EPS with a presentation of basic EPS and requires dual presentation of basic and diluted EPS. This Statement will be effective for Centex's fiscal 1998, ending March 31, 1998. RECLASSIFICATIONS Certain prior year balances have been reclassified to be consistent with the fiscal 1997 presentation. (B) SAVINGS AND LOAN OPERATIONS In December 1988, the company purchased certain assets and assumed certain liabilities of four Texas savings and loan associations pursuant to acquisition agreements and an assistance agreement with the Federal Savings and Loan Insurance Corporation (FSLIC), subsequently replaced by the FSLIC Resolution Fund (the Fund). The acquisition was made by Texas Trust, a federal stock savings bank and subsidiary of CTX Holding, a wholly-owned subsidiary of the company. The acquisition agreements provided for sharing by the Fund in a portion of the tax benefits realized by Centex Corporation and indemnification by the Fund against unassumed liabilities and claims. In December 1994, Texas Trust and CTX Holding executed an agreement with the Fund which terminated the assistance agreement. Also, in December 1994, a non-affiliated entity purchased all of Texas Trust's branch office facilities and assumed its deposit liabilities. Immediately after the sale, Texas Trust was dissolved and its charter was canceled. (C) INVESTMENT IN CXP In April 1994, the company's construction products subsidiary, Centex Construction Products, Inc. (CXP), completed the sale of 11.73 million shares (51%) of its common stock in an Initial Public Offering. CXP's operations include cement, gypsum wallboard, concrete and aggregate facilities, including its 50% joint venture interests in its Texas and Illinois cement plants. In connection with CXP's Initial Public Offering, Centex received a dividend and other payments from CXP of $186.5 million, which was used by Centex to reduce outstanding indebtedness. As a result of Centex Construction Products, Inc.'s repurchases of its own stock during the June 30, 1996 quarter, Centex's ownership interest in CXP increased to more than 50%, (51.4% as of March 31, 1997). Accordingly, beginning with the quarter ended June 30, 1996, CXP's financial statements have been consolidated with those of Centex. In February 1997, CXP acquired a gypsum wallboard manufacturing facility, a gypsum mine, and a cogeneration power facility located in Eagle County, Colorado together with the working capital assets, for a total purchase price of approximately $56 million. 27 13 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- (D) PROPERTY AND EQUIPMENT Property and equipment cost by major category and accumulated depreciation are summarized below:
March 31, ----------------------- 1997 1996 --------- --------- Land, Buildings and Improvements $ 42,474 $ 1,837 Machinery, Equipment and Other 153,112 82,539 Plants 294,117 -- --------- --------- 489,703 * 84,376 Accumulated Depreciation (196,560)* (47,237) --------- --------- $ 293,143 $ 37,139 ========= =========
*Includes June, 1996 balances of $309,674 and $131,594, respectively, related to the consolidation of CXP. (E) INDEBTEDNESS SHORT-TERM DEBT Balances of short-term debt were:
March 31, ----------------------------------------------------- 1997 1996 ------------------------- ------------------------- Centex Financial Centex Financial Corporation Services Corporation Services ----------- --------- ----------- --------- Banks $ 34,000 $273,147 $ 51,000 $245,000 Commercial Paper 13,000 -- 35,000 -- Other Financial Institutions -- 307,371 1,251 330,016 -------- -------- -------- -------- $ 47,000 $580,518 $ 87,251 $575,016 -------- -------- -------- -------- Consolidated Short-term Debt $627,518 $662,267 ======== ========
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 indebtedness outstanding during fiscal 1997 and 1996 were 6.0% and 6.4%, respectively. The weighted average rates of balances outstanding at March 31, 1997 and 1996 were 6.2% and 6.1%, respectively. 28 14 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- LONG-TERM DEBT Balances of long-term debt were:
March 31, -------------------- 1997 1996 -------- -------- Senior Notes, 9.05% Paid in May 1996 $ -- $100,000 Subordinated Debentures, 8.75% to 8.8% Due in 2007 119,387 119,350 Subordinated Debentures, 7.375% Due in 2005 99,601 99,552 Other Indebtedness, 7.0% to 9.06% Due through 2005 17,781 2,100 -------- -------- $236,769 $321,002 ======== ========
Maturities of long-term debt during the next five fiscal years are: 1998, $4,797; 1999, $3,900; 2000, $6,398; 2001, $1,892; 2002, $554. Included in other long-term debt is a $2.1 million convertible subordinated debenture sold in August 1985 to a corporate officer at par. The indebtedness bears interest at LIBOR plus 1.5% and is convertible into 200,000 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 Centex maintains a $425 million 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 to Centex Corporation under this facility during the fiscal years ended March 31, 1997 and 1996. There were no borrowings outstanding to CTX Mortgage under this facility during the fiscal year ended March 31, 1997 and a one-time short-term borrowing of $25 million was outstanding to CTX Mortgage during fiscal year 1996. CTX Mortgage has a $300 million committed and secured mortgage warehouse facility with a bank group, which expires in October 1999. CTX Mortgage also maintains committed mortgage warehouse facilities of $200 million expiring December 1997 with two investment banks. In addition, CTX Mortgage has a $100 million asset-backed commercial paper program which expires in July 1997 and is expected to be renewed at that time. CTX Mortgage's warehouse facilities provide for limited support by Centex which, under certain conditions, may require Centex's purchase of up to 10% of the outstanding collateral from time to time. Under the most restrictive covenants of the various debt agreements, retained earnings of $404 million were free of restrictions at March 31, 1997. (F) CAPITAL STOCK SHAREHOLDER 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. Each Right entitles its holder to purchase one one-hundredth of a share of a new series of preferred stock designated Junior Participating Preferred Stock, Series D, at an exercise price of $135. The Rights will become exercisable upon the earlier of 29 15 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- 10 days after the first public announcement that a person or group has acquired beneficial ownership of 15 percent 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 percent 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 percent 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 percent or more (or, in the case of FMR Corp., 20 percent 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 percent or more (or, in the case of FMR Corp., 20 percent 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 percent or more (or, in the case of FMR Corp., 20 percent or more) of the Common Stock, but less than 50 percent 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 for directors, officers and key employees of the company, the Centex Corporation 1987 Stock Option Plan (the 1987 Plan) and the Centex Corporation Stock Option Plan (the Centex Plan). Options granted under the Centex Plan were not granted at less than the fair market value at the date of the 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 the fair market value at the date of grant. Under both plans, option periods and exercise dates may vary within a maximum period of 10 years. A summary of the activity in the stock option plans is presented below:
1997 1996 -------------------------- -------------------------- Number Weighted Avg. Number Weighted Avg. of Shares Exercise Price of Shares Exercise Price --------- -------------- --------- -------------- Outstanding Options at Beginning of Year 3,025,909 $ 18.93 3,397,073 $ 17.86 Granted 357,875 $ 32.02 170,000 $ 29.11 Exercised (595,315) $ 12.93 (372,873) $ 13.67 Forfeited/Expired (108,440) $ 25.21 (168,291) $ 18.56 --------- --------- Outstanding Options at End of Year 2,680,029 $ 21.75 3,025,909 $ 18.93 ========= =========
Using the treasury stock method, which assumes that any proceeds 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, 1997 would have been 2.3%. This is significantly less than appears on a gross basis when compared to the 29,016,089 common shares outstanding as of March 31, 1997. 30 16 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- The following table summarizes information about stock options outstanding at March 31, 1997:
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 - - ------------------------ ----------- ------------ -------- ----------- -------- $ 8.50 to $ 9.4375 198,107 .6 $ 8.51 98,705 $ 8.52 $ 12.75 to $ 18.375 1,436,547 3.3 $16.83 875,683 $16.57 $ 23.125 to $ 28.75 430,875 8.3 $27.34 10,534 $24.56 $ 30.00 to $ 39.3125 614,500 7.2 $33.58 34,720 $32.87 --------- --------- $ 8.50 to $ 39.3125 2,680,029 4.8 $21.75 1,019,642 $16.43 ========= =========
The weighted average fair value of options granted during fiscal year 1997 was $14.18 and $13.80 for options granted in fiscal year 1996. The fair value of each option granted in 1997 and 1996 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 6.8% and 6.3%; a dividend yield of .6% and .7%; expected volatility of 35.7% and expected lives of eight years for both 1997 and 1996. 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 fair market value at the date of the grant. SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does not require, companies to record compensation cost for employee stock-based compensation plans at fair value as determined by generally recognized option pricing models such as the Black-Scholes model or the binominal model. Because of the inexact and subjective nature of deriving stock option values using these methods, the company has adopted the disclosure-only provisions of SFAS No. 123 and continues to account for stock-based compensation as it has in the past using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation expense has been recognized for the company's employee stock option plans. Had compensation cost for the company's employee stock option plans been determined based on the fair value at the grant date for awards consistent with the provisions of SFAS No. 123, the company's net earnings and earnings per share for the fiscal years ended March 31, 1997 and 1996 would not have been materially different than those reported. SFAS No. 123 has not been applied to options granted prior to April 1, 1995. 31 17 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- (G) INCOME TAXES The provision for income taxes includes the following components:
For the Years Ended March 31, -------------------------------- 1997 1996 1995 -------- -------- -------- Current Provision (Benefit) Federal $ 11,216 $ 41,805 $ 53,754 State 3,121 (842) 4,071 -------- -------- -------- 14,337 40,963 57,825 -------- -------- -------- Deferred Provision (Benefit) Federal 38,771 (10,438) (4,570) State 4,072 3,896 285 -------- -------- -------- 42,843 (6,542) (4,285) -------- -------- -------- Provision for Income Taxes $ 57,180 $ 34,421 $ 53,540 ======== ======== ========
The effective tax rate is greater than the federal statutory rate of 35% in 1996 and 1995 due to the following items:
For the Years Ended March 31, -------------------------------- 1997 1996 1995 -------- -------- -------- Financial Income Before Taxes $ 163,743 $ 87,786 $ 145,788 ========= ========= ========= Income Taxes at Statutory Rate $ 57,311 $ 30,724 $ 51,025 Increases (Decreases) in Tax Resulting From -- State Income Taxes, net 4,131 1,966 2,791 Negative Goodwill Amortization (6,000) -- -- Other 1,738 1,731 (276) --------- --------- --------- Provision for Income Taxes $ 57,180 $ 34,421 $ 53,540 ========= ========= ========= Effective Tax Rate 35% 39% 37%
The deferred income tax provision (benefit) 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, -------------------------------- 1997 1996 1995 -------- -------- -------- Utilization of Net Operating Loss Carryforwards $ 46,865 $ -- $ -- Tax Basis in Excess of Book Basis-Real Estate 3,648 -- -- Uniform Capitalization for Tax Reporting (2,893) (5,112) (2,377) Software Development Costs Expensed as Incurred (4,067) 1,728 1,243 Equity Adjustments and Gain on CXP's Initial Public Offering 1,329 (254) 21,500 Excess Tax Depreciation and Amortization 2,257 502 (32,389) Alternative Minimum Tax (1,973) (349) (507) Interest and Real Estate Taxes Expensed as Incurred (4,002) 1,736 (749) Financial and Accrual Changes and Other 1,679 (4,793) 8,994 -------- -------- -------- $ 42,843 $ (6,542) $ (4,285) ======== ======== ========
32 18 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- Components of deferred income taxes are as follows:
March 31, ------------------- 1997 1996 -------- -------- Deferred Tax Liabilities Excess Tax Depreciation and Amortization $ 23,413 $ 1,874 Interest and Real Estate Taxes Expensed as Incurred 23,571 27,573 Equity Adjustments and Gain on CXP's Initial Public Offering 22,575 21,246 State Income Taxes -- 8,354 Consolidated Return Regulation Deferrals 6,870 6,888 Software Development Expensed as Incurred -- 3,685 All Other 9,173 8,771 -------- -------- Total Deferred Tax Liabilities 85,602 78,391 -------- -------- Deferred Tax Assets Tax Basis in Excess of Book Basis -- Real Estate 108,488 -- Net Operating Loss Carryforwards 77,256 -- Uniform Capitalization for Tax Reporting 41,889 19,990 Financial Accruals 43,098 36,127 State Income Taxes 4,610 -- All Other 7,674 5,654 -------- -------- Total Deferred Tax Assets 283,015 61,771 -------- -------- Net Deferred Tax Asset (Liability) $197,413 $(16,620) ======== ========
At March 31, 1997, Centex had $220.7 million of net operating loss carryforwards available to reduce future federal taxable income which expire if unused as follows: 2008, $45.6; 2009, $33.8; 2010, $126.1; 2011, $15.2. (H) CENTEX DEVELOPMENT COMPANY, L.P. In March 1987, certain of the company's subsidiaries contributed to Centex Development Company, L.P. (CDC), a newly formed master limited partnership, properties with a historical cost basis (which approximated market value) of approximately $76 million. CDC was formed to enable stockholders to participate in long-term real estate development projects whose dynamics are inconsistent with Centex's traditional financial objectives. In November 1987, the company distributed as a dividend to its stockholders securities relating to CDC. These securities included all of the issued and outstanding shares of common stock of 3333 Holding Corporation and warrants to purchase approximately 80% of the Class B units of limited partnership interest in CDC. A wholly-owned subsidiary of 3333 Holding Corporation serves as general partner of CDC. These securities are held by a nominee on behalf of the stockholders and will trade in tandem with the common stock of the company 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. 33 19 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- The partnership agreement provides that Centex, the Class A 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 initial capital contribution, adjusted for cash distributions representing return of the initial capital contribution. In July 1995, in conjunction with the extension of the automatic detachment date from 1997 to 2007, Centex reduced its unrecovered capital to $47.3 million and waived unpaid preference as of that date of $37.5 million. Unrecovered capital was reduced by an additional $4.5 million during fiscal 1997 and $10 million during fiscal 1996 through partnership distributions. No distributions were made in fiscal 1995. Preference payments in arrears at March 31, 1997 amounted to $5.7 million. Supplementary condensed combined financial statements for the company, 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. are set forth below. For additional information on 3333 Holding Company and its subsidiary and Centex Development Company, L.P., see their separate financial statements and related footnotes included elsewhere in this annual report. - - ------------------------------------------------------------------------------- SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
March 31, ----------------------- 1997 1996 ---------- ---------- ASSETS Cash and Cash Equivalents $ 31,950 $ 14,273 Receivables 989,886 914,549 Inventories 1,041,855 1,244,931 Investments in Centex Construction Products, Inc. -- 106,504 Joint Ventures and Unconsolidated Subsidiaries 5,479 3,984 Property and Equipment, net 293,143 37,139 Other Assets 327,281 5,982 ---------- ---------- $2,689,594 $2,327,362 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable and Accrued Liabilities $ 740,230 $ 616,959 Short-term Debt 634,573 665,593 Long-term Debt 236,769 321,002 Minority Stockholders' Interest 142,230 -- Negative Goodwill 98,837 -- Stockholders' Equity 836,955 723,808 ---------- ---------- $2,689,594 $2,327,362 ========== ==========
34 20 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
For the Years Ended March 31, ------------------------------------ 1997 1996 1995 ---------- ---------- ---------- Revenues $3,793,621 $3,111,486 $3,281,198 Costs and Expenses 3,629,672 3,023,447 3,194,642 ---------- ---------- ---------- Earnings Before Gain on CXP's Initial Public Offering and Income Taxes 163,949 88,039 86,556 Gain on CXP's Initial Public Offering -- -- 59,328 ---------- ---------- ---------- Earnings Before Income Taxes 163,949 88,039 145,884 Income Taxes 57,180 34,421 53,540 ---------- ---------- ---------- Net Earnings $ 106,769 $ 53,618 $ 92,344 ========== ========== ==========
(I) ACQUISITION OF VISTA PROPERTIES, INC. During September 1995, the company acquired certain equity interests in Vista for a net investment of approximately $85 million in cash. At the time of the acquisition, Vista's real property portfolio consisted of approximately 3,400 acres of land located in seven states in which the company has major operations. Vista's real property portfolio generally consists of land that is zoned, planned or developed for single- and multi-family residential, office, retail, industrial and other commercial uses. After a period of extensive evaluation of benefits relating to combining Vista's planning, development and operational efforts with certain of the company's subsidiaries and in a further effort to optimize the benefits derived from the complimentary business of Vista and the company, the managements of both companies agreed to a business combination pursuant to which the assets and operations of Vista were to be combined with the company's existing home building operations. Accordingly, during the quarter ended June 30, 1996, Centex's Home Building subsidiary completed a business combination transaction and reorganization with Vista that increased Centex's ownership of Vista's common stock from approximately 53% to 99.975%. Under the terms of the combination transaction, Centex's Home Building assets and operations were contributed to Vista in exchange for 12.4 million shares of Vista's common stock and Vista changed its name to Centex Real Estate Corporation. As a result of the combination, Centex's Investment Real Estate portfolio, valued in excess of $125 million, was reduced to a nominal "book basis" after recording certain Vista-related tax benefits. Accordingly, as these properties are developed or sold, the net sales proceeds will be reflected as operating margin. "Negative Goodwill" recorded as a result of the business combination is being amortized to earnings over approximately seven years which represents the estimated period over which the land will be developed and/or sold. All investment property operations are being reported through the "Investment Real Estate" business segment which operates under the Vista Properties Company name. 35 21 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- (J) ACQUISITION OF CAVCO INDUSTRIES, INC. During March 1997, Centex Real Estate Corporation acquired 78% of Cavco Industries, Inc.'s (Cavco) outstanding common stock at $26.75 per share for a total of $74.3 million. Prior to the acquisition, Cavco's common stock was publicly traded on the NASDAQ exchange. Cavco is the largest producer of manufactured housing in Arizona as well as the nation's largest producer of park model homes, having delivered 4,893 manufactured housing units during its most recent fiscal year ended September 30, 1996. Cavco currently operates three manufactured housing facilities in the Phoenix area and is building a plant near Albuquerque, New Mexico, which will be that state's first manufactured housing operation. Goodwill of $68.7 million was recorded in connection with the Cavco acquisition (approximately $53.6 million relates to the 78% acquired by Centex) and will be amortized over 30 years beginning in fiscal 1998. (K) BUSINESS SEGMENTS The company operates in five 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. 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. is included in the Investment Real Estate segment. HOME BUILDING HOUSING Housing 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 Housing operations.
For the Years Ended March 31, -------------------------------------- 1997 1996 1995 ---------- ---------- ---------- (Dollars in millions) Revenues $ 2,299.6 $ 1,989.9 $ 2,110.7 Cost of Sales & Expenses 2,155.6 1,883.2 1,998.6 ---------- ---------- ---------- Operating Earnings $ 144.0 $ 106.7 $ 112.1 ========== ========== ========== Identifiable Assets $ 1,036.5 $ 1,318.7 $ 1,286.0 ========== ========== ========== Capital Expenditures $ 4.2 $ 4.9 $ 6.4 ========== ========== ========== Depreciation and Amortization $ 3.4 $ 3.1 $ 3.3 ========== ========== ==========
MANUFACTURED HOUSING Manufactured Housing operations involve the manufacture of quality residential and recreational homes and the sale thereof through a network of independent dealers. The company entered the Manufactured Housing industry in late March 1997, when a subsidiary acquired 78% of Cavco's outstanding common stock. (See Note J). 36 22 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- As of March 31, 1997, Manufactured Housing had identifiable assets of $93.3 million. The Cavco acquisition had no effect on Centex's earnings this fiscal year as the acquisition was not effective until late March 1997. Cavco had revenues of $131.1 million and operating earnings of $6.9 million for their most recent fiscal year ended September 30, 1996. INVESTMENT REAL ESTATE During the quarter ended June 30, 1996, Centex's Home Building subsidiary completed a business combination transaction and reorganization with Vista (see Note I). The following table sets forth financial information relating to the Investment Real Estate operation.
For the Year Ended March 31, ---------------------------- 1997 ---------------------------- (Dollars in millions) Revenues $ 9.0 Cost of Sales & Expenses 7.1 Negative Goodwill Amortization (16.0) -------- Operating Earnings $ 17.9 ======== Identifiable Assets $ 269.3 ======== Capital Expenditures $ .2 ======== Depreciation and Amortization, including Negative Goodwill $ (15.9) ========
FINANCIAL SERVICES Financial Services operations involve the financing of housing, home equity lending and the sale of title and other insurance coverages. These activities include mortgage origination, the sale of title and other insurance coverages and other related services for homes sold by subsidiaries and by others. The Savings and Loan included the operations of CTX Holding and its subsidiary, Texas Trust Savings Bank, FSB (sold during fiscal 1995 -- see Note B). The following table sets forth financial information relating to the Financial Services operations.
For the Years Ended March 31, --------------------------------------------------------------- (Dollars in millions) 1997 1996 1995 ---------- ---------- ------------------------------------- Mortgage Savings Banking & Loan Total ---------- ---------- ---------- Revenues $ 168.7 $ 129.6 $ 97.4 $ 9.4 $ 106.8 Cost of Sales & Expenses 144.3 112.4 96.0 1.4 97.4 ---------- ---------- ---------- ---------- ---------- Operating Earnings $ 24.4 $ 17.2 $ 1.4 $ 8.0 $ 9.4 ========== ========== ========== ========== ========== Identifiable Assets $ 704.1 $ 674.2 $ 450.7 $ -- $ 450.7 ========== ========== ========== ========== ========== Capital Expenditures $ 11.1 $ 2.5 $ 6.7 $ .2 $ 6.9 ========== ========== ========== ========== ========== Depreciation and Amortization, including Negative Goodwill in 1995 $ 7.6 $ 5.7 $ 6.0 $ (6.8) $ (.8) ========== ========== ========== ========== ==========
37 23 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- CONSTRUCTION PRODUCTS Construction Products operations involve the manufacture and sale of cement, gypsum wallboard, aggregates and readymix concrete. The following table sets forth financial information relating to the Construction Products operations.
For the Years Ended March 31, ------------------------------ 1997 1996 1995 ------ ------ ------ (Dollars in millions) Revenues $239.4 $ -- $ -- Cost of Sales & Expenses 175.0 -- -- ------ ------ ------ Operating Earnings 64.4 52.3 33.8 Minority Interest (31.7) (26.7) (17.2) ------ ------ ------ Net Operating Earnings to Centex $ 32.7 $ 25.6 $ 16.6 ====== ====== ====== Identifiable Assets $286.8 $106.5* $ 89.9* ====== ====== ====== Capital Expenditures $ 6.3 $ -- $ -- ====== ====== ====== Depreciation and Amortization $ 13.8 $ -- $ -- ====== ====== ======
*Amounts represent Centex's 49% Investment in CXP. As a result of Centex Construction Products, Inc.'s (CXP) repurchases of its own stock during the quarter ended June 30, 1996, Centex's ownership interest in CXP increased to more than 50%, (51.4% as of March 31, 1997). Accordingly, CXP's financial results have been consolidated with those of Centex in fiscal 1997. CONTRACTING AND CONSTRUCTION SERVICES Contracting and Construction Services includes 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. 38 24 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- The following table sets forth financial information relating to the Contracting and Construction Services operation. As this segment generates significant levels of balance sheet related cash flow, Intracompany Interest Income (credited at the prime rate in effect) is reflected in this segment. These amounts are eliminated in consolidation.
For the Years Ended March 31, ---------------------------------- 1997 1996 1995 -------- -------- -------- (Dollars in millions) Revenues $1,068.3 $ 983.5 $1,059.9 Cost of Sales & Expenses 1,070.5 988.5 1,061.7 -------- -------- -------- Operating Loss, as reported (2.2) (5.0) (1.8) Intracompany Interest Income* 5.3 4.9 4.8 -------- -------- -------- Total Economic Return $ 3.1 $ (.1) $ 3.0 ======== ======== ======== Identifiable Assets* $ 227.5 $ 216.1 $ 199.8 ======== ======== ======== Capital Expenditures $ 2.0 $ 1.7 $ 2.7 ======== ======== ======== Depreciation and Amortization $ 2.5 $ 2.9 $ 3.1 ======== ======== ========
* 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, ------------------------------ 1997 1996 1995 -------- -------- -------- (Dollars in millions) Corporate General and Administrative Expenses $ 16.8 $ 15.0 $ 15.3 ======== ======== ======== Identifiable Assets $ 61.4 $ 21.4 $ 23.3 ======== ======== ======== Capital Expenditures $ 6.6 $ .1 $ .2 ======== ======== ======== Depreciation and Amortization $ 2.3 $ .8 $ .8 ======== ======== ========
(L) 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 39 25 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- 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. There is no material difference between the recorded amount and the estimated fair value of CTX Mortgage's off-balance-sheet unfunded loan commitments. These are generally priced at market at the time of funding. 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, -------------------------------------------- 1997 1996 ------------------- ------------------- Carrying Fair Carrying Fair Value Value Value Value -------- -------- -------- -------- Financial Assets Residential Mortgage Loans $632,657 $645,604(A) $629,756 $640,269(A) Financial Liabilities Long-term Debt $236,769 $233,757(B) $321,002 $325,455(B)
(A) Fair values are based on quoted market prices for similar instruments. (B) Fair values are based on a present value discounted cash flow with the discount rate approximating current market for similar instruments. (M) COMMITMENTS AND CONTINGENCIES In order to assure the future availability of land for home building, the company has made deposits totaling $14 million as of March 31, 1997 for options to purchase undeveloped land and developed lots having a total purchase price of approximately $380 million. These options and commitments expire at various dates to 2003. The company has also committed to purchase land and developed lots totaling approximately $28 million. In addition, the company has executed lot purchase contracts with CDC (see Note H) which aggregate approximately $2 million. Management believes that none of the litigation matters in which it or any subsidiary is involved, if determined unfavorably to Centex or any subsidiary, would have a material adverse effect on the consolidated financial condition or results of operations of the company. The Harrah's New Orleans Casino contract was suspended on November 22, 1995 due to a bankruptcy filing by the Harrah's Jazz Company partnership, the developer of the casino. Centex and its subcontractors filed claims against the partnership for completed but unpaid work. Centex also filed a lawsuit against Harrah's Entertainment, Inc., parent company of the major partner in the partnership, to recover its claims. In late November 1996, Centex and Harrah's reached a settlement which is conditioned upon Harrah's plan of reorganization becoming effective. It appears possible that the plan will go effective in the summer, 1997, at which time Harrah's will pay $34 million in settlement of the claims of Centex and its subcontractors. Upon payment of such sum, Centex will resume construction of the casino. 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. 40 26 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- 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, 1997 and 1996, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. 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 9, 1997 41 27 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996 Centex reported consolidated revenues of $3.8 billion for fiscal 1997, 22% above $3.1 billion for fiscal 1996. Earnings before income taxes were $163.7 million, 87% more than $87.8 million for fiscal 1996. Net earnings for fiscal 1997 reached $106.6 million, a historical high and 100% improvement over net earnings of $53.4 million last year. Earnings per share for fiscal 1997 were $3.62 per share compared to $1.83 for the prior year. HOME BUILDING HOUSING The following summarizes Housing results for the two-year period ended March 31, 1997 (dollars in millions, except per unit data):
1997 1996 ------------------------- ------------------------ Home Building Revenues $ 2,299.6 100.0% $ 1,989.9 100.0% Cost of Sales (1,877.3) (81.6%) (1,640.0) (82.4%) Selling, General & Administrative (278.3) (12.1%) (243.2) (12.2%) ---------- ---------- ---------- ---------- Operating Earnings $ 144.0 6.3% $ 106.7 5.4% ========== ========== ========== ========== Units Closed 13,107 11,970 Unit Sales Price $ 172,296 $ 163,912 % Change 5.1% 2.9% Operating Earnings per Unit $ 10,990 $ 8,914 % Change 23.3% 3.0% Backlog Units 4,308 5,533 % Change (22.1%) 38.8%
The operating earnings for fiscal 1997 were higher as a percentage of revenues and on a per unit basis compared to fiscal 1996 as a result of the divisions' focus on improving operating margins. Fiscal 1997 home closings of 13,107 were the highest in company history. Impacted by higher interest rates and fewer neighborhoods, home orders declined 12% to 11,882 units from 13,516 units in fiscal 1996. MANUFACTURED HOUSING During March 1997, Centex Real Estate Corporation acquired 78% of Cavco Industries, Inc.'s (Cavco) outstanding common stock at $26.75 per share for a total of $74.3 million. Prior to the acquisition, Cavco's common stock was publicly traded on the NASDAQ exchange. Cavco is the largest producer of manufactured housing in Arizona as well as the nation's largest producer of park model homes, having delivered 4,893 manufactured housing units during its most recent fiscal year ended September 30, 1996. Cavco currently operates three manufactured housing facilities in the Phoenix area and is building a plant near Albuquerque, New Mexico, which will be that state's first manufactured housing operation. 42 28 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- This acquisition creates a strategic base for Centex's expansion into the manufactured housing industry, providing an additional way to serve the growing affordable housing market. The company is also evaluating opportunities related to the development of manufactured home communities as well as financing for manufactured homes. INVESTMENT REAL ESTATE In June 1996, by completing a business combination transaction and reorganization with Vista Properties, Inc., Centex created an Investment Real Estate operation through which all investment property transactions are reported. For fiscal 1997, operating earnings from Investment Real Estate totaled $17.9 million. FINANCIAL SERVICES The Financial Services segment consists primarily of the financing of housing, home equity lending and the sale of title and other insurance coverages. The following summarizes Financial Services' results for the two-year period ended March 31, 1997 (dollars in millions):
1997 1996 ---------- ---------- Revenues $ 168.7 $ 129.6 ========== ========== Operating Earnings $ 24.4 $ 17.2 ========== ========== Origination Volume $ 5,394.9 $ 4,886.1 ========== ========== Number of Loans Originated Centex-built Homes 9,489 8,445 Non-Centex-built Homes ("Spot") 37,673 33,151 ---------- ---------- 47,162 41,596 ========== ==========
Total mortgage originations for fiscal 1997 increased 13% to 47,162 from 41,596 for fiscal 1996. The per loan margin for fiscal 1997 was $518, 26% higher than $412 per loan in fiscal 1996. Total mortgage applications for fiscal 1997 increased 20% to 57,276 from 47,763 applications reported for fiscal 1996. CONSTRUCTION PRODUCTS As a result of Centex Construction Products, Inc.'s (CXP) repurchases of its own stock during the quarter ended June 30, 1996, Centex's ownership interest in CXP has increased to more than 50%, (51.4% as of March 31, 1997). Accordingly, beginning with the June 30, 1996 quarter, CXP's financial results have been consolidated with those of Centex and are reflected in Centex's financial statements. For fiscal 1997, CXP's revenues were $239.4 million. CXP's revenues for fiscal 1996, which were not consolidated with Centex's results, were $222.6 million. For the current year, CXP's pretax earnings, net to Centex's ownership interest, were $32.7 million, a 28% increase over $25.6 million last year. CXP's record results for fiscal 1997 were due to higher pricing for all its products, particularly gypsum wallboard, along with continued strong product demand. 43 29 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- CONTRACTING AND CONSTRUCTION SERVICES The following summarizes Contracting and Construction Services results for the two-year period ended March 31, 1997 (dollars in millions):
1997 1996 -------- -------- Revenues $1,068.3 $ 983.5 ======== ======== Operating Loss $ (2.2) $ (5.0) ======== ======== New Contracts Received $ 981.0 $ 857.0 ======== ======== Backlog of Uncompleted Contracts $1,114.1 $1,201.5 ======== ========
The Contracting and Construction Services operation provided a positive average net cash flow in excess of Centex's investment in the group of $64.2 million in fiscal 1997 and $55.4 million in fiscal 1996. The Harrah's New Orleans Casino contract was suspended on November 22, 1995 due to a bankruptcy filing by the Harrah's Jazz Company partnership, the developer of the casino. Centex and its subcontractors filed claims against the partnership for completed but unpaid work. Centex also filed a lawsuit against Harrah's Entertainment, Inc., parent company of the major partner in the partnership, to recover its claims. In late November 1996, Centex and Harrah's reached a settlement which is conditioned upon Harrah's plan of reorganization becoming effective. It appears possible that the plan will go effective in the summer, 1997, at which time Harrah's will pay $34 million in settlement of the claims of Centex and its subcontractors. Upon payment of such sum, Centex will resume construction of the casino. FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995 Centex reported consolidated revenues of $3.1 billion for fiscal 1996, 5% less than $3.3 billion for fiscal 1995. Earnings before income taxes were $87.8 million, 2% more than $86.5 million for fiscal 1995. Total earnings before income taxes for fiscal 1995, including the gain on the sale of 51% of Centex Construction Products, Inc. (CXP), were $145.8 million. Net earnings for fiscal 1996 were $53.4 million, down 3% compared to $54.7 million last year. Total net earnings for last year, including the gain on the CXP sale, were $92.2 million. Earnings per share for fiscal 1996 were $1.83 compared to $1.81 for fiscal 1995. Total earnings per share for fiscal 1995, including the gain from the CXP sale, were $3.04. 44 30 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- HOME BUILDING The following summarizes Home Building results for the two-year period ended March 31, 1996 (dollars in millions, except per unit data):
1996 1995 ------------------------- ------------------------ Home Building Revenues $ 1,989.9 100.0% $ 2,110.7 100.0% Cost of Sales (1,640.0) (82.4%) (1,748.6) (82.9%) Selling, General & Administrative (243.2) (12.2%) (250.0) (11.8%) ---------- ---------- ---------- ---------- Operating Earnings $ 106.7 5.4% $ 112.1 5.3% ========== ========== ========== ========== Units Closed 11,970 12,964 Unit Sales Price $ 163,912 $ 159,222 % Change 2.9% 8.0% Operating Earnings per Unit $ 8,914 $ 8,651 % Change 3.0% 13.2% Backlog Units 5,533 3,987 % Change 38.8% (31.2%)
The operating earnings for fiscal 1996 were higher as a percentage of revenues and on a per unit basis compared to fiscal 1995 as a result of an increase in the per unit sales price even though certain general and administrative costs were being absorbed by 8% fewer closed units in fiscal 1996. FINANCIAL SERVICES The Financial Services segment consists primarily of the Mortgage Banking operations. Savings and Loan operations were also included in this segment until their sale in December 1994. Mortgage Banking The following summarizes Mortgage Banking's results for the two-year period ended March 31, 1996 (dollars in millions):
1996 1995 ---------- ---------- Revenues $ 129.6 $ 97.4 ========== ========== Operating Earnings $ 17.2 $ 1.4 ========== ========== Origination Volume $ 4,886.1 $ 4,195.2 ========== ========== Number of Loans Originated Centex-built Homes 8,445 8,503 Non-Centex-built Homes ("Spot") 33,151 28,548 ---------- ---------- 41,596 37,051 ========== ==========
45 31 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- Declining interest rates in fiscal 1996 resulted in an increase in mortgage applications and originations compared to fiscal 1995. Applications for the 1996 fiscal year were 47,763, up 31% from 36,487 for the prior fiscal year. Builder applications rose 35% for the year while spot applications increased 30%. These increases occurred even though Mortgage Banking had substantially fewer offices than it had during most of fiscal year 1995. SAVINGS AND LOAN Savings and Loan revenues and operating earnings in fiscal 1995 were $9.4 million and $8.0 million, respectively. In December 1994, the Savings and Loan sold its deposits and branches for a pre-tax gain of $3.2 million. The completion of the sale was Centex's final step in exiting the savings and loan industry. CONSTRUCTION PRODUCTS Earnings from Centex's 49% investment in Centex Construction Products, Inc. (CXP) were $25.6 million for fiscal 1996, a 55% increase over $16.6 million for fiscal 1995. CXP benefited during the year from continued strong product demand, improved operating efficiencies in its wallboard plants and stronger than expected product shipments due to unseasonably mild weather. CONTRACTING AND CONSTRUCTION SERVICES The following summarizes Contracting and Construction Services results for the two-year period ended March 31, 1996 (dollars in millions):
1996 1995 -------- -------- Revenues $ 983.5 $1,059.9 ======== ======== Operating Loss $ (5.0) $ (1.8) ======== ======== New Contracts Received $ 857.0 $1,151.8 ======== ======== Backlog of Uncompleted Contracts $1,201.5 $1,328.0 ======== ========
Contracting and Construction Services' operating loss during fiscal 1996 resulted from weak operating margins and write-downs of certain projects. In an effort to improve its operating margins, the Contracting and Construction Services operations became more selective with respect to the jobs it bid during fiscal 1996. This resulted in a decrease in revenues, fewer new contracts received and a decrease in backlog of uncompleted contracts in fiscal 1996. The Contracting and Construction Services operation provided a positive average net cash flow in excess of Centex's investment in the group of approximately $55-$60 million during fiscal 1996 and 1995. FINANCIAL CONDITION AND LIQUIDITY Centex fulfills its short-term financing requirements with cash generated from its operations and funds available under its credit facilities. These credit facilities also serve as back-up lines for overnight borrowings under its uncommitted bank facilities and commercial paper program. During fiscal 1995, Centex replaced two separate bank credit agreements with a five-year $425 million bank revolving credit facility. During fiscal 1997, this facility was renegotiated to improve pricing and to extend the term to fiscal year 2002. There were no borrowings to Centex under this or the prior facilities during fiscal 1997, 1996, or 1995 or to CTX Mortgage Company during fiscal 1997 and 1995. CTX Mortgage Company made a one-time short-term borrowing of $25 million under this agreement during fiscal 46 32 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- 1996. In addition, CTX Mortgage Company has its own $600 million of credit facilities to finance mortgages which are held during the period while they are being securitized and readied for delivery against forward sale commitments. Record earnings combined with a decrease in inventories provided Centex with the capital necessary to reduce its debt and to acquire Cavco Industries. Additionally, Centex's 51.4% owned subsidiary, CXP, acquired Eagle Gypsum during the year. The reconsolidation of CXP in June 1996 had a $6.6 million net effect on the Statement of Cash Flows as of June 30, 1996 and was included in Other, net. The major items making up the net effect were (in millions) Property and Equipment ($181.4), Investment in CXP $106.5, Minority Interest $95.0, Inventories ($26.9) and Receivables, Payables and Other $13.4. The company believes it has adequate resources and sufficient credit facilities to satisfy its current needs and provide for future growth. The $100 million Senior Notes, which were retired in May 1996, were replaced by short-term borrowings under various credit facilities. OTHER DEVELOPMENTS AND OUTLOOK During the year, Centex expanded its "B & C" (sub-prime) mortgage business, Centex Home Equity Corporation (formerly, Nova Credit Corporation), opening approximately 30 offices since January 1996. The division added two senior industry executives and made major progress in adding other experienced industry leaders to expand its management team. During the quarter ended December 31, 1996, a subsidiary of Centex Corporation completed the company's first Mexican investment (capital commitment of approximately $10 million) through its acquisition of a 30% interest in a Mexican corporation (Inverloma) which was organized to acquire and develop approximately 70 acres of real estate in Mexico City. This property is the last large undeveloped tract available for residential development in Mexico City which is both close to downtown and located in an affluent area. The current development plan includes up to 750 residential lots and homes, ranging in price from $230,000 to over $1 million. The project should be completed in approximately 5 to 7 years. Grupo Loma, a large and experienced upper end real estate developer in Mexico City, owns a 50% interest in Inverloma. During the quarter ended June 30, 1996, Centex's Home Building subsidiary completed a business combination transaction and reorganization with Vista Properties, Inc. that increased Centex's ownership of Vista's common stock from approximately 53% to 99.975%. Under the terms of the combination transaction, Centex's Home Building assets and operations were contributed to Vista in exchange for 12.4 million shares of Vista's common stock. As a result of the combination, Centex's Investment Real Estate portfolio, valued in excess of $125 million, was reduced to a nominal "book basis" after recording certain Vista-related tax benefits. Accordingly, as these properties are developed or sold, the net sales proceeds will be reflected as operating margin. "Negative Goodwill" recorded as a result of the business combination is being amortized to earnings over approximately seven years. 47 33 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- HomeTeam Services was formed in fiscal year 1996 to provide value added services to new home buyers. In April 1996, HomeTeam Services entered the security and pest control businesses by acquiring the operating assets of two entities -- Dallas-based Apartment Protection Systems, Inc. (APS) and Environmental Safety Systems, Inc. (ESI) of Melbourne, Florida. APS does business under the HomeTeam Services umbrella of companies as HomeTeam Security (HTS). HTS specializes in the installation and monitoring of security systems as well as in access control installations, and through their Underwriters Laboratory approved monitoring station monitors more than 97,000 security systems. The former owners of APS have retained a minority stock ownership interest in HTS. During fiscal year 1997, HTS has expanded their base of operations out of Dallas and into seven new home-building markets by building on its relationship with Centex Homes. ESI developed the Pest Defense System, an innovative patented method of delivering pest control materials inside structural walls through permanent tubing that is accessed via ports on outside walls. HomeTeam Services acquired ESI which had approximately 7,500 of the 11,000 accounts currently serviced by ESI. The remainder of the accounts are owned by franchisees. During fiscal year 1997, HomeTeam acquired the accounts and the territorial rights from three franchisees and in addition opened new offices in Phoenix and Dallas. All of the offices were brought into the HomeTeam group as HomeTeam Environmental (HTE). By the end of the fiscal year HTE had installed over 4,200 new systems and began service on approximately 1,900 new accounts. During fiscal year 1997, HTE entered the conventional pest and termite control business through the acquisition of the operations of eight conventional pest control companies. HTE plans to continue its expansion activity in fiscal 1998 through similar type acquisitions. Higher interest rates in recent months slowed both home sales and mortgage applications resulting in lower backlogs. However, if interest rates remain at or near current levels, Home Building margins should continue to improve in fiscal 1998. The company also expects improved results from its Financial Services, Construction Products and Contracting and Construction Services operations during fiscal 1998. - - ------------------------------------------------------------------------------- Certain statements in this Annual Report may be "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors, including changes in economic conditions and interest rates, increases in raw material and labor costs, and general competitive factors that may cause actual results to differ materially. For more information about risks, uncertainties and other factors please refer to the company's Form 10K for fiscal 1997. 48 34 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- QUARTERLY RESULTS (UNAUDITED) (Dollars in thousands, except per share data)
March 31, --------------------------- 1997 1996 ---------- ---------- FIRST QUARTER Revenues $ 892,411 $ 700,950 Earnings Before Income Taxes $ 33,351 $ 13,073 Net Earnings $ 21,819 $ 7,873 Earnings Per Share $ .75 $ .27 SECOND QUARTER Revenues $1,001,603 $ 786,846 Earnings Before Income Taxes $ 43,319 $ 24,015 Net Earnings $ 28,240 $ 14,551 Earnings Per Share $ .96 $ .50 THIRD QUARTER Revenues $ 939,107 $ 790,149 Earnings Before Income Taxes $ 42,494 $ 24,906 Net Earnings $ 27,463 $ 15,156 Earnings Per Share $ .93 $ .52 FOURTH QUARTER Revenues $ 951,870 $ 825,042 Earnings Before Income Taxes $ 44,579 $ 25,792 Net Earnings $ 29,041 $ 15,785 Earnings Per Share $ .98 $ .54
49 35 Centex Corporation and Subsidiaries - - ------------------------------------------------------------------------------- SUMMARY OF SELECTED FINANCIAL DATA (UNAUDITED) (Dollars in thousands, except per share data)
--------------------------------------------------------- 1997 1996 1995 1994 ----------- ----------- ----------- ----------- Revenues $ 3,784,991 $ 3,102,987 $ 3,277,504 $ 3,039,709 Net Earnings Before 1995 CXP Gain and 1988 Accounting Change $ 106,563 $ 53,365 $ 54,753 $ 85,162 Gain on CXP's IPO for 1995, net of tax and Effect of Change in Accounting for Income Taxes in 1988 -- -- 37,495 -- ----------- ----------- ----------- ----------- Net Earnings $ 106,563 $ 53,365 $ 92,248 $ 85,162 =========== =========== =========== =========== Total Assets $ 2,672,535 $ 2,336,966 $ 2,049,698 $ 2,580,356 Total Long-term Debt, Including Debentures $ 236,769 $ 321,002 $ 222,530 $ 222,832 Total Debt $ 283,769 $ 408,253 $ 427,381 $ 429,470 Deferred Income Taxes $ (195,983) $ 16,085 $ 27,795 $ 35,088 Stockholders' Equity $ 835,777 $ 722,836 $ 668,227 $ 668,659 Total Debt as a Percent of Total Capitalization (Total Debt, Deferred Income Taxes, Negative Goodwill and Stockholders' Equity) 23.3% 35.6% 38.0% 37.1% Net Earnings as a Percent of Beginning Stockholders' Equity 14.7% 8.0% 13.8% 14.7% Per Common Share Earnings Before 1995 CXP Gain and 1988 Accounting Change $ 3.62 $ 1.83 $ 1.81 $ 2.60 Gain on CXP's IPO for 1995, net of tax and Effect of Change in Accounting for Income Taxes in 1988 -- -- 1.23 -- ----------- ----------- ----------- ----------- Net Earnings $ 3.62 $ 1.83 $ 3.04 $ 2.60 =========== =========== =========== =========== Cash Dividends $ .20 $ .20 $ .20 $ .20 Book Value Based on Shares Outstanding at Year End $ 28.80 $ 25.43 $ 23.80 $ 21.12 Stock Prices High $ 41 3/4 $ 35 5/8 $ 32 3/8 $ 45 5/8 Low $ 25 7/8 $ 23 1/2 $ 20 1/4 $ 27 1/2
On November 30, 1987, Centex Corporation distributed as a dividend to its stockholders securities relating to Centex Development Company, L.P. (see Note H to the Consolidated Financial Statements of Centex Corporation and Subsidiaries). Since this distribution, such securities have traded in tandem with, and as a part of, the common stock of Centex Corporation. Debt and deferred income taxes reflect Centex Corporation only, with the Financial Services reflected on the equity method versus consolidation. Fiscal year 1997 deferred income tax asset is not included in total capitalization. 50 36
For the Years Ended March 31, - - -------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 1988 - - ----------- ----------- ----------- ----------- ----------- ----------- $ 2,363,325 $ 2,028,646 $ 2,089,110 $ 1,925,423 $ 1,707,989 $ 1,352,601 $ 61,038 $ 34,557 $ 43,605 $ 62,003 $ 40,020 $ 24,063 -- -- -- -- -- 50,100 - - ----------- ----------- ----------- ----------- ----------- ----------- $ 61,038 $ 34,557 $ 43,605 $ 62,003 $ 40,020 $ 74,163 =========== =========== =========== =========== =========== =========== $ 2,272,093 $ 2,347,452 $ 2,037,486 $ 2,045,141 $ 1,800,522 $ 1,148,098 $ 223,988 $ 232,294 $ 137,235 $ 140,112 $ 140,192 $ 178,862 $ 368,988 $ 298,508 $ 267,946 $ 267,739 $ 240,457 $ 222,962 $ 55,722 $ 56,627 $ 80,205 $ 59,311 $ 74,487 $ 139,767 $ 578,415 $ 518,494 $ 483,677 $ 447,911 $ 384,174 $ 364,846 35.8% 33.0% 30.9% 33.0% 32.6% 30.6% 11.8% 7.1% 9.7% 16.1% 11.0% 20.4% $ 1.91 $ 1.11 $ 1.42 $ 2.01 $ 1.32 $ .75 -- -- -- -- -- 1.57 - - ----------- ----------- ----------- ----------- ----------- ----------- $ 1.91 $ 1.11 $ 1.42 $ 2.01 $ 1.32 $ 2.32 =========== =========== =========== =========== =========== =========== $ .20 $ .20 $ .20 $ .20 $ .14375 $ .125 $ 18.57 $ 16.99 $ 16.07 $ 14.85 $ 13.28 $ 12.13 $ 34 1/8 $ 27 3/8 $ 21 7/8 $ 20 7/8 $ 14 7/8 $ 17 $ 20 $ 17 $ 9 3/4 $ 14 $ 10 $ 7 7/8
51 37 3333 HOLDING CORPORATION AND SUBSIDIARIES AND CENTEX DEVELOPMENT COMPANY, L.P. TO OUR STOCKHOLDERS: The revenues and earnings for 3333 Holding Corporation (Holding) and Subsidiary (Development) and Centex Development Company, L.P. (the Partnership or CDC) are largely dependent on land sales, the timing of which varies significantly from period to period. For the fiscal year ended March 31, 1997, the entities had combined revenues of $9.5 million versus revenues of $14.5 million in the prior year. Significant land sales in fiscal 1997 included the sale of 63.2 acres of commercial land in The Colony located near Dallas, Texas and 153 residential lots sold to Centex Homes in Florida and New Jersey. Combined net earnings totaled $925,000 for the current year compared to $277,000 for the prior year. The improvement in earnings in fiscal 1997 is largely due to a reduction in administrative costs and higher margins on land sales due to the recent improvement in the North Texas real estate market. During the year CDC entered into a limited partnership with Centex Multi-Family Company to develop multi-family housing. Development and construction is projected to commence in early fiscal 1998. The first site scheduled for construction is on CDC-owned land in The Colony, Texas. In addition to multi-family housing, the Partnership is continuing to evaluate other development opportunities for both existing properties and new acquisitions. /s/ J.S. BILHEIMER J.S. Bilheimer President May 9, 1997 52 38 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- 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. as of March 31, 1997 and 1996, and the related combining statements of operations and cash flows and stockholders' equity and partners' capital for each of the three years in the period ended March 31, 1997. 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 generally accepted auditing standards. 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. as of March 31, 1997 and 1996, 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, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Dallas, Texas, May 9, 1997 53 39 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share/unit data)
For the Years Ended March 31, ----------------------------------------------------------- 1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- REVENUES 3333 Holding Corporation and Subsidiary $ 1,664 $ 2,045 $ 1,602 $ 537 $ 566 Centex Development Company, L.P. $ 9,026 $ 13,943 $ 9,796 $ 12,859 $ 9,783 Combined Revenues $ 9,529 $ 14,470 $ 10,342 $ 13,249 $ 10,156 OPERATING EARNINGS (LOSS) 3333 Holding Corporation and Subsidiary $ 206 $ 253 $ 96 $ (114) $ (96) Centex Development Company, L.P. $ 719 $ 24 $ (16,323) $ (1,510) $ (4,176) Combined Operating Earnings (Loss) $ 925 $ 277 $ (16,227) $ (1,624) $ (4,272) TOTAL ASSETS 3333 Holding Corporation and Subsidiary $ 8,648 $ 8,652 $ 8,673 $ 8,600 $ 8,600 Centex Development Company, L.P. $ 42,978 $ 43,168 $ 105,946 $ 121,027 $ 128,621 Combined Assets $ 50,127 $ 50,786 $ 113,282 $ 128,092 $ 134,691 TOTAL DEBT 3333 Holding Corporation and Subsidiary $ 7,000 $ 7,600 $ 7,600 $ 7,600 $ 6,500 Centex Development Company, L.P. $ 7,055 $ 3,326 $ 56,485 $ 54,149 $ 59,262 Combined Debt $ 14,055 $ 10,926 $ 64,085 $ 61,749 $ 65,762 OPERATING EARNINGS (LOSS) PER SHARE/UNIT (Average Outstanding Shares, 1,000; Units 1,000) 3333 Holding Corporation and Subsidiary $ 206 $ 253 $ 96 $ (114) $ (96) Centex Development Company, L.P. $ 719 $ 24 $ (16,323) $ (1,510) $ (4,176)
54 40 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- COMBINING BALANCE SHEETS (Dollars in thousands)
March 31, ------------------------------------------------------------------ 1997 1996 1997 1996 1997 1996 -------- -------- -------- -------- -------- -------- 3333 Holding Centex Development Corporation Combined Company, L.P. and Subsidiary -------------------- ------------------- -------------------- ASSETS Cash $ 630 $ 231 $ 625 $ 225 $ 5 $ 6 Accounts Receivable -- Affiliates -- -- 732 267 -- -- Centex Corporation and Subsidiaries 176 179 -- -- 176 179 Other 136 181 136 181 -- -- Notes Receivable -- Centex Corporation and Subsidiaries 7,700 7,700 -- -- 7,700 7,700 Other 2,365 3,809 2,365 3,809 -- -- Investment in Affiliate -- -- -- -- 767 767 Investment in Real Estate Joint Venture 202 180 202 180 -- -- Projects Held for Development and Sale 38,918 38,506 38,918 38,506 -- -- -------- -------- -------- -------- -------- -------- $ 50,127 $ 50,786 $ 42,978 $ 43,168 $ 8,648 $ 8,652 ======== ======== ======== ======== ======== ======== LIABILITIES, STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL Accounts Payable and Accrued Liabilities -- Affiliates $ -- $ -- $ -- $ -- $ 732 $ 267 Centex Corporation and Subsidiaries 126 153 -- -- 126 153 Other 2,522 2,718 2,410 2,558 112 160 Notes Payable -- Centex Corporation and Subsidiaries 7,000 7,600 -- -- 7,000 7,600 Other 7,055 3,326 7,055 3,326 -- -- Land Sale Deposits 10 -- 10 -- -- -- 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) (123) (329) -- -- (123) (329) Partners' Capital 32,236 36,017 33,003 36,784 -- -- -------- -------- -------- -------- -------- -------- Total Stockholders' Equity and Partners' Capital 33,414 36,989 33,503 37,284 678 472 -------- -------- -------- -------- -------- -------- $ 50,127 $ 50,786 $ 42,978 $ 43,168 $ 8,648 $ 8,652 ======== ======== ======== ======== ======== ========
See notes to combining financial statements. 55 41 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- COMBINING STATEMENTS OF OPERATIONS AND CASH FLOWS (Dollars in thousands, except per share/unit data)
For the Years Ended March 31, ------------------------------------------------------------------------------------------------ 1997 1996 1995 1997 1996 1995 1997 1996 1995 -------- -------- -------- -------- -------- -------- -------- -------- -------- Centex Development 3333 Holding Combined Company, L.P. Corporation and Subsidiary ------------------------------ ------------------------------ ----------------------------- COMBINING STATEMENTS OF OPERATIONS REVENUES Real Estate Sales $ 8,270 $ 13,018 $ 9,506 $ 8,270 $ 13,018 $ 9,506 $ -- $ -- $ -- Interest and Other Income 1,259 1,452 836 756 925 290 1,664 2,045 1,602 -------- -------- -------- -------- -------- -------- -------- -------- -------- 9,529 14,470 10,342 9,026 13,943 9,796 1,664 2,045 1,602 -------- -------- -------- -------- -------- -------- -------- -------- -------- COSTS AND EXPENSES Real Estate Sales 6,772 11,861 9,064 6,772 11,861 9,064 -- -- -- Property Valuation Adjustment -- -- 15,500 -- -- 15,500 -- -- -- Selling and Administrative 1,324 1,774 1,394 1,535 2,058 1,555 740 1,011 761 Interest 508 558 611 -- -- -- 718 781 745 -------- -------- -------- -------- -------- -------- -------- -------- -------- 8,604 14,193 26,569 8,307 13,919 26,119 1,458 1,792 1,506 -------- -------- -------- -------- -------- -------- -------- -------- -------- EARNINGS (LOSS) BEFORE INCOME TAXES 925 277 (16,227) 719 24 (16,323) 206 253 96 Income Taxes -- -- -- -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- NET EARNINGS (LOSS) $ 925 $ 277 $(16,227) $ 719 $ 24 $(16,323) $ 206 $ 253 $ 96 ======== ======== ======== ======== ======== ======== ======== ======== ======== EARNINGS (LOSS) PER SHARE/UNIT (Average Outstanding Shares, 1,000; Units, 1,000) $ 719 $ 24 $(16,323) $ 206 $ 253 $ 96 ======== ======== ======== ======== ======== ======== COMBINING STATEMENTS OF CASH FLOWS CASH FLOWS -- OPERATING ACTIVITIES Net Earnings (Loss) $ 925 $ 277 $(16,227) $ 719 $ 24 $(16,323) $ 206 $ 253 $ 96 Property Valuation Adjustment -- -- 15,500 -- -- 15,500 -- -- -- Net Change in Payables, Receivables and Deposits (165) 213 (868) (558) 479 (791) 393 (266) (77) Decrease (Increase) in Notes Receivable 1,444 216 (2,874) 1,444 216 (2,874) -- -- -- Increase in Advances to Joint Venture (22) (180) -- (22) (180) -- -- -- -- (Increase) Decrease in Projects Held for Development and Sale (412) 7,949 3,454 (412) 7,949 3,454 -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- 1,770 8,475 (1,015) 1,171 8,488 (1,034) 599 (13) 19 -------- -------- -------- -------- -------- -------- -------- -------- -------- CASH FLOWS-- FINANCING ACTIVITIES (Decrease) Increase in Notes Payable -- Centex Corporation and Subsidiaries (600) -- -- -- -- -- (600) -- -- Other 3,729 334 2,336 3,729 334 2,336 -- -- -- Capital Distributions (4,500) (10,000) -- (4,500) (10,000) -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- (1,371) (9,666) 2,336 (771) (9,666) 2,336 (600) -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- Net Increase (Decrease) In Cash 399 (1,191) 1,321 400 (1,178) 1,302 (1) (13) 19 Cash at Beginning Of Year 231 1,422 101 225 1,403 101 6 19 -- -------- -------- -------- -------- -------- -------- -------- -------- -------- Cash at End of Year $ 630 $ 231 $ 1,422 $ 625 $ 225 $ 1,403 $ 5 $ 6 $ 19 ======== ======== ======== ======== ======== ======== ======== ======== ========
See notes to combining financial statements. 56 42 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- COMBINING STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL (Dollars in thousands)
For the Years Ended March 31, 1997, 1996 and 1995 ---------------------------------------------------------------------------------------- Centex Development 3333 Holding Company, L.P. Corporation and Subsidiary ------------------------------- ------------------------------------------ Class B General Limited Capital In Retained Unit Partner's Partners' Stock Common Excess Of Earnings Combined Warrants Capital Capital Warrants Stock Par Value (Deficit) -------- -------- --------- --------- -------- -------- ---------- --------- Balance at March 31, 1994 $ 62,939 $ 500 $ 767 $ 62,316 $ 1 $ -- $ 800 $ (678) Net Earnings (Loss) (16,227) -- -- (16,323) -- -- -- 96 -------- -------- -------- -------- -------- -------- -------- -------- Balance at March 31, 1995 46,712 500 767 45,993 1 -- 800 (582) Capital Distributions (10,000) -- -- (10,000) -- -- -- -- Net Earnings 277 -- -- 24 -- -- -- 253 -------- -------- -------- -------- -------- -------- -------- -------- Balance at March 31, 1996 36,989 500 767 36,017 1 -- 800 (329) CAPITAL DISTRIBUTIONS (4,500) -- -- (4,500) -- -- -- -- NET EARNINGS 925 -- -- 719 -- -- -- 206 -------- -------- -------- -------- -------- -------- -------- -------- BALANCE AT MARCH 31, 1997 $ 33,414 $ 500 $ 767 $ 32,236 $ 1 $ -- $ 800 $ (123) ======== ======== ======== ======== ======== ======== ======== ========
See notes to combining financial statements. - - ------------------------------------------------------------------------------- NOTES TO COMBINING FINANCIAL STATEMENTS (A) ORGANIZATION In March 1987, certain subsidiaries of Centex Corporation (Centex) contributed to Centex Development Company, L.P. (CDC or the Partnership), a newly formed master limited partnership, properties with a historical cost basis (which approximated market value) of approximately $76 million. CDC was formed to enable stockholders to participate in long-term real estate development projects whose dynamics are inconsistent with Centex's traditional financial objectives. In November 1987, Centex distributed as a dividend to its stockholders securities relating to CDC. These securities included all of the issued and outstanding shares of common stock of 3333 Holding Corporation (Holding) and warrants to purchase approximately 80% of the Class B units of limited partnership interest in CDC. 3333 Development Corporation (Development), a wholly-owned subsidiary of Holding, serves as general partner of CDC. These securities are held by a nominee on behalf of the stockholders and 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 on the scheduled detachment date which is in November 2007. Supplementary condensed combined financial statements of Centex Corporation and subsidiaries, 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. are set forth below. For additional information on Centex Corporation and subsidiaries, see their separate financial statements and related footnotes. 57 43 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS (Dollars in thousands)
March 31, ----------------------- 1997 1996 ---------- ---------- ASSETS Cash and Cash Equivalents $ 31,950 $ 14,273 Receivables 989,886 914,549 Inventories 1,041,855 1,244,931 Investments in Centex Construction Products, Inc. -- 106,504 Joint Ventures and Unconsolidated Subsidiaries 5,479 3,984 Property and Equipment, net 293,143 37,139 Other Assets 327,281 5,982 ---------- ---------- $2,689,594 $2,327,362 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable and Accrued Liabilities $ 740,230 $ 616,959 Short-term Debt 634,573 665,593 Long-term Debt 236,769 321,002 Minority Stockholders' Interest 142,230 -- Negative Goodwill 98,837 -- Stockholders' Equity 836,955 723,808 ---------- ---------- $2,689,594 $2,327,362 ========== ==========
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS (Dollars in thousands)
For the Years Ended March 31, ------------------------------------ 1997 1996 1995 ---------- ---------- ---------- Revenues $3,793,621 $3,111,486 $3,281,198 Costs and Expenses 3,629,672 3,023,447 3,194,642 ---------- ---------- ---------- Earnings Before Gain on CXP's Initial Public Offering and Income Taxes 163,949 88,039 86,556 Gain on CXP's Initial Public Offering -- -- 59,328 ---------- ---------- ---------- Earnings Before Income Taxes 163,949 88,039 145,884 Income Taxes 57,180 34,421 53,540 ---------- ---------- ---------- Net Earnings $ 106,769 $ 53,618 $ 92,344 ========== ========== ==========
58 44 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- (B) 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, 1997 and 1996 and results of operations for each of the three years ended March 31, 1997. 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. (C) SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Revenue from real estate sales is recognized as required payments are received and title passes. INVENTORY CAPITALIZATION AND COST ALLOCATION Land held for development and sale is stated at the lower of cost (including development costs and, where appropriate, capitalized interest and real estate taxes) or market. The capitalized costs are included in cost of land sales in the combining statements of operations as related revenues are recognized. In March 1995, CDC recorded a pre-tax adjustment to reduce the book value of certain properties by approximately $15.5 million to reflect CDC's view that development activity had not reached anticipated levels in order to continue to support the historical carrying value of such properties. This adjustment resulted in carrying values that facilitate a nearer-term disposition or development of these properties. A substantial portion of the adjustment relates to the book values of two Dallas area properties. EARNINGS (LOSS) PER SHARE/UNIT Earnings (loss) per share/unit are based on the weighted average number of outstanding shares of common stock (1,000 for Holding) and Class A limited partnership units (1,000 for the Partnership). These shares/units do not include common stock/unit equivalents because they have no material effect on earnings (loss) per share/unit. 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. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 Statement of Financial Accounting Standards No. 121, issued in March 1995, establishes methods of accounting for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. This Statement was implemented on April 1, 1996 and did not have a material impact on the individual or combined financial statements of Holding and its subsidiary and the Partnership. 59 45 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- COMBINING STATEMENTS OF OPERATIONS AND CASH FLOWS -- SUPPLEMENTAL DISCLOSURES Interest capitalized by the Partnership during fiscal years ended March 31, 1997, 1996 and 1995 totaled $22,000, $98,000 and $4,787,000, respectively, of which $4,687,000 relates to the Forster Ranch property in 1995 (disposed of in 1995). No income taxes were paid during the years ended March 31, 1997, 1996 and 1995. RECLASSIFICATIONS Certain prior year balances have been reclassified to be consistent with the fiscal 1997 presentation. (D) 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, 1998 bearing interest at prime plus .875%. Interest is due in quarterly installments. Interest income of $713,000, $750,000, and $680,000 related to this note is included in the accompanying combining financial statements for the years ended March 31, 1997, 1996 and 1995, respectively. Notes Receivable -- Other at March 31, 1997 and 1996 have stated interest rates ranging up to 10% and are due in monthly or quarterly installments. Discounts and allowances totaled $21,000 at both March 31, 1997 and 1996. The weighted average interest rate, inclusive of discounts, was 9% at both March 31, 1997 and 1996. Notes receivable at March 31, 1997 are collectible over five years, with $28,000 being due within one year. (E) NOTES PAYABLE Centex had advanced Holding $7.0 million as of March 31, 1997 which is evidenced by a note secured by the common stock of Development. The note, which had a fluctuating balance during fiscal 1997 and 1996, bears interest at prime plus 1% that is payable quarterly. The principal balance together with all unpaid accrued interest is due on the earlier of April 1, 1998 or the date on which the warrants to purchase Class B units of limited partnership interests are detached from shares of the common stock of Centex. Interest expense of $508,000, $558,000, and $611,000 related to this note is included in the accompanying combining financial statements for the years ended March 31, 1997, 1996 and 1995, respectively. Under the most restrictive covenants of the note agreement, Holding and its subsidiary (excluding the Partnership) may not, without Centex's consent, (i) create any additional liens on or sell real estate properties contributed by the limited partner, (ii) effect a merger or consolidation, (iii) declare dividends or make certain other shareholder payments or (iv) allow tangible net worth, as defined, to be less than $7.7 million for Development. 60 46 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- All notes payable are non-recourse, secured solely by the underlying real estate. As land is sold, a portion of the proceeds is restricted for repayment of the notes. The prime rate in effect was 8.50% at March 31, 1997 and 8.25% at March 31, 1996. The 30 day LIBOR rate at March 31, 1997 and 1996 was 5 9/16% and 5 7/16%, respectively. The note balances and rates in effect were as follows (dollars in thousands):
March 31, --------------- 1997 1996 ------ ------ Credit Line at LIBOR Plus 3/4% Maturing in Fiscal Year 1998, Unsecured, Guaranteed by CREC $ -- $1,373 Note Payable at 12%, Retired in Fiscal Year 1997 -- 785 Note Payable at 9%, Maturing in Fiscal Year 1998 555 682 Note Payable, Matured in Fiscal Year 1997 -- 486 Note Payable at 8%, Maturing in Fiscal Year 2000 6,500 -- ------ ------ $7,055 $3,326 ====== ======
(F) STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL PREFERRED RETURN The partnership agreement provides that the Class A limited partners are entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of their Unrecovered Capital. In July 1995, in conjunction with the extension of the detachment date, Centex Real Estate Corporation (CREC) waived unrecovered preference totaling $37.5 million, and reduced its Unrecovered Capital in the Partnership to $47.3 million. Unrecovered Capital represents initial capital contributions as reduced by repayments, and is the basis for preference accruals. Distributions made by the Partnership reduced Unrecovered Capital by an additional $4.5 million during fiscal 1997 and $10 million during fiscal 1996. Preference payments in arrears at March 31, 1997 amounted to $5,736,000, and Unrecovered Capital totaled $32,761,000. 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: (i) To the Class A 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 20% to the Class A limited partners and 80% to the general partner. All loss allocations and allocations of net income after Payout shall be made to the partners in accordance with their percentage interests, as defined. 61 47 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- 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 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 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 limited partners until their Unrecovered Capital is reduced to zero. (ii) After Payout, distributions of cash shall 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. (G) RELATED PARTY TRANSACTIONS SERVICE AND MANAGEMENT AGREEMENTS Holding entered into a service agreement in May 1987 with Centex Service Company (CSC), a wholly-owned subsidiary of Centex, whereby CSC will provide certain tax, accounting and other similar services for Holding at a fee of $2,500 per month. Service fees of $30,000 for each of fiscal years 1997, 1996, and 1995 are reflected as administrative expenses in the accompanying combining financial statements. The Partnership paid $951,000, $1,295,000, and $922,000 to Holding during the fiscal years 1997, 1996 and 1995, 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. Also in the fiscal year 1995, the Partnership paid certain Centex subsidiaries $785,000 in management fees accrued in the year ended March 31, 1994 relative to a similar management agreement. 62 48 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- SALES AND PURCHASES Partnership revenues during fiscal years 1997, 1996, and 1995 include land sales to CREC of $3,814,000, $4,416,000, and $5,423,000, respectively. Additionally, at March 31, 1997, CREC had contracts to purchase lots for the aggregate price of approximately $2.0 million to be paid as lots are delivered. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE Included in Accounts Receivable-Affiliates and Accounts Payable-Affiliates in the accompanying combining financial statements are $732,000 at March 31, 1997 and $267,000 at March 31, 1996, which the Partnership advanced to Holding. Interest of $210,000 and $223,000 was accrued on advances during fiscal years 1997 and 1996, respectively. (H) INCOME TAXES At March 31, 1997, Holding had operating loss carryforwards for income tax reporting purposes of $85,000. If unused, the loss carryforwards will expire in the fiscal years 2009 through 2013. Holding joins with its subsidiary in filing consolidated income tax returns. The taxable income of the Partnership has been allocated to the holders of the Class A units. Accordingly, no tax provision for Partnership earnings is shown in the combining financial statements. 63 49 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- QUARTERLY RESULTS (UNAUDITED) (Dollars in thousands, except per share/unit data)
March 31, -------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 ------- ------- ------- ------- ------- ------- 3333 Holding Centex Development Corporation Combined Company, L.P. and Subsidiary ------------------ ------------------ ------------------ FIRST QUARTER Revenues $ 3,472 $ 2,382 $ 3,322 $ 2,241 $ 579 $ 611 Earnings (Loss) Before Taxes $ 356 $ 10 $ 176 $ (188) $ 180 $ 198 Net Earnings (Loss) $ 356 $ 10 $ 176 $ (188) $ 180 $ 198 Earnings (Loss) Per Share/Unit $ 176 $ (188) $ 180 $ 198 SECOND QUARTER Revenues $ 825 $ 8,099 $ 691 $ 7,998 $ 445 $ 470 Earnings (Loss) Before Taxes $ (91) $ 186 $ (190) $ 169 $ 99 $ 17 Net Earnings (Loss) $ (91) $ 186 $ (190) $ 169 $ 99 $ 17 Earnings (Loss) Per Share/Unit $ (190) $ 169 $ 99 $ 17 THIRD QUARTER Revenues $ 4,026 $ 3,508 $ 3,932 $ 3,371 $ 307 $ 465 Earnings (Loss) Before Taxes $ 644 $ 193 $ 708 $ 184 $ (64) $ 9 Net Earnings (Loss) $ 644 $ 193 $ 708 $ 184 $ (64) $ 9 Earnings (Loss) Per Share/Unit $ 708 $ 184 $ (64) $ 9 FOURTH QUARTER Revenues $ 1,206 $ 481 $ 1,081 $ 333 $ 333 $ 499 Earnings (Loss) Before Taxes $ 16 $ (112) $ 25 $ (141) $ (9) $ 29 Net Earnings (Loss) $ 16 $ (112) $ 25 $ (141) $ (9) $ 29 Earnings (Loss) Per Share/Unit $ 25 $ (141) $ (9) $ 29
64 50 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. - - ------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996 For the year ended March 31, 1997, Holding, Development and the Partnership (together the Company) reported combined revenues of $9.5 million, a 34.5% decrease from the $14.5 million reported a year ago. Revenues for the Partnership are largely dependent on land sales, the timing of which are uncertain and can vary significantly from period to period. Fiscal year 1997 sales included the sale of 63.2 acres of commercial land in The Colony, Texas, and 153 residential lots sold to Centex Homes in Florida and New Jersey. Fiscal year 1996 sales included the sale of 121.2 acres of residential and 52.2 acres of commercial land in The Colony, Texas; 398.7 acres of agricultural land in New Braunfels, Texas; 7.2 acres of agricultural land in Fate, Texas; and 180 residential lots to Centex Homes in Florida and New Jersey. Notwithstanding the decreased revenues, combined earnings for the year ended March 31, 1997 increased to $925,000 compared to $277,000 for the year ended March 31, 1996. The improved earnings in fiscal year 1997 were primarily due to a reduction in administrative costs and higher margins on real estate sales as a result of the improved real estate markets in areas in which land sales occurred. FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995 For the year ended March 31, 1996, Holding, Development and the Partnership reported combined revenues of $14.5 million compared to $10.3 million for the year ended March 31, 1995. Revenues for the Partnership were largely attributable to interest income and land sales. Fiscal 1996 sales included the sale of 579.3 acres of commercial, residential, and agricultural land in various counties in Texas and 180 lots to Centex Homes in Florida and New Jersey. Fiscal 1995 sales included the sale of a commercial property in Sonora, California; 116.5 acres in Puerto Rico; a 33.9 acre commercial tract in Bolingbrook, Illinois; and 254 residential lots in Florida and New Jersey. Operations for the year ended March 31, 1996 resulted in net income of $277,000. The year ended March 31, 1995 reflected a combined net loss of $16.2 million, which included property valuation adjustments of $15.5 million. The property valuation adjustments were recorded in March 1995 to reflect CDC's view that development activity had not reached anticipated levels to support the historical carrying value of specific properties, primarily The Colony and Bryan Place properties located in the Dallas area. These adjustments resulted in carrying values that facilitate nearer-term disposition or development of these properties. Without the property valuation adjustments, the combined net loss for fiscal 1995 was $.7 million. The improvement in operations before property valuation adjustments was primarily attributed to higher gross margins on sales, principally in New Jersey, and increased interest income resulting from real estate sold with financing. During fiscal 1996, the Partnership entered into a real estate joint venture to develop an apartment complex in College Station, Texas. The costs and expenses associated with the Partnership's investigation into the apartment business resulted in increased selling and administrative costs in fiscal 1996 compared to fiscal 1995. LIQUIDITY AND CAPITAL RESOURCES During the fiscal years ended March 31, 1997 and March 31, 1996, the Partnership made capital distributions totaling $4.5 million and $10.0 million, respectively. Holding, Development, and the Partnership believe that they will be able to provide or obtain the necessary funding for their current operations and future expansion needs. The revenues, earnings and liquidity of these companies are largely dependent on future land sales, the timing of which is uncertain. The ability to obtain external debt or equity capital is subject to the provisions of Holding's loan agreement with Centex and the partnership agreement governing the Partnership. 65 EX-21.1 3 LIST OF SUBSIDIARIES OF CENTEX 1 EXHIBIT 21.1 The following is a list of the subsidiaries of the Company, wholly-owned unless otherwise stated. This list of subsidiaries includes all of the significant subsidiaries of the Company as of June 27, 1997. SUBSIDIARIES
STATE ENTITY NAME OF ORGANIZATION ----------- --------------- 111 E. Chestnut Corporation Illinois 1629 Service Corporation Texas 21 Housing Corporation Nevada 2728 Holding Corporation Nevada 900 Development Corporation Cayman Islands Advanced Financial Technology, Inc. Nevada Advanced Protection Systems, Inc. Nevada Armor Insurance Company Vermont BP Sand & Gravel, Inc. Delaware Bradfield Farms Water Company North Carolina Braewood Development Corp. Nevada Cavco Industries, Inc. Arizona Cavco Industries of New Mexico, Inc. New Mexico 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 Acceptance Corporation Nevada Centex-AIM Construction, L.L.C. Michigan Centex American Gypsum Company New Mexico Centex Building Services, Inc. Nevada
2 Centex Cement Corporation Nevada Centex Collateralized Mortgage Corporation Nevada Centex Construction Company, Inc. Nevada Centex Construction Group Services, Inc. Nevada Centex Construction Group, Inc. Nevada Centex Construction Products, Inc. Delaware Centex Credit Corporation Nevada Centex Development Management Company Nevada Centex Eagle Gypsum Company, LLC Delaware Centex Eagle Gypsum Company Delaware Centex Equity Corporation Nevada Centex Escrow Company Nevada Centex Finance Company Nevada Centex Financial Corporation Nevada Centex Financial Management Corporation Nevada Centex Financial Services, Inc. Nevada Centex Forcum Lannom, Inc. Nevada Centex Golden Construction Company Nevada Centex-Great Southwest Corporation Florida Centex-Hamby Construction, Inc. Georgia Centex Home Services Company Nevada Centex Homes (UK) Limited United Kingdom Centex Homes, Inc. Texas Centex Homes Marketing, Inc. Georgia Centex Homes Realty Company Nevada Centex International, Inc. Nevada Centex International, Inc. Texas Centex Landis Construction Co., Inc. Louisiana Centex Life Solutions, Inc. Nevada Centex Materials, Inc. Nevada Centex Multi-Family Company Nevada
3 Centex New Jersey Realty, Inc. Nevada Centex Real Estate Corporation Nevada Centex Real Estate Construction Company Nevada Centex Realty Company Nevada Centex Repair & Remodel Corporation Nevada Centex-Rodgers Construction Company Nevada Centex Roofing Company Nevada Centex-Rooney Construction Co., Inc. Florida Centex Seismic Services, Inc. Nevada Centex Senior Services Corporation Nevada Centex Service Company Nevada Centex Technology, Inc. Nevada Centex Title & Ancillary Services, Inc. Nevada Charles Church Homes Limited United Kingdom Commerce Land Title, Inc. Nevada Crosland Bond Company North Carolina CTX Commercial Corporation Nevada CTX Holding Company Nevada CTX Insurance Agency, Inc. Texas CTX Mortgage Company Nevada CTX Mortgage Ventures Corporation Nevada Dundee Insurance Agency, Inc. Texas Enhanced Safetysystems, Inc. Nevada Fox & Jacobs, Inc. Texas Genbond Two, Inc. North Carolina GHQ Company, Inc. Nevada Great Lakes Development Co., Inc. Nevada Illinois Cement Company Illinois Independent General Agency, Inc. Texas Insecontrol, Inc. Florida
4 John Crosland Acceptance Corporation Three North Carolina John Crosland Company North Carolina Loan Processing Technologies, Inc. Nevada M & W Drywall Supply Company Nevada M&W General Construction Company Nevada Matthews Readymix, Inc. California Metropolitan Tax Service, Inc. Nevada Metropolitan Title & Guaranty Company Florida MFH Acquisition Company Arizona MFH Holding Company Nevada Mogul Water Company Nevada Mountain Cement Company Nevada National Security Containers, Inc. Arizona Nevada Cement Company Nevada Panoramic Land, Inc. Nevada PDG/Prescott Development Group, LLC Arizona Radar Exterminating Company, Inc. Georgia Residential Contractors, Inc. Nevada Rural Southwest Housing Company, LLC Arizona San Juan Land Company Nevada Sun Built Homes, Inc. Arizona Texas Cement Company Nevada Texas-Lehigh Cement Company Texas Vista General Partner, Inc. Nevada Vista Mortgage & Realty, Inc. Delaware Western Aggregates, Inc. Nevada Western Cement Company of California California Westfest, LLC Arizona Wisconsin Cement Company Wisconsin
5 PARTNERSHIPS ENTITY NAME ----------- A.W. Mortgage, L.P. American Priority Mortgage Company, L.P. Anderson Funding Services, L.P. Bateson Dailey, a Joint Venture Bateson-Fossil Creek, L.P. Bayfront Associates, Ltd. Blakeney Heath Limited Partnership Builder's Mortgage Services, L.P. Centex Auchter, a Joint Venture Centex/Bateson Joint Venture Centex Concord, General Partnership Centex Engle Joint Venture Centex/Goins Rash Cain, a Joint Venture Centex Homes Centex Homes Company, General Partnership Centex Lennar Joint Venture Centex Multi-Family Company, L.P. Centex-Corrigan Multi-Family II, Joint Venture Centex-Draper 156 Partnership Centex-Draper 162 Partnership Centex-Great Southwest Corporation/ Construct Two, a Joint Venture Centex-Great Southwest Corporation Polote, a Joint Venture Centex-Kensington (Mankato I) Partnership Centex-Rodgers Construction Company-Construction Control Services Corporation, a Joint Venture Centex-Rodgers-Sorensen Gross, a Joint Venture 6 Centex-Rooney Construction Co., Inc./ Construct Two Construction Managers, Inc., a Joint Venture Centex-Rooney Construction Co., Inc./Landis Company, Inc., a Joint Venture Centex-Rooney Construction Co., Inc./Huber, Hunt & Nichols, Inc., a Joint Venture Centex-Rooney Jones, a Joint Venture Centex-Rooney National Development, JV Centex-Rooney/Russell, a Joint Venture Centex-Rooney/Sierra, J.V. Centex-Schaumberg Industrial Park Central Park Professional Center COINS #1 CCMC A FB COINS #9 CAC I, J & K, FB Crossland Acceptance Associates V, a General Partnership Golden Turner, a Joint Venture Golden-Bateson, a Joint Venture Golden-C A B, Joint Venture Harvard Mortgage Company, L.P. Hines Baseball Limited Partnership HMP Home Loans, L.P. Illinois Cement Company Integrity Homes, a Texas General Partnership Masters Lending Group, L.P. Mortgage Acceptance Associates No. 2 Mortgage Collateral Associates No. 1, a General Partnership Mortgage Collateral Associates No. 3, a General Partnership NHC Mortgage Group, L.P. Palmdale 101 Venture PHS Mortgage Company PrideFinancial Services, L.P. 7 Roselle Property Sycamore Creek Texas-Lehigh Cement Company Vista Development Company, L.P. Vista Industrial Development Company, L.P. Vista Office Development Company, L.P. Vista Realty Development Company, L.P. Vista Retail Development Company, L.P. All of the Company's subsidiaries are included in the Consolidated Financial Statements of the Company incorporated by reference into this Form 10-K from the Centex 1997 Annual Report to Stockholders. EX-21.2 4 LIST OF SUBSIDIARIES OF HOLDING 1 EXHIBIT 21.2 The following list of subsidiaries of 3333 Holding Corporation, wholly-owned unless otherwise stated, includes all of the significant subsidiaries of 3333 Holding Corporation as of June 27, 1997. NEVADA CORPORATIONS: CDC MF1, LLC 3333 Development Corporation PARTNERSHIPS: Arbors of Wolf Pen Creek Partners Centex Development Company, L.P. All of the Company's subsidiaries are included in the Consolidated Financial Statements of the Company incorporated by reference into this Form 10-K from the Centex 1997 Annual Report to Stockholders. EX-23.1 5 CONSENTS OF INDEPENDENT PUBLIC ACCOUNTANTS-CENTEX 1 EXHIBIT 23.1 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 (number 33-61223) and Form S-8 (numbers 33-44575; 33-29174; 2-95271; 2-51637; 2-54043; 2-59535; 2-68747; 2-78831; 33-55083; 333-28229) of our report dated May 9, 1997, incorporated by reference to Centex Corporation's Annual Report on Form 10-K for the year ended March 31, 1997, and to all references to our firm included in these registration statements. Arthur Andersen LLP Dallas, Texas June 27, 1997 EX-23.2 6 CONSENTS OF INDEPENDENT PUBLIC ACCOUNTANTS-HOLDING 1 EXHIBIT 23.2 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-8 (numbers 33-44575; 33-29174; 2-95271; 2-51637; 2-54043; 2-59535; 2-68747; 2-78831; 33-55083-01; 33-55083-02; 333-28229-01; 333-28229-02) of our report dated May 9, 1997, incorporated by reference to 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. Annual Report on Form 10-K for the year ended March 31, 1997, and to all references to our firm included in these registration statements. Arthur Andersen LLP Dallas, Texas June 27, 1997 EX-23.3 7 CONSENTS OF INDEPENDENT PUBLIC ACCOUNTANTS-DEVELOP 1 EXHIBIT 23.3 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-8 (numbers 33-44575; 33-29174; 2-95271; 2-51637; 2-54043; 2-59535; 2-68747; 2-78831; 33-55083-01; 33-55083-02; 333-28229-01; 333-28229-02) of our report dated May 9, 1997, incorporated by reference to 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. Annual Report on Form 10-K for the year ended March 31, 1997, and to all references to our firm included in these registration statements. Arthur Andersen LLP Dallas, Texas June 27, 1997 EX-24.1 8 POWERS OF ATTORNEY - CENTEX 1 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 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, 1997, 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 25th day of June, 1997. /s/ Alan B. Coleman -------------------------- Alan B. Coleman 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, 1997, 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 25th day of June, 1997. /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, 1997, 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 26th day of June, 1997. /s/ William J Gillilan III ---------------------------------- William J Gillilan III 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, 1997, 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 26th day of June, 1997. /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, 1997, 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 26th day of June, 1997. /s/ Charles H. Pistor --------------------------------- Charles H. Pistor 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, 1997, 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 26th day of June, 1997. /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, 1997, 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 26th day of June, 1997. /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, 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, 1997, 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 26th day of June, 1997. /s/ Paul T. Stoffel ---------------------------------- Paul T. Stoffel Director Centex Corporation EX-24.2 9 POWERS OF ATTORNEY - HOLDING 1 EXHIBIT 24.2 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer, 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, 1997, 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 24th day of June, 1997. /s/ Josiah O. Low, III --------------------------------- Josiah O. Low, III Director 3333 Holding Corporation 2 3333 HOLDING CORPORATION POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer, 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, 1997, 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 26th day of June, 1997. /s/ David M. Sherer ------------------------------ David M. Sherer Director 3333 Holding Corporation EX-24.3 10 POWERS OF ATTORNEY - DEVELOPMENT 1 EXHIBIT 24.3 CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer, 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 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, 1997, 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 24th day of June, 1997. /s/ Josiah O. Low, III -------------------------------- Josiah O. Low, III Director Centex Development Company, L.P. 2 CENTEX DEVELOPMENT COMPANY, L.P. POWER OF ATTORNEY THE UNDERSIGNED hereby constitutes and appoints J. Stephen Bilheimer, 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 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, 1997, 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 26th day of June, 1997. /s/ David M. Sherer -------------------------------- David M. Sherer Director Centex Development Company, L.P. EX-27.1 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX CORPORATION'S MARCH 31, 1997, FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000018532 CENTEX CORPORATION 1,000 12-MOS MAR-31-1997 APR-01-1996 MAR-31-1997 31,320 0 987,385 0 1,001,759 0 489,703 196,560 2,678,829 0 236,769 0 0 7,254 828,523 2,678,829 3,784,991 3,784,991 3,538,679 3,538,679 48,507 0 34,062 163,743 57,180 106,563 0 0 0 106,563 3.62 0.00
EX-27.2 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3333 HOLDING CORPORATION'S MARCH 31, 1997, FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000818762 3333 HOLDING CORP. 1,000 12-MOS MAR-31-1997 APR-01-1996 MAR-31-1997 5 0 7,876 0 0 0 0 0 8,648 0 0 0 0 1 677 8,648 1,664 1,664 1,458 1,458 0 0 0 206 0 206 0 0 0 206 0.00 0.00
EX-27.3 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTEX DEVELOPMENT COMPANY L.P.'S MARCH 31, 1997, FORM 10-K IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000818764 CENTEX DEVELOPMENT CO. 1,000 12-MOS MAR-31-1997 APR-01-1996 MAR-31-1997 625 0 3,233 0 38,918 0 0 0 42,978 0 0 0 0 500 33,003 42,978 9,026 9,026 8,307 8,307 0 0 0 719 0 719 0 0 0 719 0.00 0.00
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