1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
JOINT QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended
DECEMBER 31, 2000
Commission File No. 1-6776
CENTEX CORPORATION
A Nevada Corporation
IRS Employer Identification No. 75-0778259
2728 N. Harwood
Dallas, Texas 75201
(214) 981-5000
Commission File Nos. 1-9624 and 1-9625, respectively
3333 HOLDING CORPORATION
A Nevada Corporation
CENTEX DEVELOPMENT COMPANY, L.P.
A Delaware Limited Partnership
IRS Employer Identification Nos. 75-2178860 and 75-2168471, respectively
2728 N. Harwood
Dallas, Texas 75201
(214) 981-6770
The registrants have 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 and
have been subject to such filing requirements for the past 90 days.
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 January 31, 2001:
Centex Corporation Common Stock 59,308,649 shares
3333 Holding Corporation Common Stock 1,000 shares
Centex Development Company, L.P. Class A Units of Limited Partnership Interest 32,260 units
Centex Development Company, L.P. Class C Units of Limited Partnership Interest 38,409 units
2
CENTEX CORPORATION AND SUBSIDIARIES
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
Form 10-Q Table of Contents
DECEMBER 31, 2000
CENTEX CORPORATION AND SUBSIDIARIES
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements 1
Condensed Consolidated Statements of Earnings
for the Three Months Ended December 31, 2000 2
Condensed Consolidated Statements of Earnings
for the Nine Months Ended December 31, 2000 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended December 31, 2000 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 30
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 31
SIGNATURES 32
i
3
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Combining Financial Statements 33
Condensed Combining Statements of Operations
for the Three Months Ended December 31, 2000 34
Condensed Combining Statements of Operations
for the Nine Months Ended December 31, 2000 35
Condensed Combining Balance Sheets 36
Condensed Combining Statements of Cash Flows
for the Nine Months Ended December 31, 2000 37
Notes to Condensed Combining Financial Statements 38
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 44
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 49
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 50
SIGNATURES 51
ii
4
CENTEX CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 1.
The condensed consolidated financial statements include the accounts of
Centex Corporation and subsidiaries and have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. References herein to "Centex" or the "Company" will include
all subsidiaries of Centex Corporation, through which all operations are
conducted, except where the context indicates that such reference is only to the
registrant, Centex Corporation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. The Company suggests
that these condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's latest Annual Report on Form 10-K. In the opinion of the Company, all
adjustments necessary to present fairly the information in the following
condensed consolidated financial statements of the Company have been included.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year.
-1-
5
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(unaudited)
For the Three Months Ended
December 31,
-------------------------------
2000 1999
------------ ------------
REVENUES
Home Building
Conventional Homes $ 1,038,810 $ 863,177
Manufactured Homes 29,494 47,160
Investment Real Estate 13,023 15,908
Financial Services 121,308 106,568
Construction Products 90,410 108,370
Contracting and Construction Services 345,568 287,978
------------ ------------
1,638,613 1,429,161
------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes 938,170 789,847
Manufactured Homes 32,031 44,484
Investment Real Estate (528) 6,991
Financial Services 118,932 97,345
Construction Products 69,397 63,038
Contracting and Construction Services 337,412 281,178
Other, net (3,123) 628
Corporate General and Administrative 8,458 8,483
Interest Expense 21,076 18,467
Minority Interest 6,294 16,971
------------ ------------
1,528,119 1,327,432
------------ ------------
EARNINGS BEFORE INCOME TAXES 110,494 101,729
Income Taxes 42,027 38,553
------------ ------------
NET EARNINGS $ 68,467 $ 63,176
============ ============
EARNINGS PER SHARE
Basic $ 1.16 $ 1.07
============ ============
Diluted $ 1.12 $ 1.04
============ ============
AVERAGE SHARES OUTSTANDING
Basic 59,080,788 59,230,006
Common Share Equivalents
Options 1,448,887 1,093,566
Convertible Debenture 400,000 400,000
------------ ------------
Diluted 60,929,675 60,723,572
============ ============
CASH DIVIDENDS PER SHARE $ 0.04 $ 0.04
============ ============
See notes to condensed consolidated financial statements.
-2-
6
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(unaudited)
For the Nine Months Ended
December 31,
-------------------------------
2000 1999
------------ ------------
REVENUES
Home Building
Conventional Homes $ 2,952,835 $ 2,461,533
Manufactured Homes 99,777 145,978
Investment Real Estate 19,667 27,357
Financial Services 323,717 343,932
Construction Products 290,507 323,391
Contracting and Construction Services 974,672 928,646
------------ ------------
4,661,175 4,230,837
------------ ------------
COSTS AND EXPENSES
Home Building
Conventional Homes 2,690,086 2,258,855
Manufactured Homes 103,504 138,153
Investment Real Estate (7,059) 3,270
Financial Services 319,068 301,536
Construction Products 200,752 190,822
Contracting and Construction Services 953,446 911,176
Other, net (5,040) 3,529
Corporate General and Administrative 25,963 23,821
Interest Expense 65,140 45,828
Minority Interest 30,827 51,677
------------ ------------
4,376,687 3,928,667
------------ ------------
EARNINGS BEFORE INCOME TAXES 284,488 302,170
Income Taxes 108,722 115,063
------------ ------------
NET EARNINGS $ 175,766 $ 187,107
============ ============
EARNINGS PER SHARE
Basic $ 2.98 $ 3.15
============ ============
Diluted $ 2.91 $ 3.06
============ ============
AVERAGE SHARES OUTSTANDING
Basic 58,946,795 59,370,180
Common Share Equivalents
Options 1,016,430 1,434,485
Convertible Debenture 400,000 400,000
------------ ------------
Diluted 60,363,225 61,204,665
============ ============
CASH DIVIDENDS PER SHARE $ 0.12 $ 0.12
============ ============
See notes to condensed consolidated financial statements.
-3-
7
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Centex Corporation
and Subsidiaries
-----------------------------
December 31, March 31,
2000* 2000**
------------ -----------
ASSETS
Cash and Cash Equivalents $ 76,945 $ 139,563
Receivables -
Residential Mortgage Loans 1,571,790 409,697
Other 576,680 483,381
Inventories 2,276,302 1,954,037
Investments -
Centex Development Company, L.P. 94,515 65,550
Joint Ventures and Other 75,178 65,944
Unconsolidated Subsidiaries -- --
Property and Equipment, net 738,055 360,604
Other Assets -
Deferred Income Taxes 51,504 49,907
Goodwill, net 279,232 251,780
Mortgage Securitization Residual Interest 153,468 160,999
Deferred Charges and Other 158,624 97,278
----------- -----------
$ 6,052,293 $ 4,038,740
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 1,134,853 $ 1,125,807
Debt -
Non-Financial Services 1,481,887 898,068
Financial Services 1,659,496 415,327
Payable to Affiliates -- --
Minority Stockholders' Interest 142,205 129,352
Negative Goodwill 38,837 50,837
Stockholders' Equity -
Preferred Stock, Authorized 5,000,000
Shares, None Issued -- --
Common Stock $.25 Par Value; Authorized
100,000,000 Shares; Issued and Outstanding
59,125,165 and 58,806,217, respectively 14,781 14,702
Capital in Excess of Par Value 6,142 --
Retained Earnings 1,574,582 1,405,895
Accumulated Other Comprehensive Loss (490) (1,248)
----------- -----------
Total Stockholders' Equity 1,595,015 1,419,349
----------- -----------
$ 6,052,293 $ 4,038,740
=========== ===========
See notes to condensed consolidated financial statements.
* Unaudited
** Condensed from audited financial statements.
-4-
8
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Centex Corporation Financial Services
----------------------------- ----------------------------
December 31, March 31, December 31, March 31,
2000* 2000** 2000* 2000**
------------ ----------- ------------ -----------
$ 33,011 $ 123,411 $ 43,934 $ 16,152
-- -- 1,571,790 409,697
481,855 418,810 94,825 64,571
2,261,207 1,945,899 15,095 8,138
94,515 65,550 -- --
75,178 65,944 -- --
270,455 267,177 -- --
699,838 319,255 38,217 41,349
8,241 24,018 43,263 25,889
262,413 233,059 16,819 18,721
-- -- 153,468 160,999
125,589 71,302 33,035 25,976
----------- ----------- ----------- -----------
$ 4,312,302 $ 3,534,425 $ 2,010,446 $ 771,492
=========== =========== =========== ===========
$ 1,057,322 $ 1,038,641 $ 77,531 $ 87,166
1,481,887 898,068 -- --
-- -- 1,659,496 415,327
-- -- 34,495 64,246
139,241 127,530 2,964 1,822
38,837 50,837 -- --
-- -- -- --
14,781 14,702 1 1
6,142 -- 180,467 150,467
1,574,582 1,405,895 55,492 52,463
(490) (1,248) -- --
----------- ----------- ----------- -----------
1,595,015 1,419,349 235,960 202,931
----------- ----------- ----------- -----------
$ 4,312,302 $ 3,534,425 $ 2,010,446 $ 771,492
=========== =========== =========== ===========
In the supplemental data presented above, "Centex Corporation" represents the
combining of all subsidiaries other than those included in Financial Services.
Transactions between Centex Corporation and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries balance sheets.
-5-
9
CENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
For the Nine Months Ended
December 31,
-----------------------------
2000 1999
----------- -----------
CASH FLOWS - OPERATING ACTIVITIES
Net Earnings $ 175,766 $ 187,107
Adjustments -
Depreciation and Amortization 44,717 34,838
Deferred Income Taxes (6,440) 10,941
Equity in Earnings of Centex Development
Company, L.P. and Joint Ventures (4,421) (648)
Minority Interest, net of taxes 19,605 33,233
(Increase) Decrease in Receivables (31,824) 68,912
(Increase) Decrease in Residential Mortgage Loans (1,162,093) 660,731
Increase in Inventories (310,971) (485,419)
(Decrease) Increase in Payables and Accruals (15,311) 15,268
Increase in Other Assets (73,845) (137,737)
Other, net (6,752) (40,387)
----------- -----------
(1,371,569) 346,839
----------- -----------
CASH FLOWS - INVESTING ACTIVITIES
Increase in Advances to Centex Development
Company, L.P. and Joint Ventures (30,451) (23,566)
Acquisition of Construction Products Operations (442,200) --
Acquisition of Home Building Operations -- (74,119)
Other Acquisitions -- (9,349)
Increase in Property and Equipment, net (46,286) (55,220)
----------- -----------
(518,937) (162,254)
----------- -----------
CASH FLOWS - FINANCING ACTIVITIES
Increase (Decrease) in Debt -
Secured by Residential Mortgage Loans 1,244,169 (569,804)
Other 583,819 458,390
Retirement of Common Stock (784) (29,032)
Proceeds from Stock Option Exercises 7,005 13,488
Dividends Paid (7,079) (7,134)
----------- -----------
1,827,130 (134,092)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 758 (48)
----------- -----------
NET (DECREASE) INCREASE IN CASH (62,618) 50,445
CASH AT BEGINNING OF PERIOD 139,563 111,268
----------- -----------
CASH AT END OF PERIOD $ 76,945 $ 161,713
=========== ===========
See notes to condensed consolidated financial statements.
-6-
10
CENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Dollars in thousands)
(unaudited)
(A) A summary of comprehensive income for the three and nine months ended
December 31, 2000 is presented below:
For the Three Months Ended For the Nine Months Ended
December 31, 2000 December 31, 2000
-------------------------- -------------------------
Net Earnings $ 68,467 $ 175,766
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments 73 (394)
Unrealized (Loss) Gain on Investment (586) 1,152
--------- ---------
Comprehensive Income $ 67,954 $ 176,524
========= =========
The Foreign Currency Translation Adjustments are the result of Centex's
investment in Centex Development Company, L.P. and its foreign subsidiaries. For
additional information on Centex Development Company L.P. and subsidiaries, see
their separate financial statements included elsewhere in this report. The
Unrealized (Loss) Gain on Investment is the result of a mark-to-market
adjustment to securities available for sale formerly held by the Company's
65.3%-owned subsidiary, Centex Construction Products, Inc. ("Construction
Products").
(B) A summary of changes in stockholders' equity is presented below:
Accumulated
Capital in Other
Preferred Common Excess of Par Retained Comprehensive
Stock Stock Value Earnings Income (Loss) Total
--------- -------- ------------- ---------- ------------- ----------
Balance, March 31, 2000 $ -- $ 14,702 $ -- $1,405,895 $ (1,248) $1,419,349
Net Earnings -- -- -- 175,766 -- 175,766
Exercise of Stock Options -- 88 6,917 -- -- 7,005
Retirement of 35,400 Shares -- (9) (775) -- -- (784)
Cash Dividends -- -- -- (7,079) -- (7,079)
Unrealized Gain on -- -- -- -- 1,152 1,152
Investment
Foreign Currency
Translation Adjustments -- -- -- -- (394) (394)
-------- -------- -------- ----------- --------- ----------
BALANCE, DECEMBER 31, 2000 $ -- $ 14,781 $ 6,142 $1,574,582 $ (490) $1,595,015
======== ======== ======== ========== ========= ==========
(C) In March 1987, certain of Centex's subsidiaries contributed to Centex
Development Company, L.P., (the "Partnership") a newly formed master limited
partnership, properties with a historical cost basis (which approximated market
value) of approximately $76 million for 1,000 Class A Limited Partnership Units.
The Partnership was formed to enable stockholders to participate in long-term
real estate development projects, the dynamics of which are inconsistent with
Centex's traditional financial objectives.
-7-
11
The Partnership is managed by its general partner, 3333 Development
Corporation ("Development"), which is in turn wholly-owned by 3333 Holding
Corporation ("Holding"). Holding is a separate public company whose stock trades
in tandem with Centex's stock. The common stock of Holding was distributed in
1987 (with warrants to purchase approximately 80% of the Class B limited
partnership units ("Class B Units") in the Partnership) as a dividend to the
stockholders of Centex. 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
automatically become detached in November 2007, unless the detachment date is
extended by Centex's board.
The stockholders of Centex elect the four-person Board of Directors of
Holding. Three of the Board members, representing the majority of the Board, are
independent outside directors who are also not directors, affiliates, or
employees of Centex. Thus, through Holding, the stockholders of Centex control
the general partner of the Partnership. The general partner and independent
Board of Holding manage how the Partnership conducts its activities, including
the acquisition, development, maintenance, operation, and sale of properties.
The general partner, acting on behalf of the Partnership, may sell or acquire
properties, including the contributed property, and enter into other business
transactions without the consent of the limited partners. In addition, the
limited partners cannot remove the general partner.
The Company accounts for its limited partner investment in the
Partnership on the equity method of accounting because the Company's interest in
the cash flow and earnings of the Partnership is limited to defined amounts, and
the Company does not control the Partnership.
During fiscal year 1998, the agreement governing the Partnership was
amended to allow for the issuance of Class C Limited Partnership Units. During
fiscal 1998, the 1,000 outstanding Class A Units owned by Centex were converted
to 32,260 new Class A Units. As of December 31, 2000, 38,409 Class C Units had
been issued in exchange for assets with a fair market value of $38.4 million.
These assets were recorded by the Partnership at fair market value. The
partnership agreement provides that Centex, as the Class A and Class C limited
partner, is entitled to a cumulative preferred return of 9% per annum on the
average outstanding balance of its Unrecovered Capital, defined as its capital
contributions, adjusted for return of capital distributions. As of December 31,
2000, Unrecovered Capital totaled $71.2 million, and preference payments in
arrears amounted to $19.6 million. No preference payments were made during
fiscal 2000 or fiscal 2001 year to date.
Supplementary condensed combined financial statements for Centex and
subsidiaries, Holding and subsidiary and the Partnership and subsidiaries are
set forth below. For additional information on Holding and subsidiary and the
Partnership and subsidiaries, see their separate financial statements and
related footnotes included elsewhere in this report.
-8-
12
SUPPLEMENTARY CONDENSED COMBINED BALANCE SHEETS
DECEMBER 31, March 31,
2000 2000*
------------ -----------
ASSETS
Cash and Cash Equivalents $ 87,087 $ 197,877
Receivables 2,158,282 907,367
Inventories 2,755,802 2,343,682
Investments in Joint Ventures and Other 75,925 68,539
Property and Equipment, net 741,261 364,182
Other Assets 692,676 599,526
----------- -----------
$ 6,511,033 $ 4,481,173
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Liabilities $ 1,239,775 $ 1,244,500
Debt 3,495,137 1,637,135
Minority Stockholders' Interest 142,269 129,352
Negative Goodwill 38,837 50,837
Stockholders' Equity 1,595,015 1,419,349
----------- -----------
$ 6,511,033 $ 4,481,173
=========== ===========
* Condensed from audited financial statements
SUPPLEMENTARY CONDENSED COMBINED STATEMENTS OF EARNINGS
For the Nine Months Ended
December 31,
--------------------------------
2000 1999
----------- -----------
Revenues $ 4,882,572 $ 4,479,147
Costs and Expenses 4,598,955 4,176,376
----------- -----------
Earnings Before Income Taxes 283,617 302,771
Income Taxes 107,851 115,664
----------- -----------
NET EARNINGS 175,766 187,107
Other Comprehensive Income (Loss) 758 (48)
----------- -----------
COMPREHENSIVE INCOME $ 176,524 $ 187,059
=========== ===========
(D) The Company's home building activities include: the acquisition of raw and
semi-developed land; the planning, supervision and funding of subcontractors'
activities to complete development of that land primarily into single family
home sites; and the construction of houses on those sites for sale to individual
home purchasers. The Company conducts its land acquisition and development
activities directly and via participation in joint ventures in which the Company
holds less than a majority interest.
-9-
13
The Company had deposited or invested $58.6 million as options toward
the purchase of undeveloped land and developed lots having a total purchase
price of approximately $1.5 billion in order to ensure the future availability
of land for home building. These options expire at various dates through the
year 2006. The Company has committed to purchase certain developed lots from the
Partnership for approximately $0.4 million.
(E) Interest expense relating to the Financial Services operations is
included in its costs and expenses. Interest related to operations other than
Financial Services is included in interest expense. For the three and nine month
periods ending December 31, 2000, Total Interest Expense is net of $5,600 and
$8,350, respectively, for interest capitalized to qualifying assets, principally
within the Home Building business segment.
For the Three Months Ended
December 31,
---------------------------
2000 1999
-------- --------
Total Interest Expense $ 48,508 $ 34,272
Less - Financial Services (27,432) (15,805)
-------- --------
Interest Expense, net $ 21,076 $ 18,467
======== ========
For the Nine Months Ended
December 31,
---------------------------
2000 1999
-------- --------
Total Interest Expense $125,550 $ 97,657
Less - Financial Services (60,410) (51,829)
-------- --------
Interest Expense, net $ 65,140 $ 45,828
======== ========
(F) In April 1994 Construction Products completed an initial public
offering of its stock which began trading on the New York Stock Exchange under
the symbol "CXP." Centex's ownership interest in Construction Products was 65.3%
as of December 31, 2000, 64.4% as of March 31, 2000, and 63.2% as of December
31, 1999.
(G) In fiscal 1996 the Company acquired an equity interest in Vista
Properties, Inc. ("Vista"), which owned a portfolio of properties located in
seven states in which the Company has significant operations. The Vista
portfolio was reduced to a nominal "book basis" after recording certain deferred
tax benefits related to the acquisition. As these properties are developed or
sold, the net sales proceeds are reflected as operating margin.
Negative Goodwill related to the Vista acquisition is being amortized
to earnings over the estimated period over which the land will be developed,
sold or realized. All investment property operations are being reported through
the "Investment Real Estate" business segment.
-10-
14
(H) The Company operates in five principal business segments: Home
Building, Investment Real Estate, Financial Services, Construction Products, and
Contracting and Construction Services. These segments operate primarily in the
United States, and their markets are nationwide. Revenues from any one customer
are not significant to the Company.
Intersegment revenues and investments in joint ventures are not
material and are not shown in the following tables. The investment in the
Partnership (approximately $94.5 million) is included in the Investment Real
Estate segment.
The following tables set forth financial information relating to the
business segments.
HOME BUILDING
CONVENTIONAL HOMES
Conventional Homes operations involve the purchase and development of
land or lots as well as the construction and sale of single-family homes.
For the Three Months Ended
December 31,
---------------------------
2000 1999
-------- --------
(Dollars in millions)
Revenues $1,038.8 $ 863.2
Cost of Sales (782.4) (666.6)
Selling, General & Administrative Expenses (155.8) (123.3)
-------- --------
Operating Earnings $ 100.6 $ 73.3
======== ========
For the Nine Months Ended
December 31,
---------------------------
2000 1999
-------- --------
(Dollars in millions)
Revenues $2,952.8 $2,461.5
Cost of Sales (2,251.2) (1,898.9)
Selling, General & Administrative Expenses (438.9) (359.9)
-------- --------
Operating Earnings $ 262.7 $ 202.7
======== ========
-11-
15
MANUFACTURED HOMES
Manufactured Homes operations involve the construction of single-family
homes and, to a lesser degree, commercial structures in factories and the sale
of these products through a network of Company-owned and independent dealers.
For the Three Months Ended
December 31,
--------------------------
2000 1999
------ ------
(Dollars in millions)
Revenues $ 29.5 $ 47.1
Cost of Sales (24.4) (36.5)
Selling, General & Administrative Expenses (6.7) (7.1)
Goodwill Amortization (0.9) (0.8)
------ ------
Operating (Loss) Earnings $ (2.5) $ 2.7
====== ======
For the Nine Months Ended
December 31,
----------------------------
2000 1999
--------- --------
(Dollars in millions)
Revenues $ 99.8 $ 146.0
Cost of Sales (82.0) (114.2)
Selling, General & Administrative Expenses (18.9) (21.4)
Goodwill Amortization (2.6) (2.6)
-------- --------
Operating (Loss) Earnings (3.7) 7.8
Minority Interest -- (1.0)
-------- --------
Net Operating (Loss) Earnings to Centex $ (3.7) $ 6.8
======== ========
INVESTMENT REAL ESTATE
Investment Real Estate operations involve the acquisition, development,
and sale of land primarily for multi-family, industrial, office, retail and
mixed-use projects.
For the Three Months Ended
December 31,
--------------------------
2000 1999
----- -----
(Dollars in millions)
Revenues $13.0 $15.9
Cost of Sales (1.8) (6.8)
Selling, General & Administrative Expenses (1.6) (4.2)
Negative Goodwill Amortization 4.0 4.0
----- -----
Operating Earnings $13.6 $ 8.9
===== =====
-12-
16
For the Nine Months Ended
December 31,
-------------------------
2000 1999
----- -----
(Dollars in millions)
Revenues $19.7 $27.4
Cost of Sales (2.2) (8.0)
Selling, General & Administrative Expenses (2.8) (7.3)
Negative Goodwill Amortization 12.0 12.0
----- -----
Operating Earnings $26.7 $24.1
===== =====
Property sales related to Investment Real Estate's nominally valued
assets resulted in operating margins of $4.3 and $9.0 million for the three and
nine months ended December 31, 2000 and $7.9 million and $16.8 million for the
three and nine month periods last year. As of December 31, 2000, Investment Real
Estate had nominally valued assets with an original cost basis of approximately
$32.7 million.
FINANCIAL SERVICES
Financial Services operations involve financing the purchases of
conventional homes, home equity and sub-prime lending, and the sale of title and
other insurance coverages. These activities include mortgage origination and
other related services for homes sold by Centex subsidiaries and by others.
For the Three Months Ended
December 31,
--------------------------
2000 1999
------ ------
(Dollars in millions)
Revenues* $121.3 $106.6
Selling, General & Administrative Expenses (91.5) (81.6)
Interest Expense (27.4) (15.8)
------ ------
Operating Earnings $ 2.4 $ 9.2
====== ======
* Financial Services revenues include interest income of $36.8 million
and $19.2 million for the three months ended December 31, 2000 and
1999, respectively.
For the Nine Months Ended
December 31,
--------------------------
2000 1999
-------- -------
(Dollars in millions)
Revenues* $ 323.7 $ 343.9
Selling, General & Administrative Expenses (258.6) (249.7)
Interest Expense (60.4) (51.8)
------- -------
Operating Earnings $ 4.7 $ 42.4
======= =======
* Financial Services revenues include interest income of $78.9 million
and $70.2 million for the nine months ended December 31, 2000 and 1999,
respectively.
-13-
17
Securitizations entered into prior to March 31, 2000 by Financial
Services' Centex Home Equity Corporation subsidiary ("Home Equity") were
structured in a manner that caused them to be accounted for as sales. The
resulting gains on such sales were reported as revenues during the period in
which the securitizations closed. Home Equity has changed the structure for
securitizations occurring subsequent to March 31, 2000, such that
securitizations after that date are being accounted for as borrowings. Although
the change in accounting for the securitizations from "sales" to "borrowings"
will have no effect on the profit recognized over the life of the mortgages, the
change does affect the timing of profit recognition. The approximate impact of
this change in fiscal 2001 was to reduce Home Equity's pre-tax earnings by
approximately $9.5 million and $31.8 million for the three and nine months ended
December 31, 2000, respectively, from the amount it would have reported if the
securitizations had been accounted for as sales.
CONSTRUCTION PRODUCTS
Construction Products operations involve the manufacture, production,
distribution, and sale of cement, gypsum wallboard, paperboard, and aggregates
and readymix concrete.
For the Three Months Ended
December 31,
--------------------------
2000 1999
-------- -------
(Dollars in millions)
Revenues $ 90.4 $ 108.4
Interest Income 1.8 1.1
Cost of Sales (69.6) (62.5)
Selling, General & Administrative Expenses (1.1) (1.2)
Goodwill Amortization (0.5) (0.4)
------- -------
Operating Earnings 21.0 45.4
Minority Interest (6.3) (17.0)
------- -------
Net Operating Earnings to Centex $ 14.7 $ 28.4
======= =======
For the Nine Months Ended
December 31,
-------------------------
2000 1999
------- -------
(Dollars in millions)
Revenues $ 290.5 $ 323.4
Interest Income 5.6 2.4
Cost of Sales (201.5) (188.6)
Selling, General & Administrative Expenses (3.5) (3.5)
Goodwill Amortization (1.4) (1.1)
------- -------
Operating Earnings 89.7 132.6
Minority Interest (30.8) (50.7)
------- ------
Net Operating Earnings to Centex $ 58.9 $ 81.9
======= =======
Identifiable Assets $ 752.4 $ 402.6
======= =======
-14-
18
CONTRACTING AND CONSTRUCTION SERVICES
Contracting and Construction Services operations involve the
construction of properties for both private and government interests, including
(among others) office, commercial and industrial buildings, hospitals, hotels,
museums, libraries, airport facilities and educational institutions. As this
segment generates significant positive cash flow, intercompany interest income
(credited at the prime rate in effect) is reflected in this segment; however,
these amounts are eliminated in consolidation.
For the Three Months Ended
December 31,
--------------------------
2000 1999
------- -------
(Dollars in millions)
Revenues $ 345.6 $ 288.0
Construction Contract Costs (322.8) (269.6)
Selling, General & Administrative Expenses (14.6) (11.6)
------- -------
Operating Income, as reported 8.2 6.8
Intercompany Interest Income* 2.5 2.0
------- -------
Total Economic Return $ 10.7 $ 8.8
======= =======
For the Nine Months Ended
December 31,
-------------------------
2000 1999
------- -------
(Dollars in millions)
Revenues $ 974.7 $ 928.6
Construction Contract Costs (911.9) (875.5)
Selling, General & Administrative Expenses (41.5) (35.6)
------- -------
Operating Income, as reported 21.3 17.5
Intercompany Interest Income* 6.9 6.3
------- -------
Total Economic Return $ 28.2 $ 23.8
======= =======
*The "net assets" position of the Contracting and Construction Services
segment provides significant cash flow (payables and accruals
consistently exceed identifiable assets). Intercompany interest income
computed on the segment's cash flow in excess of its equity is
reflected above. However, these amounts are eliminated in
consolidation.
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 do not merit breaking out as
separate business segments.
For the Three Months Ended
December 31,
--------------------------
2000 1999
------ ------
(Dollars in millions)
Corporate General and Administrative Expenses $ (8.5) $ (8.5)
====== ======
Operating Earnings (Loss)-Other, net $ 3.1 $ (0.6)
====== ======
-15-
19
For the Nine Months Ended
December 31,
-------------------------
2000 1999
------ ------
(Dollars in millions)
Corporate General and Administrative Expenses $(26.0) $(23.8)
====== ======
Operating Earnings (Loss)-Other, net $ 5.0 $ (3.5)
====== ======
(I) The computation of diluted earnings per share excludes anti-dilutive
options to purchase 2,823,000 common shares at an average price of $37.44, and
4,416,000 common shares at an average price of $35.24 for the three months and
nine months ended December 31, 2000, respectively. All anti-dilutive options
have expiration dates ranging from September 2007 to December 2010.
(J) Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued in
June 1998. This statement addresses the accounting for derivative instruments,
including derivative instruments embedded in other contracts (collectively
referred to as derivatives), and hedging activities as well as the disclosure of
these activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the consolidated balance sheet and measure those
instruments at fair value. In June 1999, SFAS No. 137 was issued which delays
the implementation of SFAS No. 133 for the Company until April 2001. In June
2000, SFAS No. 138 was issued which amends SFAS No. 133 for certain derivative
instruments and certain hedging activities.
SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," was issued in September 2000. This
statement replaces SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS No. 140 revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral and requires certain disclosures, but carries most of SFAS
No. 125's provisions without reconsideration. This statement will become
effective for the Company in April 2001.
The Company is in the process of assessing the impact SFAS Nos. 133,
138 and 140 will have on its financial statements.
(K) During November 2000 Construction Products purchased selected strategic
assets summarized below, and assumed certain liabilities. The net purchase price
was approximately $392 million. Funding came from cash on hand and borrowings
under Construction Products' new $325 million senior credit facility.
The principal assets acquired were: a 1.1 billion-square-foot gypsum
wallboard plant located in Duke, Oklahoma; a short line railroad and railcars
linking the Duke plant to adjacent railroads; a recently completed 220,000
ton-per-year lightweight paper mill in Lawton, Oklahoma; a 50,000 ton-per-year
Commerce City (Denver), Colorado paper mill; and three recycled paper fiber
collection sites. The gypsum wallboard operations will be operated by
Construction Products' American Gypsum Company located in Albuquerque, New
Mexico. The paper operations will be located in Lawton, Oklahoma, and will focus
primarily on the gypsum wallboard paper business.
(L) Certain prior year balances have been reclassified to be consistent
with the December 31, 2000 presentation.
-16-
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Centex's consolidated revenues for the three months ended December 31,
2000 were $1.6 billion, a 15% increase over $1.4 billion for the same period
last year. Earnings before income taxes were $110.5 million, 9% higher than
$101.7 million last year. Net earnings for the three months ended December 31,
2000 were $68.5 million, 8% higher than $63.2 million for the same period last
year.
For the nine months ended December 31, 2000, consolidated revenues
totaled $4.7 billion, 10% higher than $4.2 billion for the same period last
year. Earnings before income taxes were $284.5 million, 6% lower than $302.2
million for the same period last year. Net earnings were $175.8 million for the
nine months ended December 31, 2000, a 6% decrease from net earnings of $187.1
million for the same period last year.
HOME BUILDING
CONVENTIONAL HOMES
The following summarizes Conventional Homes' results for the three and
nine months ended December 31, 2000 compared to the same periods last year
(dollars in millions, except per unit data):
For the Three Months Ended December 31,
---------------------------------------------------------------------------
2000 1999
-------------------------------- -------------------------------
Conventional Homes Revenues $ 1,038.8 100.0% $ 863.2 100.0%
Cost of Sales (782.4) (75.3)% (666.6) (77.2)%
Selling, General & Administrative Expenses (155.8) (15.0)% (123.3) (14.3)%
---------- ---------- ---------- ----------
Operating Earnings $ 100.6 9.7% $ 73.3 8.5%
========== ========== ========== ==========
Units Closed 4,893 4,495
% Change 8.9% 24.8%
Unit Sales Price $ 208,328 $ 189,466
% Change 10.0% 3.2%
Operating Earnings Per Unit $ 20,568 $ 16,314
% Change 26.1% 1.1%
For the Nine Months Ended December 31,
--------------------------------------------------------------------------
2000 1999
-------------------------------- ------------------------------
Conventional Homes Revenues $ 2,952.8 100.0% $ 2,461.5 100.0%
Cost of Sales (2,251.2) (76.2)% (1,898.9) (77.2)%
Selling, General & Administrative Expenses (438.9) (14.9)% (359.9) (14.6)%
---------- ---------- ---------- ----------
Operating Earnings $ 262.7 8.9% $ 202.7 8.2%
========== ========== ========== ==========
Units Closed 14,202 12,854
% Change 10.5% 27.9%
Unit Sales Price $ 203,071 $ 188,595
% Change 7.7% 2.4%
Operating Earnings Per Unit $ 18,501 $ 15,768
% Change 17.3% 5.0%
-17-
21
Conventional Homes' revenues for the three months and nine months ended
December 31, 2000 increased by $175.6 million and $491.3 million, respectively,
from revenues for the same periods last year. These improvements resulted from
an increased number of operating neighborhoods along with an increase in units
per neighborhood, and a higher average unit selling price compared to the fiscal
2000 per-unit sales price.
Operating earnings for the three and nine months ended December 31,
2000 were 9.7% and 8.9% as a percentage of revenue and approximately $20,568 and
$18,501 on a per unit basis compared to operating earnings of 8.5% and 8.2% of
revenue and approximately $16,314 and $15,768 on a per-unit basis for the same
periods last year.
Home sales (orders) totaled 4,351 units during the three months ended
December 31, 2000, compared to 4,089 units during the same period last year,
representing a 6.4% increase. Home sales (orders) totaled 15,226 units during
the nine months ended December 31, 2000 compared to 13,191 units for the same
period last year. The backlog of homes sold but not closed at December 31, 2000
was 8,603 units, 16.1% more than the 7,413 units for the same period last year.
MANUFACTURED HOMES
The following summarizes Manufactured Homes' results for the three and
nine months ended December 31, 2000 compared to the same periods last year
(dollars in millions):
For the Three Months Ended December 31,
--------------------------------------------------------------
2000 1999
------------------------- --------------------------
Manufactured Homes Revenues (Construction) $ 18.3 100.0% $ 30.3 100.0%
Cost of Sales (15.1) (82.4)% (23.3) (76.9)%
Selling, General & Administrative Expenses (3.5) (19.5)% (3.4) (11.3)%
------ ------ ------ ------
(0.3) (1.9)% 3.6 11.8%
------ ====== ------ ======
Retail Sales Revenues 10.2 100.0% 16.8 100.0%
Cost of Sales (8.4) (82.6)% (13.2) (78.4)%
Selling, General & Administrative Expenses (2.6) (25.4)% (3.7) (21.9)%
------ ------ ------ ------
(0.8) (8.0)% (0.1) (0.3)%
------ ====== ------ ======
Construction and Retail (Loss) Earnings (1.1) 3.5
Subdivision Development Activities (0.5) --
Goodwill Amortization (0.9) (0.8)
------ ------
Group Operating (Loss) Earnings $ (2.5) $ 2.7
====== ======
Units Sold 1,004 1,501
-18-
22
For the Nine Months Ended December 31,
----------------------------------------------------------------------
2000 1999
----------------------------- ------------------------------
Manufactured Homes Revenues (Construction) $ 63.5 100.0% $ 98.1 100.0%
Cost of Sales (52.3) (82.4)% (76.2) (77.6)%
Selling, General & Administrative Expenses (9.5) (14.9)% (10.8) (11.0)%
-------- -------- -------- --------
1.7 2.7% 11.1 11.4%
-------- ======== -------- ========
Retail Sales Revenues 34.2 100.0% 47.9 100.0%
Cost of Sales (27.8) (81.4)% (38.0) (79.4)%
Selling, General & Administrative Expenses (8.5) (24.8)% (10.6) (22.2)%
-------- -------- -------- --------
(2.1) (6.2)% (0.7) (1.6)%
-------- ======== -------- ========
Construction and Retail (Loss) Earnings (0.4) 10.4
Subdivision Development Activities (0.7) --
Goodwill Amortization (2.6) (2.6)
Minority Interest -- (1.0)
-------- --------
Group Operating (Loss) Earnings $ (3.7) $ 6.8
======== ========
Units Sold 3,328 4,723
Manufactured Homes currently operates four manufacturing plants: three
in the Phoenix, Arizona area, and one in central Texas, and also operates 22
retail locations. As a consequence of an oversupply of homes in the total
industry distribution pipeline and the reduced availability and higher cost of
financing for purchasers of manufactured homes, Manufactured Homes' construction
sales and retail sales for the three and nine months ended December 31, 2000
declined from the same periods last year. In response, management has idled its
New Mexico plant and slowed production in its other plants until the return of
more favorable market conditions.
INVESTMENT REAL ESTATE
The following summarizes Investment Real Estate's results for the three
and nine months ended December 31, 2000 compared to the same periods last year
(dollars in millions):
For the Three Months Ended
December 31,
--------------------------
2000 1999
----- -----
Revenues $13.0 $15.9
===== =====
Operating Earnings $13.6 $ 8.9
===== =====
For the Nine Months Ended
December 31,
--------------------------
2000 1999
------ ------
Revenues $ 19.7 $ 27.4
====== ======
Operating Earnings $ 26.7 $ 24.1
====== ======
-19-
23
For the three and nine months ended December 31, 2000, Centex's
Investment Real Estate operations, through which all investment property
transactions are reported, had operating earnings of $13.6 and $26.7 million,
respectively, 52% and 11% higher than $8.9 and $24.1 million for the same
periods a year ago. The timing of land sales is uncertain and can vary
significantly from period to period.
Property sales related to Investment Real Estate's nominally valued
assets resulted in operating margins of $4.3 million and $7.9 million for the
three months ended December 31, 2000 and 1999, and $9.0 million and $16.8
million for the nine months ended December 31, 2000 and 1999, respectively. As
of December 31, 2000, Investment Real Estate had nominally valued assets with an
original cost basis of approximately $32.7 million which are expected to be sold
over the next 12 to 24 months.
Negative goodwill amortization was $4 million in the three month
periods ended December 31, 2000 and 1999, and $12 million in the nine month
periods ended December 31, 2000 and 1999.
FINANCIAL SERVICES
The following summarizes Financial Services' results for the three and
nine months ended December 31, 2000 compared to the same periods last year
(dollars in millions):
For the Three Months Ended
December 31,
--------------------------
2000 1999
------- -------
Revenues $ 121.3 $ 106.6
======= =======
Operating Earnings $ 2.4 $ 9.2
======= =======
Origination Volume $ 2,461 $ 2,168
======= =======
Number of Loans Originated
CTX Mortgage Company
Centex-built Homes ("Builder") 2,956 2,449
Non-Centex-built Homes ("Retail") 10,610 10,614
------- -------
13,566 13,063
Centex Home Equity Corporation 6,564 5,526
Centex Finance Company (closed during fiscal 2000) -- 202
------- -------
20,130 18,791
======= =======
-20-
24
For the Nine Months Ended
December 31,
-------------------------
2000 1999
-------- -------
Revenues $ 323.7 $ 343.9
======= =======
Operating Earnings $ 4.7 $ 42.4
======= =======
Origination Volume $ 7,316 $ 7,337
======= =======
Number of Loans Originated
CTX Mortgage Company
Builder 8,261 7,489
Retail 33,572 39,093
------- -------
41,833 46,582
Centex Home Equity Corporation 20,310 15,506
Centex Finance Company (closed during fiscal 2000) -- 674
------- -------
62,143 62,762
======= =======
Financial Services' operating earnings for the three months ended
December 31, 2000 were $2.4 million compared to $9.2 million for the same period
last year. For the nine months ended December 31, 2000, operating earnings were
$4.7 million compared to $42.4 million for the same period last year.
Financial Services' revenues for the third quarter of fiscal 2001 were
$121.3 million versus $106.6 million for the third quarter last year, and $323.7
million for the first nine months of fiscal 2001 compared to $343.9 million for
the same period last year. Gains on sales of mortgage loans receivable, a
component of Financial Services' revenues, decreased to $40.7 million for the
quarter ended December 31, 2000 from $65.4 million for the comparable quarter
last year, and to $128.7 million for the nine months ended December 31, 2000
compared to $208.3 million for the same period last year. This decline is
primarily due to the change, discussed below, in the method of accounting for
securitizations completed by Home Equity.
CTX Mortgage Company and related companies ("CTX Mortgage") had
operating earnings totaling $5.9 million for the three months ended December 31,
2000 compared to operating earnings of $5.8 million for the three months ended
December 31, 1999, and $16.7 million for the nine months ended December 31,
2000, which was 45% less than operating earnings of $30.6 million reported for
the nine months ended December 31, 1999. The decline in CTX Mortgage's
year-to-date operating earnings is primarily due to higher interest rates in the
first nine months of fiscal 2001 compared to the same period last year, which
has resulted in a decrease in refinancing activity, a more competitive pricing
environment, and a change in product mix to a greater volume of adjustable rate
loans that have lower profit margins. Originations for the nine months ended
December 31, 2000 totaled 41,833 compared to 46,582 originations in the same
period last year. The per-loan profit for the nine months ended December 31,
2000 was $400, or 39% lower than $657 for the same period last year. CTX
Mortgage's total mortgage applications for the three months ended December 31,
2000 increased 14% to 12,723 from 11,197 applications for the same period last
year. For the nine months ended December 31, 2000, CTX Mortgage's applications
decreased 1% to 43,919 from 44,210 for the same period last year.
-21-
25
Up to December 1999, substantially all of the mortgage loans generated
by CTX Mortgage were sold forward upon closing and subsequently delivered to
third-party purchasers within approximately 60 days thereafter. In mid-December
1999, CTX Mortgage began to sell, at closing, the majority of its mortgage loans
to Harwood Street Funding I, LLC ("HSF-I"), a non-affiliated limited liability
company. This arrangement is discussed in more detail in the Financial Condition
and Liquidity section below.
CTX Mortgage's interest income, earned primarily on loans pending sale,
decreased 65% for the quarter ended December 31, 2000 to $4.2 million from $12.0
million for the same quarter last year, and declined 73% for the nine months
ended December 31, 2000 to $13.4 million from $49.1 million for the same period
last year. CTX Mortgage's interest expense for the quarter ended December 31,
2000 was $4.5 million, a 59% decrease from $10.9 million for the same period
last year. Interest expense for the nine months ended December 31, 2000 was
$14.3 million, a 63% decrease from $38.3 million for the same period last year.
The decrease in CTX Mortgage's net interest income was due to the reduction in
its inventory of loans because of the sales arrangement with HSF-I, as discussed
in the Financial Condition and Liquidity section.
Home Equity reported operating losses of $3.5 million and $12.1
million, respectively, for the quarter and nine months ended December 31, 2000,
compared to operating earnings of $3.4 million and $11.8 million, respectively,
for the same periods last year. As discussed below, this decline primarily
resulted from accounting for $400 million in securitizations completed during
the quarter ended December 31, 2000 and $1.15 billion in securitizations during
fiscal 2001 as borrowings rather than as sales.
Home Equity's originations for the three months ended December 31, 2000
were 6,564, a 19% increase over 5,526 originations for the same period last
year. Originations for the nine months ended December 31, 2000 were 20,310, a
31% increase over 15,506 originations for the same period last year. Loan volume
for the three months ended December 31, 2000 was $442.8 million, a 25%
improvement over the same period last year. Loan volume for the nine months
ended December 31, 2000 was $1.3 billion, a 31% improvement over the same period
last year. Loan volume for the three and nine months ended December 31, 2000 was
favorably impacted by the opening of new operating locations during the later
quarters of fiscal 2000, plus generally increased activity. Home Equity's
sub-prime applications totaled 35,105 for the quarter ended December 31, 2000,
an increase of 9% over the 32,341 applications for the same period last year.
Home Equity's sub-prime applications totaled 109,853 for the nine months ended
December 31, 2000, an increase of 22% over the 89,785 applications for the same
period last year.
During the quarter ended December 31, 2000, Home Equity completed $400
million in loan securitizations, compared to $305 million of loan
securitizations during the same period last year. For the nine months ended
December 31, 2000, Home Equity completed securitizations totaling $1.15 billion,
compared to $1.0 billion in securitizations for the same period last year. Home
Equity retains the servicing rights associated with these securitized loans and
is the long-term servicer of these loans. Service fee income related to this
long-term servicing was $6.8 million in the three months ended December 31,
2000, a 70% increase from the $4.0 million in the same period last year. For the
nine months ended December 31, 2000, service fee revenue was $17.8 million
compared to $10.0 million for the same period last year.
Substantially all of the mortgage loans produced by Home Equity are
securitized, generally on a quarterly basis. Securitizations entered into prior
to March 31, 2000 by Home Equity were structured in a manner that caused them to
be accounted for as sales. The resulting gains on such sales were reported as
-22-
26
revenues during the period in which the securitizations closed. Home Equity has
changed the structure for securitizations occurring subsequent to March 31,
2000, such that securitizations after that date are being accounted for as
borrowings. Although the change in accounting for the securitizations from
"sales" to "borrowings" will have no effect on the profit recognized over the
life of the mortgages, the change does affect the timing of profit recognition.
The approximate impact of this change in fiscal 2001 was to reduce Home Equity's
pre-tax earnings by approximately $9.5 million and $31.8 million for the three
and nine months ended December 31, 2000, respectively, from the amount it would
have reported if the securitizations had been structured as sales.
Among other effects, the loans thus securitized are reflected as loans
receivable on the Company's balance sheet, and the Company's income statement
reflects the interest income and the interest expense associated with this loan
portfolio. Such net interest income, rather than gain on sale of loans as in
past periods, is Home Equity's primary source of operating income. Primarily as
a result of this change, Home Equity's interest income increased 353% for the
quarter ended December 31, 2000 to $32.6 million from $7.2 million for the same
period last year, and increased 210% for the nine months ended December 31, 2000
to $65.5 million from $21.1 million for the same period last year. Interest
expense for the quarter ended December 31, 2000 was $22.9 million, a 367%
increase from $4.9 million for the same period last year, and for the nine
months ended December 31, 2000, was $46.1 million, a 241% increase from $13.5
million for the same period last year. Therefore, Home Equity's net interest
income increased 322% to $9.7 million for the quarter ended December 31, 2000
from $2.3 million for the same period last year, and increased 155% for the nine
months ended December 31, 2000 to $19.4 million from $7.6 million for the same
period last year.
Financial Services' other sources of revenue include, among other
things, loan origination fees, servicing fee income, title policy fees and
insurance commissions, mortgage loan broker fees, and fees for mortgage loan
quality control and processing services.
CONSTRUCTION PRODUCTS
The following summarizes Construction Products' results for the three
and nine months ended December 31, 2000 compared to the same periods last year
(dollars in millions):
For the Three Months Ended
December 31,
-------------------------
2000 1999
------- -------
Revenues $ 90.4 $108.4
Interest Income 1.8 1.1
Cost of Sales and Expenses (69.6) (62.5)
Selling, General & Administrative Expenses (1.1) (1.2)
Goodwill Amortization (0.5) (0.4)
------ ------
Operating Earnings 21.0 45.4
Minority Interest (6.3) (17.0)
------ ------
Net Operating Earnings to Centex $ 14.7 $ 28.4
====== ======
-23-
27
For the Nine Months Ended
December 31,
-------------------------
2000 1999
------- -------
Revenues $ 290.5 $ 323.4
Interest Income 5.6 2.4
Cost of Sales (201.5) (188.6)
Selling, General & Administrative Expenses (3.5) (3.5)
Goodwill Amortization (1.4) (1.1)
------- -------
Operating Earnings 89.7 132.6
Minority Interest (30.8) (50.7)
------- -------
Net Operating Earnings to Centex $ 58.9 $ 81.9
======= =======
Construction Products' revenues were $90.4 million for the three months
ended December 31, 2000, a 17% decrease from the same period last year. For the
three months ended December 31, 2000, Construction Products' operating earnings,
net of minority interest, were $14.7 million, a 48% decrease from the $28.4
million reported for the same period last year. Revenues from Construction
Products for the nine months ended December 31, 2000 were $290.5 million, 10%
lower than revenues for the same period last year. For the nine months ended
December 31, 2000, Construction Products' operating earnings, net of minority
interest, were $58.9 million, 28% lower than the results for the same period
last year. The decrease in revenues and operating earning for the three and nine
month periods ending December 31, 2000 are primarily the result of lower
pricing, particularly in gypsum wallboard. Construction Products' results for
both the current year quarter and nine month period were also adversely impacted
by higher fuel and energy costs.
During November 2000, Construction Products purchased selected
strategic assets summarized below, and assumed certain liabilities. The net
purchase price was approximately $392 million. Funding came from cash on hand
and borrowings under Construction Products' new $325 million senior credit
facility.
The principal assets acquired were: a 1.1 billion-square-foot gypsum
wallboard plant located in Duke, Oklahoma; a short line railroad and railcars
linking the Duke plant to adjacent railroads; a recently completed 220,000
ton-per-year lightweight paper mill in Lawton, Oklahoma; a 50,000 ton-per-year
Commerce City (Denver), Colorado paper mill; and three recycled paper fiber
collection sites. The gypsum wallboard operations will be operated by
Construction Products' American Gypsum Company located in Albuquerque, New
Mexico. The paper operations will be located in Lawton, Oklahoma, and will focus
primarily on the gypsum wallboard paper business.
-24-
28
\
CONTRACTING AND CONSTRUCTION SERVICES
The following summarizes Contracting and Construction Services' results
for the three and nine months ended December 31, 2000 compared to the same
periods last year (dollars in millions):
For the Three Months Ended
December 31,
--------------------------------------------
2000 1999
----------------- -----------------
Revenues $ 345.6 $ 288.0
================= =================
Operating Earnings $ 8.2 $ 6.8
================= =================
New Contracts Received $ 318.5 $ 486.8
================= =================
Backlog of Uncompleted Contracts $ 1,445 $ 1,322
================= =================
For the Nine Months Ended
December 31,
--------------------------------------------
2000 1999
----------------- -----------------
Revenues $ 974.7 $ 928.6
================= =================
Operating Earnings $ 21.3 $ 17.5
================= =================
New Contracts Received $ 1,037.6 $ 1,313.5
================= =================
Backlog of Uncompleted Contracts $ 1,445 $ 1,322
================= =================
Contracting and Construction Services' revenues for the three and nine
months ended December 31, 2000 were $345.6 million and $974.7 million,
respectively. Operating earnings for the group improved 20% to $8.2 million for
the three months and 21% to $21.3 million for the nine months ended December 31,
2000 over the same periods last year. This increase was primarily the result of
a continuing shift in recent years to higher-margin private negotiated projects
from lower-margin public bid work.
The Contracting and Construction Services operations provided a
positive average net cash flow in excess of Centex's investment in the group of
$99.3 million for the three months ended December 31, 2000 and $94.7 million for
the same period last year. For the nine months ended December 31, 2000, the
positive average net cash flow in excess of Centex's investment in the group was
$95.1 million, compared to $102.8 million for the same period last year.
-25
29
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 2000, the Company had cash and cash equivalents of
$76.9 million, including $30.4 million of restricted cash and $11.8 million
belonging to the Company's 65.3%-owned Construction Products subsidiary. The net
cash used in or provided by the operating, investing, and financing activities
for the nine months ended December 31, 2000 and 1999 is summarized below
(dollars in thousands):
For the Nine Months Ended
December 31,
---------------------------------
2000 1999
----------- -----------
Net cash provided by (used in)
Traditional Operations*
Operating Activities $ (149,354) $ (233,472)
Investing Activities (513,888) (142,454)
Financing Activities 572,084 432,060
----------- -----------
(91,158) 56,134
----------- -----------
Financial Services
Operating Activities (1,222,215) 590,311
Investing Activities (5,049) (19,800)
Financing Activities 1,255,046 (576,152)
----------- -----------
27,782 (5,641)
----------- -----------
Effect of exchange rates on cash 758 (48)
----------- -----------
Net (decrease) increase in cash $ (62,618) $ 50,445
=========== ===========
* Traditional operations is the combining of all subsidiaries other than
those included in the Financial Services business segment.
For the first nine months of fiscal 2001, cash was used in the
Operating Activities to finance increases in residential mortgage loans and
housing inventories. The increase in housing inventories relates to the
increased level of sales and resulting units under construction during the year
and to the acquisition of expansion land. The funds provided by Financing
Activities included new debt used to fund both residential mortgage loans and
the increased home building activity.
Short-term debt as of December 31, 2000 was $817.8 million, which
included $542.0 million of debt applicable to the Financial Services operation
(see below). Excluding Financial Services, the Company's short-term borrowings
are generally accomplished at prevailing market interest rates from the
Company's commercial paper programs and from uncommitted bank facilities. In
August, the Company entered into a $600 million committed multi-bank revolving
credit facility expiring in 2005 which serves as backup for commercial paper
borrowings.
The Financial Services segment obtains most of its own short-term
liquidity needs through separate facilities which require only limited support
from Centex Corporation. During the third quarter of fiscal 2000, CTX Mortgage
began selling to HSF-I substantially all of the Conforming, Jumbo A, and GNMA
eligible mortgages originated by CTX Mortgage under a revolving sales agreement.
HSF-I, an unaffiliated special purpose entity, acquires and then resells
mortgages originated by CTX Mortgage into secondary
-26-
30
markets. Under the sales agreement between CTX Mortgage and HSF-I, which has a
five year term with certain renewal options, CTX Mortgage is not required to
sell its mortgage loans to HSF-I; however, HSF-I has committed to purchase all
eligible loans offered by CTX Mortgage. This arrangement gives CTX Mortgage
daily access, on a revolving basis, to HSF-I's $1.5 billion of capacity. CTX
Mortgage also maintains $190 million of secured committed mortgage warehouse
facilities.
In February 2001, Home Equity began selling mortgage loans to Harwood
Street Funding II, LLC ("HSF-II") under a revolving sales agreement. HSF-II, an
affiliated special purpose limited liability company, acquires mortgages
originated or acquired by Home Equity and then resells them into the secondary
market or to securitization structures. Under the sales agreement between Home
Equity and HSF-II, Home Equity is not required to sell its mortgage loans to
HSF-II; however, HSF-II has committed to purchase all eligible loans offered by
Home Equity. This arrangement gives Home Equity daily access, on a revolving
basis, to HSF-II's $550 million of capacity. HSF-II's funding for the purchase
of the loans is provided through the sale by it in the capital markets of
five-year subordinated notes and short-term secured liquidity notes. Home Equity
continues to service the loans acquired by HSF-II. Home Equity also has $325
million of committed secured mortgage warehouse facilities to finance sub-prime
mortgages held until securitization.
In addition, Financial Services has $90 million of uncommitted
unsecured credit facilities under which it can borrow and, in turn, allocate
such borrowed funds to its CTX Mortgage, Home Equity, and other subsidiaries. At
December 31, 2000, Financial Services had borrowed $90 million under these
facilities; $45 million of such borrowings were allocated to CTX Mortgage and
$45 million to Home Equity. All borrowings under these unsecured facilities are
guaranteed by Centex Corporation.
CTX Mortgage and Home Equity share a $175 million uncommitted secured
credit facility to finance mortgage inventory. At December 31, 2000, CTX
Mortgage had borrowed $25 million and Home Equity had borrowed $145 million
under this facility. This facility has limited recourse to Centex Corporation.
The Company is exposed to market risks related to fluctuations in
interest rates on mortgage loans receivable, residual interest in mortgage
securitizations, and in debt. The Company utilizes forward sale commitments to
mitigate the risk associated with the majority of CTX Mortgage's mortgage loan
portfolio and forward starting interest rate swaps for most of the unsecuritized
mortgage portfolio of Home Equity. The Company does not utilize forward or
option contracts on foreign currencies or commodities, or other types of
derivative financial instruments. There have been no material changes in the
Company's market risk since March 31, 2000. At December 31, 2000, market risk
associated with the swaps mentioned above is considered minimal.
-27-
31
Debt outstanding as of December 31, 2000 was as follows (dollars in thousands):
Non-Financial Services:
Short-Term Notes Payable $ 275,810
Senior Debt:
Medium-Term Note Programs, 6.94% to 7.95%, due through 2006 486,991
Long-Term Notes, 6.4% to 9.75%, due through 2006 214,966
Other Indebtedness, weighted-average 8.9%, due through 2027 294,768
Subordinated Debt:
Subordinated Debentures, 7.375%, due in 2006 99,784
Subordinated Debentures, 8.75%, due in 2007 99,560
Subordinated Debentures, 9.5%, due in 2009 10,008
----------
1,481,887
----------
Financial Services:
Short-Term Notes Payable 541,970
Home Equity Loans Asset-backed Certificates, 6.60%
to 8.48%, due through 2031 327,518
Home Equity Loans Asset-backed Certificates, 6.60%
to 7.99%, due through 2030 390,008
Home Equity Loans Asset-backed Certificates, 6.74%
to 7.17%, due through 2031 400,000
----------
1,659,496
----------
Centex Corporation and Subsidiaries $3,141,383
==========
Maturities of long-term debt (in thousands) are fiscal: 2001, $118,286;
2002, $702,452; 2003, $268,178; 2004, $413,342; 2005, $105,720; and $715,625
thereafter. The Company believes it has adequate resources and sufficient credit
facilities to satisfy its current needs and to provide for future growth.
On February 1, 2001, Centex issued $250 million in 7.875% senior notes
due February 1, 2011. Proceeds of the bond issue were used to reduce commercial
paper and short term bank borrowings.
OTHER DEVELOPMENTS AND OUTLOOK
In October 2000, Centex Homes, a Nevada General Partnership ("Centex
Homes") signed a letter of intent to acquire the home building assets of The
Selective Group, based in Farmington Hills, Michigan. The closing is scheduled
for March 2001, subject to customary conditions.
As part of its increased focus on serving urban markets, Centex Homes
announced in January 2001 that it had signed a letter of intent to acquire
CityHome Builders, Inc. ("CityHomes"), a leading builder of upscale urban
townhomes in Dallas. The acquisition would include all homes under construction
as well as land or lots for approximately 300 homes. CityHomes, founded in 1997,
has been nationally recognized for its sophisticated luxury homes, generally
priced from $250,000 to $450,000.
-28-
32
Also during the quarter, Centex HomeTeam Pest Control acquired four
pest management companies, three in Florida and one in North Carolina. The
acquisitions added a total of 8,200 customers to HomeTeam Pest Control's
existing customer bases in these markets, bringing its total number of customers
nationwide to 121,000.
The Company expects home sales to remain strong and closings and
margins to continue to increase. Fiscal 2001 home building results should exceed
fiscal 2000's record levels, and the Company also expects all-time high results
from its contracting and construction services operations. In addition,
operating earnings from Financial Services are expected to increase as interest
rates fall and its sub-prime loan portfolio grows. However, despite strong
product volumes, earnings from Construction Products will be negatively impacted
by higher fuel and energy costs and lower product pricing in gypsum wallboard.
--------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations, the Other Developments and Outlook and other sections of
this report on Form 10-Q contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by the context of the statement and
generally arise when the Company is discussing its beliefs, estimates or
expectations. These statements are not guarantees of future performance and
involve a number of risks and uncertainties. Actual results and outcomes may
differ materially from what is expressed or forecast in such forward-looking
statements. The principal risks and uncertainties that may affect the Company's
actual performance and results of operations include the following: general
economic conditions and interest rates; the cyclical and seasonal nature of the
Company's businesses; adverse weather; changes in property taxes and energy
costs; changes in federal income tax laws and federal mortgage financing
programs; governmental regulation; changes in governmental and public policy;
changes in economic conditions specific to any one or more of the Company's
markets and businesses; competition; availability of raw materials; and
unexpected operations difficulties. Other risks and uncertainties may also
affect the outcome of the Company's actual performance and results of
operations.
-29-
33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks related to fluctuations in
interest rates on its direct debt obligations, on mortgage loans receivable,
residual interest in mortgage securitizations, and securitizations classified as
debt. The Company utilizes derivative instruments, including interest rate
swaps, in conjunction with its overall strategy to manage the debt outstanding
that is subject to changes in interest rates. The Company utilizes forward sale
commitments to mitigate the risk associated with the majority of its mortgage
loan portfolio. Other than the forward commitments and interest rate swaps
discussed earlier, the Company does not utilize forward or option contracts on
foreign currencies or commodities, or other types of derivative financial
instruments.
There have been no material changes in the Company's market risk from
March 31, 2000. For further information regarding the Company's market risk,
refer to the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2000.
-30-
34
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
None
(2) Reports on Form 8-K
Current Report on Form 8-K of Centex Corporation dated
October 25, 2000, filed with the SEC on October 26, 2000.
Current Report on Form 8-K of Centex Corporation dated
November 16, 2000, and filed with the SEC on that date.
Current Report on Form 8-K of Centex Corporation dated
November 17, 2000, and filed with the SEC on November 20,
2000.
-31-
35
SIGNATURES
Pursuant to the requirements 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
February 13, 2001 /s/ Leldon E. Echols
----------------------------
Leldon E. Echols
Executive Vice President and
Chief Financial Officer
(principal financial officer)
February 13, 2001 /s/ Mark A. Blinn
----------------------------
Mark A. Blinn
Vice President - Controller and
Financial Strategy
(chief accounting officer)
-32-
36
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED COMBINING FINANCIAL STATEMENTS
ITEM 1.
The condensed combining financial statements include the accounts of
3333 Holding Corporation and subsidiary ("Holding") and Centex Development
Company, L.P. and subsidiaries (the "Partnership") (collectively the
"Companies"), and have been prepared by the Companies, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Companies believe that the disclosures are adequate to make the information
presented not misleading. The Companies suggest that these condensed combining
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Companies' latest Annual Report on Form 10-K.
In the opinion of the Companies, all adjustments necessary to present fairly the
information in the following condensed combining financial statements of the
Companies have been included. The results of operations for such interim periods
are not necessarily indicative of the results for the full year.
-33-
37
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit/share data)
(unaudited)
For the Three Months Ended December 31,
---------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ----------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
-------- ------------ -------------- -------- ------------- --------------
REVENUES $ 80,752 $ 80,752 $ -- $ 79,450 $ 79,450 $ 153
COSTS AND EXPENSES 78,031 77,894 137 79,533 79,527 159
-------- -------- -------- -------- -------- --------
EARNINGS (LOSS) BEFORE
INCOME TAXES 2,721 2,858 (137) (83) (77) (6)
INCOME TAXES (928) (928) -- 29 29 --
-------- -------- -------- -------- -------- --------
NET EARNINGS (LOSS) $ 3,649 $ 3,786 $ (137) $ (112) $ (106) $ (6)
======== ======== ======== ======== ======== ========
NET EARNINGS (LOSS) ALLOCABLE
TO LIMITED PARTNER $ 3,786 $ (106)
======== ========
EARNINGS (LOSS) PER UNIT/SHARE $ 53.57 $ (137) $ (1.66) $ (6)
======== ======== ======== ========
WEIGHTED-AVERAGE UNITS/SHARES
OUTSTANDING 70,669 1,000 63,773 1,000
See notes to condensed combining financial statements.
-34-
38
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit/share data)
(unaudited)
For the Nine Months Ended December 31,
----------------------------------------------------------------------------------------------
2000 1999
--------------------------------------------- ---------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
--------- ------------ -------------- --------- ------------- --------------
REVENUES $ 222,510 $ 222,509 $ 1 $ 249,249 $ 249,249 $ 457
COSTS AND EXPENSES 219,517 219,157 360 248,684 247,603 1,538
--------- --------- --------- --------- --------- ---------
EARNINGS (LOSS)
BEFORE INCOME TAXES 2,993 3,352 (359) 565 1,646 (1,081)
INCOME TAXES (871) (871) -- 601 601 --
--------- --------- --------- --------- --------- ---------
NET EARNINGS (LOSS) $ 3,864 $ 4,223 $ (359) $ (36) $ 1,045 $ (1,081)
========= ========= ========= ========= ========= =========
NET EARNINGS ALLOCABLE
TO LIMITED PARTNER $ 4,223 $ 1,045
========= =========
EARNINGS (LOSS) PER UNIT/SHARE $ 60.70 $ (359) $ 16.99 $ (1,081)
========= ========= ========= =========
WEIGHTED-AVERAGE UNITS/SHARES
OUTSTANDING 69,573 1,000 61,489 1,000
See notes to condensed combining financial statements.
-35-
39
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING BALANCE SHEETS
(Dollars in thousands)
DECEMBER 31, 2000* March 31, 2000**
--------------------------------------------- ---------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
--------- ------------ -------------- --------- ------------- --------------
ASSETS
Cash $ 10,142 $ 10,137 $ 5 $ 58,314 $ 58,298 $ 16
Accounts Receivable 8,582 13,859 1 13,077 17,948 6
Notes Receivable 1,019 1,019 -- 3,131 3,131 --
Inventories 400,496 398,860 1,636 329,941 328,928 1,013
Investments -
Commercial Properties, net 70,099 70,099 -- 61,420 61,420 --
Real Estate Joint Ventures 3,069 3,069 -- 2,595 2,595 --
Affiliate -- -- 1,716 -- -- 1,716
Property and Equipment, net 3,206 3,138 68 3,578 3,481 97
Other Assets -
Goodwill, net 29,515 29,515 -- 30,727 30,727 --
Deferred Charges and Other 14,009 13,859 150 8,835 8,660 175
--------- --------- --------- --------- --------- ---------
$ 540,137 $ 543,555 $ 3,576 $ 511,618 $ 515,188 $ 3,023
========= ========= ========= ========= ========= =========
LIABILITIES, STOCKHOLDERS' EQUITY
AND PARTNERS' CAPITAL
Accounts Payable and
Accrued Liabilities $ 116,769 $ 116,727 $ 5,894 $ 118,693 $ 119,162 $ 4,982
Notes Payable 347,386 347,386 -- 323,740 323,740 --
--------- --------- --------- --------- --------- ---------
Total Liabilities 464,155 464,113 5,894 442,433 442,902 4,982
--------- --------- --------- --------- --------- ---------
Stockholders' Equity and
Partners' Capital 75,982 79,442 (2,318) 69,185 72,286 (1,959)
--------- --------- --------- --------- --------- ---------
$ 540,137 $ 543,555 $ 3,576 $ 511,618 $ 515,188 $ 3,023
========= ========= ========= ========= ========= =========
* Unaudited.
** Condensed from audited financial statements.
See notes to condensed combining financial statements.
-36-
40
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
CONDENSED COMBINING STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
For the Nine Months Ended December 31,
----------------------------------------------------------------------------------------------
2000 1999
--------------------------------------------- ---------------------------------------------
Centex Centex
Development Development
Company, L.P. 3333 Holding Company, L.P. 3333 Holding
and Corporation and Corporation
Combined Subsidiaries and Subsidiary Combined Subsidiaries and Subsidiary
--------- ------------ -------------- --------- ------------- --------------
CASH FLOWS - OPERATING
ACTIVITIES
Net Earnings (Loss) $ 3,864 $ 4,223 $ (359) $ (36) $ 1,045 $ (1,081)
Adjustments:
Depreciation and Amortization 3,622 3,592 30 2,752 2,719 33
Equity in Earnings from
Joint Ventures (446) (446) -- (23) (23) (15)
Decrease (Increase) in Receivables 2,149 2,144 5 (5,662) (5,662) --
Decrease in Notes Receivable 2,112 2,112 -- 194 194 --
Increase in Inventories (84,340) (83,717) (623) (11,612) (11,237) (375)
Increase in Commercial Properties (10,064) (10,064) -- -- -- --
(Increase) Decrease in Other Assets (8,273) (8,298) 25 (2,744) (2,915) 171
Increase in Payables and Accruals 6,238 5,326 912 12,131 10,313 1,905
--------- --------- --------- --------- --------- ---------
(85,138) (85,128) (10) (5,000) (5,566) 638
--------- --------- --------- --------- --------- ---------
CASH FLOWS - INVESTING ACTIVITIES
Increase in Advances to
Joint Ventures and Investment in
Affiliate (28) (28) -- (947) (948) (71)
(Increase) Decrease in Property and
Equipment, net (175) (174) (1) 318 317 1
--------- --------- --------- --------- --------- ---------
(203) (202) (1) (629) (631) (70)
--------- --------- --------- --------- --------- ---------
CASH FLOWS - FINANCING ACTIVITIES
Increase (Decrease) in Notes Payable 39,341 39,341 -- 24,719 25,301 (582)
Issuance of Class "C"
Partnership Units -- -- -- 4,830 4,830 --
--------- --------- --------- --------- --------- ---------
39,341 39,341 -- 29,549 30,131 (582)
--------- --------- --------- --------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (2,172) (2,172) -- 13 13 --
--------- --------- --------- --------- --------- ---------
NET (DECREASE) INCREASE IN CASH (48,172) (48,161) (11) 23,933 23,947 (14)
CASH AT BEGINNING OF PERIOD 58,314 58,298 16 364 331 33
--------- --------- --------- --------- --------- ---------
CASH AT END OF PERIOD $ 10,142 $ 10,137 $ 5 $ 24,297 $ 24,278 $ 19
========= ========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Increase in Notes Payable
Related to an Acquisition $ -- $ -- $ -- $ 253,812 $ 253,812 $ --
Issuance of Class C Units in
Exchange for Assets $ 3,327 $ 3,327 $ -- $ 3,265 $ 3,265 $ --
See notes to condensed combining financial statements.
-37-
41
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINING FINANCIAL STATEMENTS
DECEMBER 31, 2000
(unaudited)
(A) In March 1987, Centex Development Company, L.P. (the "Partnership"), a
master limited partnership, was formed to enable holders of common stock of
Centex Corporation (together with its subsidiaries, "Centex") to participate in
long-term real estate development projects whose dynamics are inconsistent with
Centex's traditional financial objectives. Certain of Centex's subsidiaries
contributed to the Partnership certain properties at their historical cost basis
in exchange for 1,000 limited partnership units ("Class A Units").
The Partnership is managed by its general partner, 3333 Development
Corporation ("Development"), which is in turn wholly-owned by 3333 Holding
Corporation ("Holding"). Holding is a separate public company whose stock trades
in tandem with Centex's stock. The common stock of Holding was distributed in
1987 (with warrants to purchase approximately 80% of the Class B limited
partnership units ("Class B Units") in the Partnership) as a dividend to the
stockholders of Centex. 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
automatically become detached in November 2007, unless the detachment date is
extended by Centex's board.
The stockholders of Centex elect the four-person Board of Directors of
Holding. Three of the Board members, representing the majority of the Board, are
independent outside directors who are also not directors, affiliates or
employees of Centex. Thus, through Holding, the stockholders of Centex control
the general partner of the Partnership. The general partner and the independent
board of Holding manage how the Partnership conducts its activities, including
the acquisition, development, maintenance, operation, and sale of properties.
The general partner, acting on behalf of the Partnership, may sell or acquire
properties, including the contributed property, and enter into other business
transactions without the consent of the limited partners. In addition, the
limited partners cannot remove the general partner.
See Note (C) to the condensed consolidated financial statements of
Centex included elsewhere in this Form 10-Q for supplementary condensed combined
financial statements for Centex and subsidiaries, Holding and subsidiary, and
the Partnership and subsidiaries.
-38-
42
(B) Holding has a service agreement with Centex Service Company, a
wholly-owned subsidiary of Centex, whereby Centex Service Company provides
certain development, tax, accounting and other similar services for Holding.
Through December 31, 2000, Holding had paid Centex Service Company $772,500 for
services provided in fiscal 2001.
The Partnership sells lots to Centex Homes, a Nevada General
Partnership ("Centex Homes") pursuant to certain purchase and sale agreements.
Revenues from these sales were zero for the three and nine months ended December
31, 2000, and $669,000 and $5.0 million for the three and nine months ended
December 31, 1999, respectively. Gains associated with the sales for the same
periods last year were $132,000 and $305,000, respectively.
(C) A summary of comprehensive income for the three and nine months ended
December 31, 2000 is presented below (dollars in thousands):
For the Three Months Ended For the Nine Months Ended
December 31, 2000 December 31, 2000
-------------------------- -------------------------
Net Earnings $ 3,649 $ 3,864
Accumulated Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments 73 (394)
------- -------
Comprehensive Income $ 3,722 $ 3,470
======= =======
(D) A summary of changes in stockholders' equity and partners' capital is
presented below (dollars in thousands):
For the Nine Months Ended December 31, 2000
------------------------------------------------------------------------------------
Centex Development Company, 3333 Holding Corporation
L.P. and Subsidiaries and Subsidiary
----------------------------------- --------------------------------
Class B General Limited Capital In Retained
Unit Partner's Partner's Stock Excess of Earnings
Combined Warrants Capital Capital Warrants Par Value (Deficit)
-------- -------- --------- --------- -------- ---------- ---------
Balance at March 31, 2000 $ 69,185 $ 500 $ 1,142 $ 70,644 $ 1 $ 800 $ (2,760)
Partnership Units Issued in
Exchange for Assets 3,327 -- -- 3,327 -- -- --
Net Earnings (Loss) 3,864 -- -- 4,223 -- -- (359)
Accumulated Other
Comprehensive Loss:
Foreign Currency
Translation Adjustments (394) -- -- (394) -- -- --
-------- -------- -------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 2000 $ 75,982 $ 500 $ 1,142 $ 77,800 $ 1 $ 800 $ (3,119)
======== ======== ======== ======== ======== ======== ========
-39-
43
During fiscal 1998, the partnership agreement governing the Partnership
was amended to allow for the issuance of Class C Limited Partnership Units
("Class C Units") to be issued in exchange for assets. During the nine months
ended December 31, 2000, 3,327 Class C Units were issued to Centex Homes, the
Partnership's sole limited partner, in exchange for assets with a fair market
value of $3.3 million.
The partnership agreement provides that Centex, as the Class A and
Class C limited partner, is entitled to a cumulative preferred return of 9% per
annum on the average outstanding balance of its Unrecovered Capital, defined as
its capital contributions, adjusted for return of capital distributions. As of
December 31, 2000, Unrecovered Capital totaled $71.2 million, and preference
payments in arrears amounted to $19.6 million. No preference payments were made
during fiscal 2000 or fiscal 2001 year to date.
(E) On April 15, 1999 Centex Development Company UK Limited ("CDC-UK"), a
company incorporated in England and Wales and a wholly-owned subsidiary of the
Partnership, closed its acquisition of all of the voting shares of Fairclough
Homes Group Limited, a United Kingdom home builder ("Fairclough"). The purchase
price at closing (approximately $225 million) was paid by the delivery of
two-year non-interest bearing promissory notes. A major portion of the
promissory note obligation is secured by a letter of credit obtained by the
Partnership from a United Kingdom bank.
Additionally, the seller of the voting shares retained non-voting
preference shares in Fairclough that will entitle it to receive substantially
all of the net, after tax earnings of Fairclough until March 31, 2001. During
this time period CDC-UK may, however, participate in Fairclough's earnings in
excess of certain specified levels. Because the non-voting preference shares
retained by the seller have the characteristics of debt, the preference
obligations are being reported as interest expense in the financial statements.
During the period between April 15, 1999 to March 31, 2001,
Fairclough's operations will be carried out subject to certain guidelines
negotiated with the seller. After March 31, 2001, CDC-UK will redeem, for a
nominal value, the preference shares.
The purchase of Fairclough has been accounted for using the purchase
method of accounting, pursuant to which the total cost of the acquisition has
been allocated to the tangible and intangible assets acquired and liabilities
assumed based upon their estimated fair values. The allocation of the purchase
price is as follows (dollars in thousands):
Inventories, Property and Equipment, and Other $ 270,450
Goodwill 34,904
Notes Issued and Liabilities Assumed (303,649)
---------
Cash Paid $ 1,705
=========
(F) The Companies operate in five principal business segments:
International Home Building, Domestic Home Building, Commercial Development,
Multi-Family Development, and Land Sales. All of the segments operate in the
United States except for International Home Building, which acquires and
develops residential properties and constructs single and multi-family housing
units in the United Kingdom.
-40-
44
The following tables set forth financial information relating to the
business segments for the three and nine months ended December 31, 2000 and 1999
(dollars in thousands).
INTERNATIONAL HOME BUILDING
For the Three Months Ended
December 31,
--------------------------
2000 1999
-------- --------
Revenues $ 49,939 $ 71,298
Costs and Expenses (45,301) (62,294)
Selling, General & Administrative Expenses (5,590) (6,433)
Interest 62 (2,542)
-------- --------
Operating (Loss) Earnings $ (890) $ 29
======== ========
For the Nine Months Ended
December 31,
--------------------------
2000 1999
--------- ---------
Revenues $ 173,813 $ 208,389
Costs and Expenses (153,892) (182,110)
Selling, General & Administrative Expenses (16,774) (17,601)
Interest (4,234) (8,077)
--------- ---------
Operating (Loss) Earnings $ (1,087) $ 601
========= =========
DOMESTIC HOME BUILDING
For the Three Months Ended
December 31,
--------------------------
2000 1999
--------- ---------
Revenues $ 9,751 $ 3,791
Cost of Sales (8,087) (3,355)
Selling, General & Administrative Expenses (529) (369)
--------- --------
Operating Earnings $ 1,135 $ 67
========= ========
For the Nine Months Ended
December 31,
--------------------------
2000 1999
-------- ----------
Revenues $ 21,450 $ 9,781
Cost of Sales (18,228) (8,500)
Selling, General & Administrative Expenses (1,502) (1,088)
-------- ----------
Operating Earnings $ 1,720 $ 193
======== ==========
-41-
45
COMMERCIAL DEVELOPMENT
For the Three Months Ended
December 31,
--------------------------
2000 1999
-------- --------
Sales Revenues $ 17,383 $ 1,901
Rental Income 2,791 1,692
Cost of Sales (14,833) (1,683)
Selling, General & Administrative Expenses (1,897) (974)
Interest (1,112) (740)
-------- --------
Operating Earnings $ 2,332 $ 196
======== ========
For the Nine Months Ended
December 31,
--------------------------
2000 1999
-------- --------
Sales Revenues $ 17,383 $ 3,765
Rental Income 7,709 3,412
Cost of Sales (14,833) (3,065)
Selling, General & Administrative Expenses (4,832) (1,881)
Interest (3,137) (1,471)
-------- --------
Operating Earnings $ 2,290 $ 760
======== ========
MULTI-FAMILY DEVELOPMENT
For the Three Months Ended
December 31,
--------------------------
2000 1999
---------- -----------
Revenues $ 654 $ --
Selling, General & Administrative Expenses (574) (475)
Interest -- (4)
--------- -----------
Operating Earnings (Loss) $ 80 $ (479)
========= ===========
For the Nine Months Ended
December 31,
-------------------------
2000 1999
-------- --------
Revenues $ 1,662 $ 17,154
Cost of Sales -- (17,049)
Selling, General & Administrative Expenses (1,605) (1,505)
Interest -- (19)
-------- --------
Operating Earnings (Loss) $ 57 $ (1,419)
======== ========
-42-
46
LAND SALES
For the Three Months Ended
December 31,
-------------------------
2000 1999
------- -------
Sales Revenues $ -- $ 670
Other Revenues 234 98
Cost of Sales -- (539)
Selling, General & Administrative Expenses (170) (125)
------- -------
Operating Earnings $ 64 $ 104
======= =======
For the Nine Months Ended
December 31,
-------------------------
2000 1999
------- -------
Sales Revenues $ -- $ 6,416
Other Revenues 493 332
Cost of Sales -- (5,943)
Selling, General & Administrative Expenses (480) (375)
------- -------
Operating Earnings $ 13 $ 430
======= =======
(G) Certain prior year balances have been reclassified to be consistent with the
December 31, 2000 presentation.
-43-
47
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On a combined basis, the Companies' revenues for the three and nine
months ended December 31, 2000 totaled $80.7 million and $222.5 million,
respectively. Revenues of $79.4 million and $249.2 million were reported for the
three and nine months ended December 31, 1999, respectively. Operating results
for the three and nine months ended December 31, 2000 reflect net earnings of
$3,649,000 for the quarter and $3,864,000 of net earnings for the year to date
period, respectively, compared to net losses of $112,000 and $36,000 for the
same periods last year. The significant decrease in revenues for the nine months
ended December 31, 2000 compared to the same period last year primarily resulted
from decreased sales revenue in the Companies' Land Sales, Multi-Family and
International Home Building business segments, offset by increased sales revenue
in the Companies' Domestic Home Building and Commercial Development business
segments.
INTERNATIONAL HOME BUILDING
The following summarizes International Home Building's results for the
three and nine months ended December 31, 2000, compared to the same periods last
year (dollars in thousands):
For the Three Months Ended
December 31,
--------------------------
2000 1999
-------- --------
Revenues $ 49,939 $ 71,298
Costs and Expenses (45,301) (62,294)
Selling, General & Administrative Expenses (5,590) (6,433)
Interest 62 (2,542)
-------- --------
Operating (Loss) Earnings $ (890) $ 29
======== ========
For the Nine Months Ended
December 31,
-------------------------
2000 1999
--------- ---------
Revenues $ 173,813 $ 208,389
Costs and Expenses (153,892) (182,110)
Selling, General & Administrative Expenses (16,774) (17,601)
Interest (4,234) (8,077)
--------- ---------
Operating (Loss) Earnings $ (1,087) $ 601
========= =========
-44-
48
International Home Building's operating results include results for
Fairclough, its parent holding company, and goodwill amortization attributable
to the Fairclough acquisition. The preferred distribution to the seller totaled
$(0.1) and $4.2 million for the three and nine months ended December 31, 2000,
respectively. Although preferred stock is ordinarily treated as an equity
security, in this case the preferred stock has the essential characteristics of
debt and, among other things, has a nominal residual interest value that is
subject to mandatory redemption in two years. Therefore, the preferred stock has
been treated as debt and the preferred distribution has been recorded as
interest expense.
For the three and nine months ended December 31, 2000, the decrease in
operating earnings is attributable to declining unit completions resulting from
severe weather conditions, a tight labor market, and a generally slower economy.
DOMESTIC HOME BUILDING
The following summarizes Domestic Home Building's results for the three
and nine months ended December 31, 2000, compared to the same periods last year
(dollars in thousands):
For the Three Months Ended
December 31,
--------------------------
2000 1999
------- -------
Revenues $ 9,751 $ 3,791
Cost of Sales (8,087) (3,355)
Selling, General & Administrative Expenses (529) (369)
------- -------
Operating Earnings $ 1,135 $ 67
======= =======
Units Closed 36 11
======= =======
Gross Margin Per Unit $ 46 $ 40
======= =======
For the Nine Months Ended
December 31,
-------------------------
2000 1999
-------- --------
Revenues $ 21,450 $ 9,781
Cost of Sales (18,228) (8,500)
Selling, General & Administrative Expenses (1,502) (1,088)
-------- --------
Operating Earnings $ 1,720 $ 193
======== ========
Units Closed 85 30
======== ========
Gross Margin Per Unit $ 38 $ 43
======== ========
During the three and nine months ended December 31, 2000 and 1999,
revenues resulted from sales of single-family homes in New Jersey.
-45-
49
COMMERCIAL DEVELOPMENT
The following summarizes Commercial Development's results for the three
and nine months ended December 31, 2000, compared to the same periods last year
(dollars and square feet in thousands):
For the Three Months Ended
December 31,
--------------------------
2000 1999
-------- --------
Sales Revenues $ 17,383 $ 1,901
Rental Income 2,791 1,692
Cost of Sales (14,833) (1,683)
Selling, General & Administrative Expenses (1,897) (974)
Interest (1,112) (740)
-------- --------
Operating Earnings $ 2,332 $ 196
======== ========
Operating Square Feet 1,512 956
======== ========
For the Nine Months Ended
December 31,
-------------------------
2000 1999
-------- --------
Sales Revenues $ 17,383 $ 3,765
Rental Income 7,709 3,412
Cost of Sales (14,833) (3,065)
Selling, General & Administrative Expenses (4,832) (1,881)
Interest (3,137) (1,471)
-------- --------
Operating Earnings $ 2,290 $ 760
======== ========
Operating Square Feet 1,512 956
======== ========
During the three and nine months ended December 31, 2000, respectively,
construction was completed on 397,000 and 564,000 square feet of office and
industrial space. At December 31, 2000, the Company owned, either directly or
through interests in joint ventures, 1,512,000 square feet of office and
industrial space in California, Texas, Florida, North Carolina and
Massachusetts. As of December 31, 2000, the occupancy level averaged 92%. The
rental income from these properties increased during the three and nine months
ended December 31, 2000, compared to the same period last year due to the
addition of 565,000 square feet of operating properties. Sales revenues for the
three and nine months ended December 31, 2000 and December 31, 1999 consisted of
the sale of land in Texas and California.
-46-
50
MULTI-FAMILY DEVELOPMENT
The following summarizes Multi-Family Development's results for the
three and nine months ended December 31, 2000, compared to the same periods last
year (dollars in thousands):
For the Three Months Ended
December 31,
--------------------------
2000 1999
----- -----
Revenues $ 654 $ --
Selling, General & Administrative Expenses (574) (475)
Interest -- (4)
----- -----
Operating Earnings (Loss) $ 80 $(479)
===== =====
For the Nine Months Ended
December 31,
-------------------------
2000 1999
-------- --------
Revenues $ 1,662 $ 17,154
Cost of Sales -- (17,049)
Selling, General & Administrative Expenses (1,605) (1,505)
Interest -- (19)
-------- --------
Operating Earnings (Loss) $ 57 $ (1,419)
======== ========
During the nine months ended December 31, 2000, a Multi-Family
Development joint venture closed on the sale of a 182-unit apartment complex in
College Station, Texas and received an earn-out payment related to the 1999 sale
of an apartment community located in The Colony, Texas.
LAND SALES
The following summarizes Land Sales' results for the three and nine
months ended December 31, 2000, compared to the same periods last year (dollars
in thousands):
For the Three Months Ended
December 31,
--------------------------
2000 1999
----- -----
Sales Revenues $ -- $ 670
Other Revenues 234 98
Cost of Sales -- (539)
Selling, General & Administrative Expenses (170) (125)
----- -----
Operating Earnings $ 64 $ 104
===== =====
-47-
51
For the Nine Months Ended
December 31,
-------------------------
2000 1999
------- -------
Sales Revenues $ -- $ 6,416
Other Revenues 493 332
Cost of Sales -- (5,943)
Selling, General & Administrative Expenses (480) (375)
------- -------
Operating Earnings $ 13 $ 430
======= =======
Other Revenues for the three and nine months ended December 31, 2000
included $86,000 and $231,000 of earnings in joint ventures, respectively, and
$148,000 and $262,000 in interest income, respectively. Sales for the three
months ended December 31, 1999 included the sale of certain residential lots in
Florida, Texas and New Jersey to Centex Homes and the sale of certain land in
Texas. Sales for the nine months ended December 31, 1999 comprised lot sales to
Centex Homes in Florida, Texas and New Jersey totaling $5.0 million, plus the
sale of 5 acres of commercial property in Texas.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended December 31, 2000, 3,327 Class C Preferred
Partnership Units were issued in exchange for assets with a fair market value of
$3.3 million. Also during the nine months ended December 31, 2000, the Companies
funded $35.5 million of construction costs with its interim construction
facilities and closed a $3.7 million permanent loan.
Development operations are not anticipated to provide a significant
source of earnings or liquidity for the Companies for the next 12 to 18 months.
As a result, the revenues, earnings and liquidity of the Companies will continue
to be largely dependent on the sale of single-family homes, land sales, and the
sale or permanent financing of development projects. The Companies believe that
the cash flows from these sources will be sufficient to provide the necessary
funding for current and future needs.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this report on Form 10-Q contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may be
identified by the context of the statement and generally arise when the
Companies are discussing their beliefs, estimates or expectations. These
statements are not guarantees of future performance and involve a number of
risks and uncertainties. Actual results and outcomes may differ materially from
what is expressed or forecast in such forward-looking statements. The principal
risks and uncertainties that may affect the Companies' actual performance and
results of operations include the following: general economic conditions and
interest rates; the cyclical and
-48-
52
seasonal nature of the Companies' business; changes in property taxes; changes
in federal income tax laws; governmental regulation; changes in governmental and
public policy; changes in economic conditions specific to any one or more of the
Companies' markets and businesses; competition; availability of raw materials;
and unexpected operations difficulties. Other risks and uncertainties may also
affect the outcome of the Companies' actual performance and results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Companies' market risk from
March 31, 2000. For more information regarding the Companies' market risk, refer
to the Companies' Annual Report on Form 10-K for the fiscal year ended March 31,
2000.
-49-
53
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
None
(2) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter ended
December 31, 2000.
-50-
54
SIGNATURES
Pursuant to the requirements 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
February 13, 2001 /s/ Stephen M. Weinberg
--------------------------------------
Stephen M. Weinberg
Director and President
(principal executive officer)
February 13, 2001 /s/ Todd D. Newman
--------------------------------------
Todd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial officer and
chief accounting officer)
-51-
55
SIGNATURES
Pursuant to the requirements 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
February 13, 2001 /s/ Stephen M. Weinberg
--------------------------------------
Stephen M. Weinberg
Director and President
(principal executive officer)
February 13, 2001 /s/ Todd D. Newman
--------------------------------------
Todd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial officer and
chief accounting officer)
-52-