##### Table of Contents



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 Quarterly Period Ended June 30, 2003 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 CorporationCentex 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 August 8, 2003: Centex Corporation
    
    Common Stock
    
    
    
    
    
    61,757,886 shares3333 Holding Corporation
    
    Common Stock
    
    
    
    
    
    1,000 sharesCentex Development Company, L.P.
    
    Class A Units of Limited Partnership Interest
    
    
    
    
    
    32,260 unitsCentex Development Company, L.P.
    
    Class C Units of Limited Partnership Interest
    
    
    
    
    
    208,330 units




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TABLE OF CONTENTS  Part I. Financial InformationItem 1. Financial StatementsStatements of Consolidated EarningsConsolidated Balance Sheets with Consolidating DetailsConsolidated Balance Sheets with Consolidating DetailsStatements of Consolidated Cash Flows with Consolidating DetailsStatements of Consolidated Cash Flows with Consolidating DetailsNotes to Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 6. Exhibits and Reports on Form 8-KSignaturesPart I. Financial InformationItem 1. Financial StatementsCondensed Combining Statements of OperationsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 6. Exhibits and Reports on Form 8-KSignaturesEXHIBIT INDEXEX-3.2 Amended and Restated By-LawsEX-4.3.2 Second Supplement to Nominee AgreementEX-10.1 Amended/Restated 1987 Stock Option PlanEX-10.2 Seventh Amended/Restated 1998 Stock PlanEX-10.3 Amended/Restated 2001 Stock Option PlanEX-10.10 Amended/Restated Long Term Incentive PlanEX-10.13 2003 Annual Incentive Compensation PlanEX-10.14 2003 Equity Incentive PlanEX-10.15 Distribution AgreementEX-10.16 Administrative Services AgreementEX-10.17 Tax Sharing AgreementEX-10.18 Agreement to Assign Trademark RightsEX-10.19 Amendment No. 1 to Distribution AgreementEX-31.1 Certification of CEO - Rule 13a-14(a)EX-31.2 Certification of CFO - Rule 13a-14(a)EX-31.3 Certification of CEO - Rule 13a-14(a)EX-31.4 Certification of CFO - Rule 13a-14(a)EX-31.5 Certification of CEO - Rule 13a-14(a)EX-31.6 Certification of CFO - Rule 13a-14(a)EX-32.1 Certification of CEO - Section 906EX-32.2 Certification of CFO - Section 906EX-32.3 Certification of CEO - Section 906EX-32.4 Certification of CFO - Section 906EX-32.5 Certification of CEO - Section 906EX-32.6 Certification of CFO - Section 906    Table of Contents  Centex Corporation and Subsidiaries
3333 Holding Corporation and Subsidiary
Centex Development Company, L.P. and Subsidiaries Form 10-Q Table of Contents June 30, 2003 Centex Corporation and Subsidiaries PagePart I
    
    Financial InformationItem 1.
    
    Financial StatementsStatements of Consolidated Earnings
    
    
    1Consolidated Balance Sheets with Consolidating Details
    
    
    2Statements of Consolidated Cash Flows with Consolidating Details
    
    
    4Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of    Operations
    
    
    26Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    47Item 4.
    
    Controls and Procedures
    
    
    47Part II
    
    Other InformationItem 6.
    
    Exhibits and Reports on Form 8-K
    
    
    48Signatures
    
    
    
    
    
    
    
    
    50
 i




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##### Table of Contents



3333 Holding Corporation and Subsidiary
Centex Development Company, L.P. and Subsidiaries PagePart I
    
    Financial InformationItem 1.
    
    Financial StatementsCondensed Combining Statements of Operations
    
    
    51Condensed Combining Balance Sheets
    
    
    52Condensed Combining Statements of Cash Flows
    
    
    53Notes to Condensed Combining Financial Statements
    
    
    54Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of    Operations
    
    
    61Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    68Item 4.
    
    Controls and Procedures
    
    
    68Part II
    
    Other InformationItem 6.
    
    Exhibits and Reports on Form 8-K
    
    
    68Signatures
    
    
    
    
    
    
    
    
    70
 ii




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##### Table of Contents



Part I. Financial Information 
 Item 1. Financial Statements 
 Centex Corporation and Subsidiaries
Statements of Consolidated Earnings
(Dollars in thousands, except per share data)
(unaudited) For the Three Months Ended June 30,2003
    
    
    2002RevenuesHome Building
    
    $
    1,504,493
    
    
    $
    1,105,515Financial Services
    
    
    266,860
    
    
    
    180,540Construction Products
    
    
    144,089
    
    
    
    128,775Construction Services
    
    
    375,755
    
    
    
    360,721Investment Real Estate
    
    
    2,745
    
    
    
    6,643Other
    
    
    22,776
    
    
    
    29,2192,316,718
    
    
    
    1,811,413Costs and ExpensesHome Building
    
    
    1,349,041
    
    
    
    1,005,452Financial Services
    
    
    201,261
    
    
    
    156,234Construction Products
    
    
    121,210
    
    
    
    101,043Construction Services
    
    
    371,196
    
    
    
    352,641Investment Real Estate
    
    
    1,990
    
    
    
    2,548Other
    
    
    24,349
    
    
    
    31,424Corporate General and Administrative
    
    
    19,232
    
    
    
    12,634Interest Expense
    
    
    16,964
    
    
    
    15,334Minority Interest
    
    
    7,485
    
    
    
    8,8822,112,728
    
    
    
    1,686,192Earnings (Loss) from Unconsolidated Entities
    
    
    5,080
    
    
    
    (495
    )Earnings from Continuing Operations Before Income Taxes
    
    
    209,070
    
    
    
    124,726Income Taxes
    
    
    66,736
    
    
    
    37,456Earnings from Continuing Operations
    
    
    142,334
    
    
    
    87,270Earnings
from Discontinued Operations, net of Taxes of $246 and $261
    
    
    456
    
    
    
    485Net Earnings
    
    $
    142,790
    
    
    $
    87,755Basic Earnings Per ShareContinuing Operations
    
    $
    2.32
    
    
    $
    1.42Discontinued Operations
    
    
    0.01
    
    
    
    0.01$
    2.33
    
    
    $
    1.43Diluted Earnings Per ShareContinuing Operations
    
    $
    2.22
    
    
    $
    1.37Discontinued Operations
    
    
    0.01
    
    
    
    0.01$
    2.23
    
    
    $
    1.38Average Shares OutstandingBasic
    
    
    61,245,265
    
    
    
    61,168,777Dilutive Securities:Options
    
    
    2,522,463
    
    
    
    1,998,229Other
    
    
    165,118
    
    
    
    430,110Diluted
    
    
    63,932,846
    
    
    
    63,597,116Cash Dividends Per Share
    
    $
    0.04
    
    
    $
    0.04
 See Notes to Consolidated Financial Statements. 1




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##### Table of Contents








Centex Corporation and Subsidiaries
Consolidated Balance Sheets with Consolidating Details
(Dollars in thousands)

Centex Corporation and SubsidiariesJune 30, 2003*
    
    
    March 31, 2003AssetsCash and Cash Equivalents
    
    $
    111,025
    
    
    $
    469,778Restricted Cash
    
    
    214,442
    
    
    
    172,321Receivables -Residential Mortgage Loans Held for Investment, net
    
    
    5,105,695
    
    
    
    4,642,826Residential Mortgage Loans Held for Sale
    
    
    347,012
    
    
    
    303,328Construction Contracts
    
    
    287,560
    
    
    
    251,024Trade, including Notes of $66,478 and $31,315
    
    
    439,018
    
    
    
    406,008Inventories -Housing Projects
    
    
    3,599,916
    
    
    
    3,306,655Land Held for Development and Sale
    
    
    102,212
    
    
    
    106,057Land Held Under Option Agreements not Owned
    
    
    50,092
    
    
    
    Construction Products
    
    
    54,894
    
    
    
    58,254Other
    
    
    16,041
    
    
    
    15,278Investments -Centex Development Company, L.P.
    
    
    296,903
    
    
    
    281,100Joint Ventures and Other
    
    
    118,397
    
    
    
    102,277Unconsolidated Subsidiaries
    
    
    
    
    
    
    Property and Equipment, net
    
    
    672,955
    
    
    
    681,165Other Assets -Deferred Income Taxes
    
    
    58,195
    
    
    
    52,929Goodwill
    
    
    303,800
    
    
    
    304,780Mortgage Securitization Residual Interest
    
    
    104,917
    
    
    
    108,102Deferred Charges and Other, net
    
    
    205,359
    
    
    
    238,290Assets of Discontinued Operations
    
    
    10,704
    
    
    
    110,364$
    12,099,137
    
    
    $
    11,610,536Liabilities and Stockholders EquityAccounts Payable
    
    $
    619,055
    
    
    $
    630,118Accrued Liabilities
    
    
    938,558
    
    
    
    1,028,211Debt -Centex
    
    
    2,083,960
    
    
    
    2,105,880Financial Services
    
    
    5,483,846
    
    
    
    4,998,819Payables to Affiliates
    
    
    
    
    
    
    Liabilities of Discontinued Operations
    
    
    910
    
    
    
    19,435Minority Interests
    
    
    224,237
    
    
    
    170,227Stockholders Equity -Preferred Stock: Authorized 5,000,000 Shares, None Issued
    
    
    
    
    
    
    Common Stock: $.25 Par Value; Authorized 100,000,000Shares; Outstanding 61,887,222 and 60,836,091 Shares, Respectively
    
    
    15,746
    
    
    
    15,483Capital in Excess of Par Value
    
    
    161,258
    
    
    
    98,711Unamortized Value of Deferred Compensation
    
    
    (31,337
    )
    
    
    (2,398
    )Retained Earnings
    
    
    2,644,436
    
    
    
    2,597,078Treasury Stock, at Cost; 1,095,648 and 1,096,844 Shares, Respectively
    
    
    (45,011
    )
    
    
    (45,037
    )Accumulated Other Comprehensive Income (Loss)
    
    
    3,479
    
    
    
    (5,991
    )Total Stockholders Equity
    
    
    2,748,571
    
    
    
    2,657,846$
    12,099,137
    
    
    $
    11,610,536


See Notes to Consolidated Financial Statements.
*Unaudited

2



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##### Table of Contents



Centex Corporation and Subsidiaries
Consolidated Balance Sheets with Consolidating Details
(Dollars in thousands) Centex**
    
    
    Financial ServicesJune 30, 2003*
    
    
    March 31, 2003
    
    
    June 30, 2003*
    
    
    March 31, 2003$
    99,541
    
    
    $
    454,696
    
    
    $
    11,484
    
    
    $
    15,08236,218
    
    
    
    8,349
    
    
    
    178,224
    
    
    
    163,972
    
    
    
    
    
    
    
    5,105,695
    
    
    
    4,642,826
    
    
    
    
    
    
    
    347,012
    
    
    
    303,328287,560
    
    
    
    251,024
    
    
    
    
    
    
    
    228,626
    
    
    
    207,704
    
    
    
    210,392
    
    
    
    198,3043,599,916
    
    
    
    3,306,655
    
    
    
    
    
    
    
    102,212
    
    
    
    106,057
    
    
    
    
    
    
    
    50,092
    
    
    
    
    
    
    
    
    
    
    
    54,894
    
    
    
    58,254
    
    
    
    
    
    
    
    5,936
    
    
    
    6,832
    
    
    
    10,105
    
    
    
    8,446296,903
    
    
    
    281,100
    
    
    
    
    
    
    
    118,397
    
    
    
    102,277
    
    
    
    
    
    
    
    455,183
    
    
    
    405,407
    
    
    
    
    
    
    
    630,315
    
    
    
    639,069
    
    
    
    42,640
    
    
    
    42,096(33,816
    )
    
    
    (36,534
    )
    
    
    92,011
    
    
    
    89,463287,198
    
    
    
    287,725
    
    
    
    16,602
    
    
    
    17,055
    
    
    
    
    
    
    
    104,917
    
    
    
    108,102117,634
    
    
    
    156,650
    
    
    
    87,725
    
    
    
    81,64010,704
    
    
    
    110,364
    
    
    
    
    
    
    
    $
    6,347,513
    
    
    $
    6,345,629
    
    
    $
    6,206,807
    
    
    $
    5,670,314$
    571,129
    
    
    $
    589,530
    
    
    $
    47,926
    
    
    $
    264,352720,635
    
    
    
    804,447
    
    
    
    217,923
    
    
    
    2,083,960
    
    
    
    2,105,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,483,846
    
    
    
    4,998,819
    
    
    
    
    
    
    
    35,882
    
    
    
    25,736910
    
    
    
    19,435
    
    
    
    
    
    
    
    222,308
    
    
    
    168,491
    
    
    
    1,929
    
    
    
    1,736
    
    
    
    
    
    
    
    
    
    
    
    15,746
    
    
    
    15,483
    
    
    
    1
    
    
    
    1161,258
    
    
    
    98,711
    
    
    
    200,467
    
    
    
    200,467(31,337
    )
    
    
    (2,398
    )
    
    
    
    
    
    
    2,644,436
    
    
    
    2,597,078
    
    
    
    239,332
    
    
    
    198,145(45,011
    )
    
    
    (45,037
    )
    
    
    
    
    
    
    3,479
    
    
    
    (5,991
    )
    
    
    (20,499
    )
    
    
    (18,942
    )2,748,571
    
    
    
    2,657,846
    
    
    
    419,301
    
    
    
    379,671$
    6,347,513
    
    
    $
    6,345,629
    
    
    $
    6,206,807
    
    
    $
    5,670,314
    **
 
 In the supplemental data presented above, Centex represents the
consolidation of all subsidiaries other than those included in Financial
Services. Transactions between Centex and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries balance sheets. 3




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##### Table of Contents



Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
(Dollars in thousands)
(unaudited) Centex Corporation and SubsidiariesFor the Three Months Ended June 30,2003
    
    
    2002Cash Flows  Operating ActivitiesNet Earnings from Continuing Operations
    
    $
    142,334
    
    
    $
    87,270Adjustments-Depreciation, Depletion and Amortization
    
    
    29,961
    
    
    
    23,726Provision for Losses on Residential Mortgage Loans Held for Investment
    
    
    15,762
    
    
    
    7,043Deferred Income Tax (Benefit) Provision
    
    
    (6,255
    )
    
    
    (5,133
    )Equity
in (Earnings) Loss of Centex Development Company, L.P. and Joint Ventures
    
    
    (4,352
    )
    
    
    25Equity in Earnings of Unconsolidated Subsidiaries
    
    
    
    
    
    
    Minority Interest, net of Taxes
    
    
    4,978
    
    
    
    5,907Changes in Assets and Liabilities, Excluding Effect of AcquisitionsIncrease in Restricted Cash
    
    
    (42,121
    )
    
    
    (13,008
    )Increase in Receivables
    
    
    (69,546
    )
    
    
    (40,708
    )(Increase) Decrease in Residential Mortgage Loans Held for Sale
    
    
    (43,684
    )
    
    
    34,777Increase in Housing Projects and Land Held for Development
and Sale Inventories
    
    
    (294,622
    )
    
    
    (338,541
    )Decrease (Increase) in Construction Products and Other Inventories
    
    
    2,562
    
    
    
    (7,012
    )(Decrease) Increase in Accounts Payable and Accrued Liabilities
    
    
    (110,650
    )
    
    
    (78,071
    )Decrease (Increase) in Other Assets, net
    
    
    31,944
    
    
    
    12,892Increase (Decrease) in Payables to Affiliates
    
    
    
    
    
    
    Other
    
    
    3,494
    
    
    
    7,646(340,195
    )
    
    
    (303,187
    )Cash Flows  Investing ActivitiesIncrease in Residential Mortgage Loans Held for Investment
    
    
    (478,631
    )
    
    
    (252,645
    )Increase in Investment and Advances to Centex
Development Company, L.P. and Joint Ventures
    
    
    (16,098
    )
    
    
    (15,850
    )(Increase)
Decrease in Investment and Advances to Unconsolidated Subsidiaries
    
    
    
    
    
    
    Purchases of Property and Equipment, net
    
    
    (10,109
    )
    
    
    (27,661
    )Discontinued Operations
    
    
    (11,369
    )
    
    
    (653
    )(516,207
    )
    
    
    (296,809
    )Cash Flows  Financing ActivitiesIncrease
(Decrease) in Short-Term Debt, net
    
    
    76,833
    
    
    
    624,363CentexIssuance of Long-Term Debt
    
    
    6,626
    
    
    
    30,256Repayment of Long-Term Debt
    
    
    (3,289
    )
    
    
    (37,882
    )Financial ServicesIssuance of Long-Term Debt
    
    
    1,309,791
    
    
    
    30,949Repayment of Long-Term Debt
    
    
    (926,854
    )
    
    
    (209,951
    )Proceeds from Stock Option Exercises
    
    
    36,988
    
    
    
    2,515Treasury Stock, net
    
    
    26
    
    
    
    (4,983
    )Dividends Paid
    
    
    (2,472
    )
    
    
    (2,463
    )497,649
    
    
    
    432,804Net Decrease in Cash and Cash Equivalents
    
    
    (358,753
    )
    
    
    (167,192
    )Cash and Cash Equivalents at Beginning of Period
    
    
    469,778
    
    
    
    218,869Cash and Cash Equivalents at End of Period
    
    $
    111,025
    
    
    $
    51,677
 See Notes to Consolidated Financial Statements. 4




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##### Table of Contents



Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
(Dollars in thousands)
(unaudited) Centex **
    
    
    Financial ServicesFor the Three Months Ended June 30,
    
    
    For the Three Months Ended June 30,2003
    
    
    2002
    
    
    2003
    
    
    2002$
    142,334
    
    
    $
    87,270
    
    
    $
    41,187
    
    
    $
    22,95125,422
    
    
    
    19,622
    
    
    
    4,539
    
    
    
    4,104
    
    
    
    
    
    
    
    15,762
    
    
    
    7,043(6,255
    )
    
    
    (5,133
    )
    
    
    (1,795
    )
    
    
    189(4,352
    )
    
    
    25
    
    
    
    
    
    
    
    (41,187
    )
    
    
    (22,951
    )
    
    
    
    
    
    
    4,978
    
    
    
    5,907
    
    
    
    
    
    
    
    (27,869
    )
    
    
    (8,381
    )
    
    
    (14,252
    )
    
    
    (4,627
    )(57,458
    )
    
    
    (12,044
    )
    
    
    (12,088
    )
    
    
    (28,664
    )
    
    
    
    
    
    
    
    (43,684
    )
    
    
    34,777(294,622
    )
    
    
    (338,541
    )
    
    
    
    
    
    
    4,221
    
    
    
    (7,729
    )
    
    
    (1,659
    )
    
    
    (9,858
    )(112,147
    )
    
    
    (81,559
    )
    
    
    (60
    )
    
    
    56937,520
    
    
    
    (3,264
    )
    
    
    (3,781
    )
    
    
    12,744
    
    
    
    
    
    
    
    10,146
    
    
    
    (126,023
    )3,301
    
    
    
    7,895
    
    
    
    193
    
    
    
    (249
    )(326,114
    )
    
    
    (358,883
    )
    
    
    (5,492
    )
    
    
    (87,044
    )
    
    
    
    
    
    
    
    (478,631
    )
    
    
    (242,070
    )(16,098
    )
    
    
    (15,850
    )
    
    
    
    
    
    
    (8,589
    )
    
    
    132,165
    
    
    
    
    
    
    
    (5,607
    )
    
    
    (30,451
    )
    
    
    (4,502
    )
    
    
    2,790(11,369
    )
    
    
    (653
    )
    
    
    
    
    
    
    (41,663
    )
    
    
    85,211
    
    
    
    (483,133
    )
    
    
    (239,280
    )(25,257
    )
    
    
    125,744
    
    
    
    102,090
    
    
    
    498,6196,626
    
    
    
    30,256
    
    
    
    
    
    
    
    (3,289
    )
    
    
    (37,882
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,309,791
    
    
    
    30,949
    
    
    
    
    
    
    
    (926,854
    )
    
    
    (209,951
    )36,988
    
    
    
    2,515
    
    
    
    
    
    
    
    26
    
    
    
    (4,983
    )
    
    
    
    
    
    
    (2,472
    )
    
    
    (2,463
    )
    
    
    
    
    
    
    12,622
    
    
    
    113,187
    
    
    
    485,027
    
    
    
    319,617(355,155
    )
    
    
    (160,485
    )
    
    
    (3,598
    )
    
    
    (6,707
    )454,696
    
    
    
    191,744
    
    
    
    15,082
    
    
    
    27,125$
    99,541
    
    
    $
    31,259
    
    
    $
    11,484
    
    
    $
    20,418
  **
 
 In the supplemental data presented above, Centex represents the
consolidation of all subsidiaries other than those included in Financial
Services. Transactions between Centex and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries statements of cash
flows. 5




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##### Table of Contents



Centex Corporation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars and shares in thousands, except per share data)
(unaudited) (A) BASIS OF PRESENTATION The consolidated interim financial statements include the accounts of
Centex Corporation and subsidiaries (the Company) after elimination of all
significant intercompany balances and transactions. The statements have been
prepared, without audit, in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted. In the opinion of the Company, all adjustments (consisting of normal,
recurring adjustments) necessary to present fairly the information in the
consolidated financial statements of the Company have been included. The
results of operations for such interim periods are not necessarily indicative
of results for the full year. The Company suggests that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes to consolidated financial statements included in the
Companys latest Annual Report on Form 10-K. (B) STATEMENTS OF CONSOLIDATED CASH FLOWS  SUPPLEMENTAL DISCLOSURES The following table provides supplemental disclosures related to the
Statements of Consolidated Cash Flows: For the Three MonthsEnded June 30,2003
    
    
    2002Cash Paid for Interest
    
    $
    71,192
    
    
    $
    68,242Net Cash Paid for Taxes
    
    $
    46,162
    
    
    $
    37,131
 Interest expense relating to the Financial Services segment is included in
its cost of sales. Interest expense related to segments other than Financial
Services is included as a separate line item in the Statements of Consolidated
Earnings. The Company capitalizes a portion of interest incurred as a component
of housing projects inventory cost. The relief of capitalized interest is
included in Home Buildings cost of sales. Capitalized interest relieved was
$13.2 million and $8.3 million for the three months ended June 30, 2003 and
2002, respectively. 6




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##### Table of Contents



For the Three MonthsEnded June 30,2003
    
    
    2002Total Interest Incurred
    
    $
    88,307
    
    
    $
    78,532Interest Capitalized
    
    
    (20,315
    )
    
    
    (18,551
    )Less  Financial Services
    
    
    (51,028
    )
    
    
    (44,647
    )Interest Expense, net
    
    $
    16,964
    
    
    $
    15,334
 (C) STOCK-BASED EMPLOYEE COMPENSATION ARRANGEMENTS On April 1, 2003, the Company adopted the fair value measurement
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS No. 123), under which the Company
recognizes compensation expense of a stock option award to an employee over the
vesting period based on the fair value of the award on the grant date. The
fair value method has been applied only to awards granted or modified on or
after April 1, 2003 (the prospective method), whereas awards granted prior to
such date will continue to be accounted for in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB No. 25), and related interpretations. In May 2003, the Company granted approximately 1.4 million options to
employees. The fair value of such options is $35.1 million, as calculated
under the Black-Scholes option-pricing model, which will be recognized as
compensation expense over the vesting period. Compensation expense of $2.9
million related to these stock options was recognized during the three month
period ended June 30, 2003. The following pro forma information reflects the Companys net earnings
and earnings per share had compensation cost for all stock option plans and
other equity-based compensation programs been determined based upon the fair
value at the date of grant for awards outstanding during the three months ended June 30,
2003 and 2002, consistent with the provisions of SFAS No. 123. For the Three MonthsEnded June 30,2003
    
    
    2002Net Earnings  as Reported
    
    $
    142,790
    
    
    $
    87,755Stock-Based Employee Compensation Expense Included
in Reported Net Income, net of Related Tax Effects
    
    
    3,585
    
    
    
    1,627Total Stock-Based Employee Compensation Expense
Determined Under Fair Value Based Method, net of
Related Tax Effects
    
    
    (8,205
    )
    
    
    (7,376
    )Pro Forma Net Earnings
    
    $
    138,170
    
    
    $
    82,006Earnings Per Share:Basic  as Reported
    
    $
    2.33
    
    
    $
    1.43Basic  Pro Forma
    
    $
    2.26
    
    
    $
    1.34Diluted  as Reported
    
    $
    2.23
    
    
    $
    1.38Diluted  Pro Forma
    
    $
    2.17
    
    
    $
    1.29
 7




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##### Table of Contents



(D) STOCKHOLDERS EQUITY A summary of changes in stockholders equity is presented below: Unamortized
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon Stock
    
    
    Capital in
    
    
    Value of
    
    
    
    
    
    
    Treasury
    
    
    OtherExcess of
    
    
    Deferred
    
    
    Retained
    
    
    Stock at
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Par Value
    
    
    Compensation
    
    
    Earnings
    
    
    Cost
    
    
    (Loss) Income
    
    
    TotalBalance, March 31, 2003
    
    
    60,836
    
    
    $
    15,483
    
    
    $
    98,711
    
    
    $
    (2,398
    )
    
    $
    2,597,078
    
    
    $
    (45,037
    )
    
    $
    (5,991
    )
    
    $
    2,657,846Issuance of Stock
Compensation
    
    
    57
    
    
    
    14
    
    
    
    31,541
    
    
    
    (31,555
    )
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    26Amortization of
Stock Compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,616
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,616Exercise of Stock Options,
Including Tax Benefits
    
    
    594
    
    
    
    149
    
    
    
    26,106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,255Stock Option Expense
    
    
    
    
    
    
    
    
    
    
    2,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,900Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,472
    )
    
    
    
    
    
    
    
    
    
    
    (2,472
    )Exercise of Convertible Debenture
    
    
    400
    
    
    
    100
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,100Cavco Spin-off
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,960
    )
    
    
    
    
    
    
    
    
    
    
    (92,960
    )Net Earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,790
    
    
    
    
    
    
    
    
    
    
    
    142,790Unrealized Loss on HedgingInstruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,252
    )
    
    
    (1,252
    )Foreign Currency TranslationAdjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,720
    
    
    
    10,720Other Comprehensive Income Items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Balance, June 30, 2003
    
    
    61,887
    
    
    $
    15,746
    
    
    $
    161,258
    
    
    $
    (31,337
    )
    
    $
    2,644,436
    
    
    $
    (45,011
    )
    
    $
    3,479
    
    
    $
    2,748,571
 (E) RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT Residential mortgage loans held for investment, including real estate
owned, consisted of the following: June 30, 2003
    
    
    March 31, 2003Residential Mortgage Loans Held for Investment
    
    $
    5,139,756
    
    
    $
    4,671,210Allowance for Losses on Residential Mortgage Loans
Held for Investment
    
    
    (34,061
    )
    
    
    (28,384
    )Residential Mortgage Loans Held for Investment,
net of Allowance for Losses
    
    $
    5,105,695
    
    
    $
    4,642,826
 8




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##### Table of Contents



Changes in the allowance for losses on residential mortgage loans held for
investment were as follows: For the Three MonthsEnded June 30,2003
    
    
    2002Balance at Beginning of Period
    
    $
    28,384
    
    
    $
    14,106Provision for Losses
    
    
    15,762
    
    
    
    7,043Recoveries on Loans Charged Off
    
    
    76
    
    
    
    18Losses Sustained
    
    
    (10,161
    )
    
    
    (3,847
    )Balance at End of Period
    
    $
    34,061
    
    
    $
    17,320Allowance as a Percentage of Gross
Loans Held for Investment
    
    
    0.7
    %
    
    
    0.5
    %Allowance as a Percentage of 90+ Days
Contractual Delinquency
    
    
    25.1
    %
    
    
    19.8
    %90+ Days Contractual DelinquencyTotal
Dollars Delinquent
    
    $
    135,651
    
    
    $
    87,304% Delinquent
    
    
    2.6
    %
    
    
    2.5
    %
 (F) GOODWILL A summary of changes in goodwill by segment for the three months ended
June 30, 2003 is presented below: Home
    
    
    Financial
    
    
    Construction
    
    
    ConstructionBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Other
    
    
    TotalBalance as of March 31, 2003
    
    $
    123,011
    
    
    $
    17,055
    
    
    $
    40,290
    
    
    $
    1,007
    
    
    $
    123,417
    
    
    $
    304,780Other, net
    
    
    
    
    
    
    (453
    )
    
    
    
    
    
    
    
    
    
    
    (527
    )
    
    
    (980
    )Balance as of June 30, 2003
    
    $
    123,011
    
    
    $
    16,602
    
    
    $
    40,290
    
    
    $
    1,007
    
    
    $
    122,890
    
    
    $
    303,800
 Goodwill for the Other segment at June 30, 2003 includes $71.5 million
related to the Companys home services operations and $51.4 million related to
the Companys investment in Construction Products. Included in Assets of
Discontinued Operations at March 31, 2003 is $67.3 million of goodwill related
to manufactured housing. 9




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##### Table of Contents



(G) INDEBTEDNESS Short-term Debt Balances of short-term debt were: June 30, 2003
    
    
    March 31, 2003Financial
    
    
    
    
    
    
    FinancialCentex
    
    
    Services
    
    
    Centex
    
    
    ServicesFinancial Institutions
    
    $
    
    
    
    $
    269,506
    
    
    $
    25,257
    *
    
    $
    283,146Commercial Paper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secured Liquidity Notes
    
    
    
    
    
    
    674,813
    **
    
    
    
    
    
    
    559,083
    **$
    
    
    
    $
    944,319
    
    
    $
    25,257
    
    
    $
    842,229Consolidated Short-term Debt
    
    
    
    
    $944,319
    
    
    
    
    
    
    
    $867,486
 * Debt relates entirely to Construction Products.
** Debt relates entirely to Harwood Street Funding II, L.L.C. The Company borrows on a short-term basis from banks under uncommitted
lines that bear interest at prevailing market rates. The weighted-average
interest rates of balances outstanding at June 30, 2003 and March 31, 2003 were
1.5% and 1.6%, respectively. Long-term Debt Balances of long-term debt and weighted-average interest rates at June 30,
2003 and March 31, 2003 were: June 30, 2003
    
    
    March 31, 2003CentexMedium-term Note Programs, due through 2007
    
    $
    281,000
    
    
    
    4.75
    %
    
    $
    281,000
    
    
    
    4.79
    %Long-term Notes, due through 2012
    
    
    1,508,170
    
    
    
    7.05
    %
    
    
    1,508,116
    
    
    
    7.05
    %Other Indebtedness, due through 2009
    
    
    95,173
    
    
    
    2.67
    %
    
    
    91,919
    
    
    
    2.81
    %Subordinated Debt:Subordinated Debentures, due in 2006
    
    
    99,906
    
    
    
    7.38
    %
    
    
    99,894
    
    
    
    7.38
    %Subordinated Debentures, due in 2007
    
    
    99,711
    
    
    
    8.75
    %
    
    
    99,694
    
    
    
    8.75
    %2,083,960
    
    
    
    
    
    
    
    2,080,623Financial ServicesHome Equity Loans Asset-Backed Certificates,
due through 2034
    
    
    4,464,527
    
    
    
    3.63
    %
    
    
    4,081,590
    
    
    
    3.67
    %Harwood Street Funding II, L.L.C. Variable
Rate Subordinated Notes, due through 2008
    
    
    75,000
    
    
    
    3.25
    %
    
    
    75,000
    
    
    
    3.38
    %4,539,527
    
    
    
    
    
    
    
    4,156,590Total
    
    $
    6,623,487
    
    
    
    
    
    
    $
    6,237,213
 10




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##### Table of Contents



The weighted-average interest rates for long-term debt during the three
months ended June 30, 2003 and 2002 were: For the Three MonthsEnded June 30,2003
    
    
    2002CentexMedium-term Note Programs
    
    
    5.31
    %
    
    
    5.37
    %Long-term Notes
    
    
    7.08
    %
    
    
    8.15
    %Other Indebtedness
    
    
    2.50
    %
    
    
    3.59
    %Subordinated Debentures
    
    
    8.07
    %
    
    
    8.07
    %Financial ServicesFinancial Services Long-Term Debt
    
    
    3.50
    %
    
    
    4.92
    %
 Maturities of Centex and Financial Services long-term debt during the next
five years ending March 31 are: FinancialCentex
    
    
    Services
    
    
    Total2004
    
    $
    25,475
    
    
    $
    926,518
    
    
    $
    951,9932005
    
    
    31,971
    
    
    
    1,040,844
    
    
    
    1,072,8152006
    
    
    403,310
    
    
    
    798,291
    
    
    
    1,201,6012007
    
    
    290,431
    
    
    
    689,442
    
    
    
    979,8732008
    
    
    359,091
    
    
    
    812,746
    
    
    
    1,171,837Thereafter
    
    
    973,682
    
    
    
    271,686
    
    
    
    1,245,368$
    2,083,960
    
    
    $
    4,539,527
    
    
    $
    6,623,487
 Financial Services debt related to securitized residential mortgage loans
structured as collateralized borrowings (Home Equity Loans Asset-Backed
Certificates) was $4.46 billion at June 30, 2003; the holders of such debt have
no recourse for non-payment to Centex Home Equity Company, L.L.C. (Home
Equity) or Centex Corporation. The principal and interest on these notes are
paid using the cash flow from the underlying residential mortgage loans, which
serve as collateral for the debt. Accordingly, the timing of the principal
payments on these notes is dependent upon the payments received on the
underlying residential mortgage loans. The expected maturities of this
component of long-term debt are based on contractual maturities adjusted for
projected repayments and prepayments of principal. As is common in these
structures, Home Equity remains liable for customary loan representations. Under the Companys debt covenants, Centex is required to maintain certain
leverage and interest coverage ratios and a minimum tangible net worth. At
June 30, 2003, the Company was in compliance with all of these covenants. 11




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##### Table of Contents



Credit Facilities The
Companys existing credit facilities and available borrowing capacity as of June
30, 2003 are summarized below: Existing Credit
    
    
    AvailableFacilities
    
    
    CapacityCentexCentex CorporationMulti-Bank Revolving Credit Facility
    
    $
    700,000
    
    
    $
    700,000
    (1)Uncommitted Bank Lines
    
    
    60,000
    
    
    
    60,000Construction ProductsSenior Revolving Credit Facility
    
    
    155,000
    
    
    
    87,817
    (2)915,000
    
    
    
    847,817Financial ServicesUnsecured Credit Facilities
    
    
    125,000
    
    
    
    70,800
    (3)Secured Credit Facilities
    
    
    415,000
    
    
    
    199,694
    (4)Harwood Street Funding II, L.L.C. Facility
    
    
    1,500,000
    
    
    
    750,1872,040,000
    
    
    
    1,020,681$
    2,955,000
    
    
    $
    1,868,498
    (5)
  (1)
 
 This is a committed, multi-bank revolving credit facility, maturing in
August 2005, which serves as backup for commercial paper borrowings. As
of June 30, 2003, there were no borrowings under this backup facility, and
the Companys $600 million commercial paper program had no issuance
outstanding. There have been no borrowings under this facility since
inception. See Note (S), Subsequent Events.  (2)
 
 This committed facility was entered into by Construction Products and has
no recourse to Centex Corporation. The Senior Revolving Credit Facility
matures in March 2006. Construction Products terminated its Annually
Renewable Commercial Paper Conduit in June 2003.  (3)
 
 Centex Corporation, CTX Mortgage Company, L.L.C. (CTX Mortgage) and
Home Equity, on a joint and several basis, share in a $125 million
uncommitted, unsecured credit facility.  (4)
 
 CTX Mortgage and Home Equity share in a $250 million committed secured
credit facility to finance mortgage inventory. CTX Mortgage also
maintains $155 million of committed secured mortgage warehouse facilities
to finance mortgages not sold to HSF-I. Home Equity also maintains a $10
million committed secured mortgage warehouse facility to finance
mortgages.  (5)
 
 The amount of available borrowing capacity includes $1.74 billion of committed
borrowings and $130.8 million of uncommitted borrowings as of June 30,
2003. Although the Company believes that the uncommitted capacity is
currently available, there can be no assurance that the lenders under the
applicable facilities would elect to make advances to the Company or its
subsidiaries if and when requested to do so. Home Equity finances its inventory of mortgage loans held for investment
through Harwood Street Funding II, L.L.C. (HSF-II), a wholly-owned,
consolidated entity, under a revolving sales agreement that expires upon final
payment of the senior and subordinated debt issued by HSF-II. This
arrangement, where HSF-II has committed to finance all eligible loans, gives
Home Equity daily access to HSF-IIs borrowing capacity of $1.50 billion. HSF-II obtains
funds through the sale of subordinated notes that are rated BBB by Standard &
Poors (S&P), Baa2 by Moodys Investors Service (Moodys) and BBB by Fitch
Ratings (Fitch) and short-term secured liquidity notes that are rated A1+ by
S&P, P1 by Moodys and F1+ by Fitch. Because HSF-II is a consolidated entity,
the debt, interest income and interest expense of HSF-II are reflected in the
financial statements of Financial Services. 12




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##### Table of Contents



Harwood Street Funding I, L.L.C. CTX Mortgage finances its inventory of mortgage loans held for sale
principally through sales of Jumbo A and conforming loans to Harwood Street
Funding I, L.L.C. (HSF-I), an unaffiliated entity established in 1999 that is
not consolidated with Financial Services or Centex at June 30, 2003, pursuant
to a mortgage loan purchase agreement (the HSF-I Purchase Agreement). Since
1999, CTX Mortgage has sold substantially all of the Jumbo A and conforming
mortgage loans that it originates to HSF-I in accordance with the HSF-I
Purchase Agreement. When HSF-I acquires these loans, it typically holds them
for a period averaging between 45 and 60 days and then resells them into the
secondary market. HSF-I obtains the funds needed to purchase eligible mortgage
loans from CTX Mortgage by issuing (1) securitized medium-term debt that is
currently rated AAA by S&P and Aaa by Moodys, (2) short-term secured liquidity
notes that are currently rated A1+ by S&P and P1 by Moodys and (3)
subordinated certificates maturing in September 2004, November 2005 and June
2006, extendable for up to five years, that are rated BBB by S&P and Baa2 by
Moodys. This arrangement provides CTX Mortgage with reduced financing cost
for eligible mortgage loans it originates and improves its liquidity. Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to
sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage
loans that satisfy certain eligibility criteria and portfolio requirements. At
June 30, 2003, the maximum amount of mortgage loans that HSF-I is allowed to
carry in its inventory under the HSF-I Purchase Agreement is limited to $3.00
billion. HSF-Is commitment to purchase eligible mortgage loans continues in effect
until the occurrence of certain termination events described in the HSF-I
Purchase Agreement. These termination events primarily relate to events of
default under, or other failure to comply with, the provisions, including loan
portfolio limitations, of the agreements that govern the mortgage loan
warehouse program but also include a downgrade in Centex Corporations credit
ratings below BB+ by S&P or Ba1 by Moodys. In the event CTX Mortgage was
unable to sell loans to HSF-I, it would draw on existing credit facilities
currently held in addition to HSF-I. In addition, it might need to make other
customary financing arrangements to fund its mortgage loan origination
activities. Although the Company believes that CTX Mortgage could arrange for
alternative financing that is common for non-investment grade mortgage
companies, there can be no assurance that such financing would be available on
satisfactory terms, and any delay in obtaining such financing could adversely
affect the results of operations of CTX Mortgage. In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as
servicer of the loans owned by HSF-I and arranges for the sale of the eligible
mortgage loans into the secondary market. In its capacity as servicer, CTX
Mortgage must act in the best interest of HSF-I so as to maximize the proceeds
of sales of eligible mortgage loans. The performance of obligations of CTX
Mortgage, in its capacity as servicer, is guaranteed by Centex. These servicer
obligations include repurchasing a mortgage loan from HSF-I in the event of a
breach of CTX Mortgages representations and warranties as the seller of the
mortgage loans, if such breach materially and adversely affects the value of
the mortgage loan and is not cured within 60 days. CTX Mortgage received $4.6
million and $2.3 million in fees for servicing loans owned by HSF-I for the
three months ended June 30, 2003 and 2002, respectively. HSF-I has entered into a swap arrangement with a bank (the Harwood Swap)
under which the bank has agreed to make certain payments to HSF-I, and HSF-I
has agreed to make certain payments to the bank, the net effect of which is
that the bank has agreed to bear certain interest rate risks, non-credit
related market risks and prepayment risks related to the mortgage loans held by
HSF-I. The purpose of this arrangement is to provide credit enhancement to
HSF-I by permitting it to hedge these risks with a counterparty having a 13




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short-term credit rating of A1+ from S&P and P1 from Moodys.
Additionally, the Company has entered into a separate swap arrangement with the
bank pursuant to which the Company has agreed to pay to the bank all amounts
that the bank is required to pay to HSF-I pursuant to the Harwood Swap plus a
monthly fee equal to a percentage of the notional amount of the Harwood Swap,
and the bank is required to pay to the Company all amounts that the bank
receives from HSF-I pursuant to the Harwood Swap. Accordingly, the Company
effectively bears all interest rate risks, non-credit related market risks and
prepayment risks that are the subject of the Harwood Swap. Financial Services
executes the forward sales of CTX Mortgages loans to hedge the risk of
reductions in value of mortgages sold to HSF-I or maintained under secured
financing agreements. This offsets most of the Companys risk as the
counterparty to the swap supporting the payment requirements of HSF-I. The
Company is also required to reimburse the bank for certain expenses, costs and
damages that it may incur. As of June 30, 2003, HSF-I owned $2.48 billion in securitized residential
mortgage loans sold to it by CTX Mortgage and had $2.34 billion of outstanding
securitized term debt and $0.14 billion of outstanding subordinated
certificates. The Company does not guarantee the payment of any debt or
subordinated certificates of HSF-I and is not liable for credit losses relating
to securitized residential mortgage loans sold to HSF-I. However, the Company
retains certain risks related to the portfolio of mortgage loans held by HSF-I.
In particular, CTX Mortgage makes representations and warranties to HSF-I to
the effect that each mortgage loan sold to HSF-I satisfies the eligibility
criteria and portfolio requirements discussed above. CTX Mortgage may be
required to repurchase mortgage loans sold to HSF-I if such mortgage loans are
determined to be ineligible loans or there occur certain other breaches of
representations and warranties of CTX Mortgage, as seller or servicer. CTX
Mortgages obligation to repurchase such loans is guaranteed by Centex
Corporation. CTX Mortgage records a liability for its estimated losses for
these obligations and such amount is included in its loan origination reserve.
CTX Mortgage sold $3.79 billion and $1.84 billion of mortgage loans to HSF-I
and repurchased $0.4 million and $0.6 million of delinquent or foreclosed
mortgage loans from HSF-I during the three months ended June 30, 2003 and 2002,
respectively. CTX Mortgage recognized gains on the sale of mortgage loans of
$87.2 million and $51.0 million for the three months ended June 30, 2003 and
2002, respectively. In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN
46), which modifies the accounting for certain entities in
which (1) equity
investors do not have a controlling financial interest and/or (2) the entity is
unable to finance its activities without additional subordinated financial
support from other parties. Pursuant to FIN 46, HSF-I is a variable interest
entity for which CTX Mortgage is the primary beneficiary. Accordingly, HSF-I
will be consolidated in the Companys Financial Statements beginning July 1,
2003. As a result, the Company anticipates that it will record a charge of
approximately $15.0 to $20.0 million representing the cumulative effect of a
change in accounting principle in the quarter ending September 30, 2003.
This charge primarily represents the deferral of service release premium income,
which will be recognized as loans are sold into the secondary market. Additionally, the consolidation of HSF-I will result in an increase in the
Companys residential mortgage loans held for sale with a corresponding
increase in the Companys Financial Services debt. HSF-Is debt does not have
recourse to the Company, and the consolidation of this debt will not change
the Companys credit profile or debt ratings. (H) CENTEX DEVELOPMENT COMPANY, L.P. Centex Development Company, L.P. (the Partnership) is a master limited
partnership formed by the Company in March 1987 to broaden the range of
business activities that may be conducted for the benefit of the Companys
stockholders to include general real estate development. The Company believed
that this 14




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##### Table of Contents



expansion would improve stockholder value through longer-term real estate
investments, real estate developments and the benefits of the partnership form
of business. The Partnership is authorized to issue three classes of limited
partnership interest. The Company indirectly holds 100% of the Partnerships
Class A and Class C limited partnership units (Class A Units and Class C
Units, respectively), which are collectively convertible into 20% of the
Partnerships Class B limited partnership units (Class B Units). The
Partnership may issue additional Class C Units in connection with the
acquisition of real property and other assets. No Class B Units have been
issued. However, the stockholders of the Company hold warrants to purchase
approximately 80% of the Class B Units. The warrants are held through a
nominee arrangement and trade in tandem with the common stock of Centex
Corporation. As holder of the Class A and Class C Units, the Company is entitled to a
cumulative preferred return of 9% per annum on the average outstanding balance
of its capital contributions to the Partnership, adjusted for cash and other
distributions representing return of capital. As of June 30, 2003, these
adjusted capital contributions, or Unrecovered Capital, were $241.1 million and
preference payments in arrears totaled $47.4 million. The Partnership is managed by its general partner, 3333 Development
Corporation, a wholly-owned subsidiary of 3333 Holding Corporation (Holding).
The common stock of Holding is held by the stockholders of the Company through
a nominee arrangement and trades in tandem with the common stock of Centex
Corporation. The stockholders of the Company elect the four-person board of
directors of Holding, three of whom are independent outside directors who are
not directors, affiliates or employees of the Company. Thus, through Holding,
the stockholders of the Company control the general partner of the Partnership.
The general partner, through its independent board and the independent board
of Holding, including its non-executive Chairman, oversees the Partnerships
activities, including the acquisition, development, maintenance, operation and
sale of properties. Consent of the limited partners for the activities of the
Partnership is not required, and the limited partners cannot remove the general
partner. As a result, at June 30, 2003, the Company accounts for its limited
partnership interest in the Partnership using the equity method of accounting
for investments. The Companys accounting for its investment in the
Partnership may be impacted by FIN 46. Management is in the process of
evaluating the applicability of FIN 46 and the related accounting for this
investment. Supplementary condensed combined financial statements for Centex
Corporation 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. 15




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##### Table of Contents



Supplementary Condensed Combined Balance Sheets of Centex Corporation and
Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries June 30,
    
    
    March 31,2003
    
    
    2003AssetsCash and Cash Equivalents
    
    $
    146,361
    
    
    $
    474,891Restricted Cash
    
    
    214,442
    
    
    
    172,321Receivables
    
    
    6,205,275
    
    
    
    5,633,999Inventories
    
    
    4,382,149
    
    
    
    4,026,246Investments in Joint Ventures and Other
    
    
    122,318
    
    
    
    106,250Assets Held for Sale
    
    
    8,291
    
    
    
    7,585Property and Equipment, net
    
    
    675,449
    
    
    
    683,473Other Assets
    
    
    725,813
    
    
    
    755,036Assets of Discontinued Operations
    
    
    10,704
    
    
    
    110,364$
    12,490,802
    
    
    $
    11,970,165Liabilities and Stockholders EquityAccounts Payable and Accrued Liabilities
    
    $
    1,698,081
    
    
    $
    1,795,247Liabilities Related to Assets Held for Sale
    
    
    6,941
    
    
    
    6,436Short-term Debt
    
    
    1,149,639
    
    
    
    1,042,825Long-term Debt
    
    
    6,661,152
    
    
    
    6,276,992Liabilities of Discontinued Operations
    
    
    910
    
    
    
    19,435Minority Stockholders Interest
    
    
    225,508
    
    
    
    171,384Stockholders Equity
    
    
    2,748,571
    
    
    
    2,657,846$
    12,490,802
    
    
    $
    11,970,165
 Supplementary Condensed Combined Statements of Earnings of Centex Corporation
and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries For the Three MonthsEnded June 30,2003
    
    
    2002Revenues
    
    $
    2,408,807
    
    
    $
    1,876,707Costs and Expenses
    
    
    2,200,407
    
    
    
    1,752,490Earnings (Loss) from Unconsolidated Entities
    
    
    757
    
    
    
    268Earnings Before Income Taxes
    
    
    209,157
    
    
    
    124,485Income Taxes
    
    
    66,736
    
    
    
    37,456Earnings from Continuing Operations
    
    
    142,421
    
    
    
    87,029Earnings from Discontinued Operations
    
    
    369
    
    
    
    726Net Earnings
    
    
    142,790
    
    
    
    87,755Other Comprehensive Income (Loss)
    
    
    9,470
    
    
    
    6,091Comprehensive Income
    
    $
    152,260
    
    
    $
    93,846
 16




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##### Table of Contents



(I) COMMITMENTS AND CONTINGENCIES The Company conducts a portion of its land acquisition, development and other
activities through its participation in joint ventures in which the Company
holds less than a majority interest. These joint ventures are typically large
in nature, and partnering with other developers allows Centex Homes to share
the risks and rewards of ownership while providing for efficient asset
utilization. The Companys investment in these non-consolidated joint ventures
was $118.4 million and $102.3 million at June 30, 2003 and March 31, 2003,
respectively. These joint ventures had total outstanding secured construction
debt of approximately $236.8 million and $232.5 million at June 30, 2003 and
March 31, 2003, respectively. The Companys liability with respect to this
debt, based on its ownership percentage of the related joint ventures, is
limited to approximately $62.2 million and $56.4 million at June 30, 2003 and
March 31, 2003, respectively. Under the structure of this debt, the Company
becomes liable up to these amounts only to the extent that the construction
debt exceeds a certain percentage of the value of the project. At June 30,
2003 and March 31, 2003, the Company was not liable for any of this debt.
Management does not believe that FIN 46 will have a material impact on the
Companys accounting for these investments. In the normal course of its business, the Company issues certain
representations, warranties and guarantees related to its home sales, land
sales, building sales, commercial construction and mortgage loan originations.
Based on historical evidence, the Company does not believe that any of these
representations, warranties or guarantees would result in a material effect on
our consolidated financial condition or operations. See further discussion of
our warranty liability below. Centex Homes offers a ten-year limited warranty for most homes constructed
and sold in the United States. The warranty covers defects in materials or
workmanship in the first year of the home and certain designated components or
structural elements of the home in the second through tenth years. In
California, effective January 1, 2003, Centex Homes began following the
statutory provisions of Senate Bill 800, which, in part, provide a statutory
warranty to customers and a statutory dispute resolution process. Centex Homes estimates the costs that may be
incurred under its warranty program for which it will be responsible and
records a liability at the time each home is closed. Factors that affect
Centex Homes warranty liability include the number of homes closed, historical
and anticipated rates of warranty claims and cost per claim. Centex Homes
periodically assesses the adequacy of its recorded warranty liability and
adjusts the amounts as necessary. Changes in Centex Homes contractual warranty liability during the three
months ended June 30, 2003 are as follows: For the Three MonthsEnded June 30, 2003Balance at Beginning of Period
    
    $
    16,125Warranties Issued
    
    
    3,894Settlements Made
    
    
    (4,337
    )Changes in Liability of Pre-Existing
Warranties, Including Expirations
    
    
    451Balance at End of Period
    
    $
    16,133
 CTX Mortgage has established a liability for anticipated losses associated
with loans originated and sold to HSF-I or other unaffiliated third parties, as
further discussed above in Note (G), Indebtedness. 17




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##### Table of Contents



Changes in CTX Mortgages mortgage loan origination reserve for the three
months ended June 30, 2003 are as follows: For the Three MonthsEnded June 30, 2003Balance at Beginning of Period
    
    $
    28,594Provision for Losses
    
    
    937Settlements
    
    
    (354
    )Balance at End of Period
    
    $
    29,177
 (J) LAND HELD UNDER OPTION AGREEMENTS NOT OWNED AND OTHER LAND DEPOSITS In order to ensure the future availability of land for homebuilding, the
Company enters into lot option purchase agreements with unaffiliated third
parties and with the Partnership, as discussed in Note (O), Related Party
Transactions, below. Under the option agreements, the Company pays a stated
deposit in consideration for the right to purchase land at a future time,
usually at predetermined prices. These options, which do not contain
performance requirements from the Company nor obligate the Company to purchase
the land in the event the land values deteriorate, expire at various dates
through the year 2010. The Company has evaluated those option agreements entered into after
January 31, 2003 under the provisions of FIN 46. The Company does not have
legal title to the optioned land; however, under FIN 46, if the option
agreements are entered into with entities that qualify as variable interest
entities and if the Company qualifies as the primary beneficiary of those
entities, the Company must consolidate such entities by recording the land
under option and an offsetting liability at fair value (the exercise price of
the option). The Company has determined that it is the primary beneficiary of
several such agreements at June 30, 2003. As a result, the Company recorded
$45.5 million of land as inventory under the caption Land Held Under Option
Agreements not Owned, with a corresponding increase to minority interest. In
addition, the Company reclassified $4.5 million of deposits related to these
options, previously included in land held for development and sale, to the new
inventory caption. The Company also has option agreements entered into before
February 1, 2003. These agreements must be evaluated for consolidation under
FIN 46 effective July 1, 2003. Management is in the process of determining the
impact of FIN 46 on these agreements. At June 30, 2003, the Company had deposited or invested with third parties
$81.1 million (excluding the $4.5 million of deposits discussed above) related to land option agreements. These agreements had a total remaining purchase
price of approximately $2.4 billion. 18




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##### Table of Contents



(K) COMPREHENSIVE INCOME A summary of comprehensive income for the three months ended June 30, 2003
and 2002 is presented below: For the Three MonthsEnded June 30,2003
    
    
    2002Net Earnings
    
    $
    142,790
    
    
    $
    87,755Other Comprehensive Income (Loss), net of Tax:Unrealized (Loss) Gain on Hedging Instruments
    
    
    (1,252
    )
    
    
    13,976Foreign Currency Translation Adjustments
    
    
    10,720
    
    
    
    (6,951
    )Other
    
    
    2
    
    
    
    (934
    )Comprehensive Income
    
    $
    152,260
    
    
    $
    93,846
 The foreign currency translation adjustments are primarily the result of
Centexs investment in the Partnership. For additional information on the
Partnership and subsidiaries, see their separate financial statements included
elsewhere in the Report. The unrealized gain or loss on hedging instruments
represents the deferral in other comprehensive income of the unrealized gain or
loss on swap agreements designated as cash flow hedges. The accounting for
interest rate swaps and other derivative financial instruments is discussed in
detail in Note (N), Derivatives and Hedging. (L) BUSINESS SEGMENTS The Company operates in five principal business segments: Home Building,
Financial Services, Construction Products, Construction Services and Investment
Real Estate. 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 $296.9 million as of June 30, 2003) is included in the
Investment Real Estate segment. Home Building Home Buildings operations involve the purchase and development of land or
lots and the construction and sale of detached and attached single-family
homes. Financial Services Financial Services mortgage operations consist primarily of home
financing, sub-prime home equity lending and the sale of title insurance and
other various insurance coverages. These activities include mortgage
origination, servicing and other related services for homes sold by the
Companys subsidiaries and others. Financial Services revenues include
interest income of $106.7 million and $80.8 million for the three months ended
June 30, 2003 and 2002, respectively. Substantially all of the Companys
interest income in each year is earned by the Financial Services segment.
Financial Services cost of sales is comprised of 19




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##### Table of Contents



interest expense related to debt issued to fund its home financing and
sub-prime home equity lending activities. Construction Products Construction Products operations involve the manufacture, production,
distribution and sale of cement, gypsum wallboard, recycled paperboard,
aggregates and readymix concrete. The Company owned 64.9% of Centex
Construction Products, Inc. at June 30, 2003 and 64.6% at June 30, 2002.
Construction Products results are shown before minority interest in the tables
presented below. See Note (S), Subsequent Events, for more information on
the planned spin-off of this segment. Construction Services Construction Services operations involve the construction of buildings
for both private and government interests including office, commercial and
industrial buildings, hospitals, hotels, correctional facilities, educational
institutions, museums, libraries, airport facilities and sports facilities. As
this segment generates positive cash flow, intercompany interest income
(credited at the prime rate in effect) of $1.4 million and $1.6 million for the
three months ended June 30, 2003 and 2002, respectively, is included in
managements evaluation of this segment. However, the intercompany interest
income is eliminated in consolidation and excluded from the tables presented
below. Investment Real Estate Investment Real Estates operations involve the acquisition, development
and sale of land, primarily for industrial, office, multi-family, retail,
residential and mixed-use projects. Under the equity method of accounting for
investments, Investment Real Estate also records as revenues any income or loss
from its investment in the Partnership, including the International Home
Building business located in the United Kingdom. Other The Companys Other segment includes Corporate general and administrative
expenses, interest expense and minority interest. Also included in the Other
segment are the Companys home services operations, which are not material for
purposes of segment reporting. In June 2003, the Company spun off its
manufactured housing operations, which had previously been included in the
Other segment. As a result of the spin-off, the manufactured housing
operations are reflected as a discontinued operation and not included in the
segment information below. Earnings related to the operations that were spun
off have been reclassified to discontinued operations. 20




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##### Table of Contents



The following are included in Other in the tables below (dollars in
millions): For the Three MonthsEnded June 30,2003
    
    
    2002Operating Loss from Home Services
    
    $
    (1.3
    )
    
    $
    (1.6
    )Corporate
General and Administrative Expense
    
    
    (19.2
    )
    
    
    (12.6
    )Interest Expense
    
    
    (17.0
    )
    
    
    (15.4
    )Minority Interest
    
    
    (7.5
    )
    
    
    (8.9
    )Other
    
    
    (0.3
    )
    
    
    (0.6
    )$
    (45.3
    )
    
    $
    (39.1
    )
 For the Three Months Ended June 30, 2003(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    1,504.5
    
    
    $
    266.9
    
    
    $
    144.1
    
    
    $
    375.8
    
    
    $
    2.7
    
    
    $
    22.7
    
    
    $
    2,316.7Cost of Sales
    
    
    (1,127.4
    )
    
    
    (51.0
    )
    
    
    (119.7
    )
    
    
    (356.8
    )
    
    
    (0.9
    )
    
    
    (9.4
    )
    
    
    (1,665.2
    )Selling,
General and Administrative Expenses

    
    
    (221.7
    )
    
    
    (150.3
    )
    
    
    (1.5
    )+
    
    
    (14.4
    )
    
    
    (1.0
    )
    
    
    (58.6
    )
    
    
    (447.5
    )Earnings from Unconsolidated Entities
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.9
    
    
    
    
    
    
    
    5.1Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    156.6
    
    
    $
    65.6
    
    
    $
    22.9
    *
    
    $
    4.6
    
    
    $
    4.7
    
    
    $
    (45.3
    )
    
    $
    209.1
  +
 
 Represents Construction Products Corporate general and administrative
expenses. General and administrative expenses related to Construction
Products operating units of $6.5 million are classified as Cost of Sales. *
 
 Before Minority Interest   For the Three Months Ended June 30, 2002(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    1,105.5
    
    
    $
    180.5
    
    
    $
    128.8
    
    
    $
    360.7
    
    
    $
    6.6
    
    
    $
    29.3
    
    
    $
    1,811.4Cost of Sales
    
    
    (823.6
    )
    
    
    (44.6
    )
    
    
    (99.7
    )
    
    
    (335.4
    )
    
    
    (0.4
    )
    
    
    (11.6
    )
    
    
    (1,315.3
    )Selling,
General and Administrative Expenses
    
    
    (181.8
    )
    
    
    (111.6
    )
    
    
    (1.4
    ) +
    
    
    (17.2
    )
    
    
    (2.1
    )
    
    
    (56.8
    )
    
    
    (370.9
    )Earnings (Loss) from
Unconsolidated Entities
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    (0.5
    )Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    100.3
    
    
    $
    24.3
    
    
    $
    27.7
    *
    
    $
    8.1
    
    
    $
    3.4
    
    
    $
    (39.1
    )
    
    $
    124.7
  +
 
 Represents Construction Products Corporate general and administrative
expenses. General and administrative expenses related to Construction
Products operating units of $6.0 million are classified as Cost of Sales. *

 
 Before Minority Interest 21




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(M) INCOME TAXES Income tax expense for the Company increased from $37.5 million to $66.7
million and the effective tax rate increased from 30.0% to 31.9% for the three
months ended June 30, 2002 and 2003, respectively. The increase in the
effective tax rate is primarily the result of the expected decrease in the
availability of net operating loss carryforwards during fiscal 2004 compared to
fiscal 2003. (N) DERIVATIVES AND HEDGING The Company is exposed to the risk of interest rate fluctuations on its
debt and other obligations. As part of its strategy to manage the obligations
that are subject to changes in interest rates, the Company has entered into
various interest rate swap agreements, designated as cash flow hedges as
described below. The swap agreements are recorded at their fair value in Other
Assets or Accrued Liabilities in the consolidated balance sheets. To the extent
the hedging relationship is effective, gains or losses in the fair value of the
derivative are deferred as a component of Stockholders Equity through Other
Comprehensive (Loss) Income. Fluctuations in the fair value of the ineffective
portion of the derivative are reflected in the current period earnings,
although such amounts are insignificant. At June 30, 2003, Centex Corporation has an interest rate swap agreement
that, in effect, fixes the variable interest rate on $25.0 million of its
outstanding debt at 6.7% and expires in October 2005. During the three months
ended June 30, 2003, the hedge related to this
derivative was effective. Amounts to be received or paid under the swap agreement are
recognized as a change in interest incurred on the related debt instrument.
Based on the balance in Accumulated Other Comprehensive Loss at June 30, 2003
related to this derivative, the Company estimates increases in interest
incurred over the next 12 months to be approximately $1.4 million. As of June
30, 2003, the balance in Accumulated Other Comprehensive Loss related to this
derivative was $3.2 million ($2.1 million net of tax). At June 30, 2003, Construction Products has an interest rate swap
agreement that, in effect, fixes the variable interest rate on $55.0 million of
its outstanding debt at 4.5% and expires in August 2003. During the three
months ended June 30, 2003, the hedge related to this
derivative was effective. Amounts to be received or paid under the swap agreement are
recognized as a change in interest incurred on the related debt instrument.
Based on the balance in Accumulated Other Comprehensive Loss at June 30, 2003
related to this derivative, the Company estimates increases in interest
incurred over the next 12 months to be approximately $0.3 million. As of June
30, 2003, the balance in Accumulated Other Comprehensive Loss related to this
derivative was $0.3 million ($0.2 million net of tax). Financial Services, through Home Equity, uses interest rate swaps to hedge
the market risk associated with the anticipated issuance of fixed rate
securitization debt used to finance sub-prime mortgages. Changes in fair value
of these derivatives are deferred in Accumulated Other Comprehensive Loss and
recorded through current earnings as an adjustment of the interest incurred
over the life of the securitization debt. Home Equity also uses interest rate
swaps that, in effect, fix the interest rate on its variable interest rate
debt. Amounts to be received or paid as a result of these swap agreements are
recognized as adjustments to interest incurred on the related debt instrument.
During the three months ended June 30, 2003, the hedges related
to these interest rate swaps were effective. At June 30, 2003, Home Equity was
hedging $1.43 billion of its outstanding debt with these interest rate swaps at
a weighted-average interest rate of 2.4%. These swaps expire at varying times
through December 2008. Based on the balance in Accumulated Other Comprehensive
Loss at June 30, 2003 related to these derivatives, the Company estimates
increases in interest incurred over the next 12 months to be approximately $8.9
million. As of June 30, 2003, the balance in Accumulated Other Comprehensive
Loss related to these derivatives was $12.2 million ($7.9 million net of tax). 22




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Financial Services, through CTX Mortgage, enters into interest rate lock
commitments (IRLCs) with its customers under which CTX Mortgage agrees to
make mortgage loans at agreed upon rates within a period of time, generally
from 1 to 30 days, if certain conditions are met. In order to hedge the risk
of fluctuations in the value of these IRLCs and mortgage loans held by it, CTX
Mortgage executes mandatory forward trades of mortgage loans and
mortgage-backed securities. CTX Mortgage also uses mandatory forward trades to
hedge the Companys obligation, created through the Harwood Swap, to protect
against certain interest rate risk and non-credit related market risk related
to mortgage loans held by HSF-I, an unaffiliated entity that is not
consolidated with Financial Services or the Company. At June 30, 2003, the
Company has elected not to utilize hedge accounting treatment under Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, (SFAS No. 133) for these derivatives.
Initially, the fair value of the IRLCs is recorded on the balance sheet as a
deferred item. Subsequent changes in the fair value of the IRLCs, mandatory
forward trades and swaps are recorded as an adjustment to earnings. The net
change in the estimated fair value of these derivative positions resulted in a
loss of $8.3 million for the three months ended June 30, 2003. In connection
with the consolidation of HSF-I, CTX Mortgage elected as of
July 1, 2003 to utilize hedge accounting treatment under SFAS No. 133 for mandatory
forward trades used to hedge changes in the value of its mortgage loan
portfolio. (O) RELATED PARTY TRANSACTIONS Centex Homes purchased land from the Partnership during the three months
ended June 30, 2003 and 2002 totaling $12.0 million and $21.1 million,
respectively. At June 30, 2003 and March 31, 2003, Centex Homes had $7.8 million and
$7.2 million, respectively, deposited with the Partnership as option deposits
for the purchase of land. Centex Homes also entered into agreements to
reimburse the Partnership for certain costs and fees incurred by the
Partnership in the purchase and ownership of these tracts of land. During the
three months ended June 30, 2003 and 2002, Centex Homes paid $0.4 million and
$1.4 million, respectively, to the Partnership in fees and reimbursements
pursuant to these agreements. Centex Homes expects to pay an additional $19.0
million to the Partnership to complete the purchase of these tracts of land
over the next three years. Construction Services has historically executed construction contracts
with the Partnership. At March 31, 2003, contracts for the construction of two
industrial facilities were completed and no additional contracts were
outstanding. At June 30, 2003, a $10.6 million contract for the construction
of an office building had been executed with the Partnership and was
outstanding. During the three months ended June 30, 2003 and 2002, the
Partnership paid zero and $3.5 million, respectively, to Construction Services
pursuant to these contracts. (P) RECENT ACCOUNTING PRONOUNCEMENTS In January 2003, the FASB issued FIN 46, which modifies the accounting for
certain entities in which (1) equity investors do not have a controlling
financial interest and/or (2) the entity is unable to finance its activities
without additional subordinated financial support from other parties. FIN 46
applied immediately for certain disclosure requirements and to variable
interest entities created, or in which an enterprise obtains an interest, after
January 31, 2003. For variable interest entities in which an enterprise holds
a variable interest that it acquired before February 1, 2003, FIN 46 applies to
interim or annual periods beginning after June 15, 2003. At June 30, 2003, the
Company has interests in the Partnership, HSF-I, land option agreements and
certain joint ventures that are or may be affected by this interpretation. In
accordance with FIN 46, the nature 23




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##### Table of Contents



of these entities operations, the Companys potential maximum exposure related to
these entities and the applicability of FIN 46 to these entities are discussed
as follows: The Partnership
    
    Financial statements filed in tandem with this ReportNote (H), Centex Development Company, L.P.HSF-I
    
    Note (G), IndebtednessLand Option Agreements
    
    Note (J), Land Held Under Option Agreements
notOwned and Other Land DepositsJoint Ventures
    
    Note (I), Commitments and Contingencies
 The Company has historically accounted for stock-based compensation in
accordance with APB No. 25 and related interpretations as permitted by SFAS No.
123. On April 1, 2003, the Company adopted the fair value measurement
provisions of SFAS No. 123 under which the Company will recognize compensation
expense of a stock option award to an employee over the vesting period based on
the fair value of the award on the grant date. The fair value method has been
applied only to awards granted or modified on or after April 1, 2003 (the
prospective method), whereas awards granted prior to such date will continue to
be accounted for under APB No. 25. See Note (C), Stock-Based Employee
Compensation Arrangements. In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, (SFAS No. 149). The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under SFAS No. 133 by requiring that contracts with comparable characteristics
be accounted for similarly, resulting in more consistent reporting of contracts
as either derivatives or hybrid instruments. A portion of this statement is
effective for contracts entered into or modified and for hedging relationships
designated after June 30, 2003. The remainder of this statement codifies
previously issued SFAS No. 133 implementation guidance, which retains its
original effective dates. The Company does not expect the implementation of
SFAS No. 149 to have a material impact on its results of operations or
financial position. (Q) OFF-BALANCE-SHEET OBLIGATIONS The Company enters into various off-balance-sheet transactions in the
normal course of business in order to reduce financing costs and improve access
to liquidity, facilitate homebuilding activities and manage exposure to
changing interest rates. Further discussion regarding these transactions can
be found above in Note (G), Indebtedness, Note (H), Centex Development
Company, L.P., Note (I), Commitments and Contingencies and Note (N),
Derivatives and Hedging. (R) SPIN-OFF OF MANUFACTURED HOUSING In June 2003, the Company spun off its manufactured housing operations,
which had previously been included in the Other segment. As a result of the
spin-off, the manufactured housing operations earnings have been reclassified
to discontinued operations in the statements of consolidated earnings, and any
assets or liabilities related to these discontinued operations have been
disclosed separately on the consolidated balance sheets. All prior period
information related to these discontinued operations has been reclassified to
be consistent with the June 30, 2003 presentation. All assets and liabilities
related to these discontinued operations that remain with the Company at June 30, 2003 are in
the process of being sold and/or disposed. For the three months ended June 30, 2003 and
2002, discontinued operations had revenues of $39.5 million and
$32.9 million, respectively, and operating earnings of $702
thousand and $746 thousand, respectively. 24




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(S) SUBSEQUENT EVENTS On
July 21, 2003, the Company announced the planned tax-free spin-off of its entire
equity interest in Centex Construction Products, Inc. The spin-off is
contingent upon approval by the Centex Construction Products, Inc.
shareholders, approval by
the Internal Revenue Service of the tax-free nature of the spin-off and other
conditions. The Company anticipates that the spin-off will be concluded on or
about December 31, 2003. In August 2003, the Company completed a new committed $800 million
multi-bank extendible revolving credit facility which will mature in August
2006. This facility replaces the $700 million revolving credit in effect at
June 30, 2003. No borrowings are outstanding under the new facility. In
addition, the Company completed a committed $250 million multi-bank letter of
credit facility which will mature in August 2004. (T) RECLASSIFICATIONS Certain prior year balances have been reclassified to be consistent with
the June 30, 2003 presentation. 25




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations For the three months ended June 30, 2003, our consolidated revenues were
$2.32 billion, a 28.2% increase over $1.81 billion for the same period last
year. Earnings from continuing operations before income taxes were $209.1
million, 67.7% higher than $124.7 million for the same period last year. The
changes in our revenues and earnings from continuing operations before income
taxes are explained below by segment. The principal reasons for the increases
in consolidated revenues and income from continuing operations before income
taxes are the continued growth of our Home Building operations and a
substantial increase in the refinancing activity of our Financial Services
operations. Net earnings from continuing operations for the three months ended June
30, 2003 were $142.3 million, 63.0% higher than $87.3 million for the same
period last year. The increase in net earnings from continuing operations is
less than the increase in earnings from continuing operations before income
taxes due to a slight increase in our effective tax rate. Our effective tax
rate related to continuing operations increased to 31.9% for the three months
ended June 30, 2003 from 30.0% for the three months ended June 30, 2002. The
increase in the effective tax rate is primarily the result of the expected
decrease in the availability of net operating loss carryforwards during fiscal
2004 compared to fiscal 2003. Any reference herein to we, us or our includes Centex Corporation and its
subsidiary companies. HOME BUILDING The following summarizes the results of our Home Building operations for
the three months ended June 30, 2003 compared to the same period last year
(dollars in millions, except per unit data): For the Three Months Ended June 30,2003
    
    
    2002% of Revenues
    
    
    % of RevenuesRevenues  Housing
    
    $
    1,477.4
    
    
    
    98.2
    %
    
    $
    1,068.1
    
    
    
    96.6
    %Revenues  Land Sales and Other
    
    
    27.1
    
    
    
    1.8
    %
    
    
    37.4
    
    
    
    3.4
    %Cost of Sales  Housing
    
    
    (1,102.6
    )
    
    
    (73.3
    %)
    
    
    (798.5
    )
    
    
    (72.2
    %)Cost of Sales  Land Sales and Other
    
    
    (24.8
    )
    
    
    (1.6
    %)
    
    
    (25.1
    )
    
    
    (2.3
    %)Selling, General and Administrative Expenses
    
    
    (221.7
    )
    
    
    (14.7
    %)
    
    
    (181.8
    )
    
    
    (16.4
    %)Earnings from Unconsolidated Entities
    
    
    1.2
    
    
    
    
    %
    
    
    0.2
    
    
    
    
    %Operating Earnings
    
    $
    156.6
    
    
    
    10.4
    %
    
    $
    100.3
    
    
    
    9.1
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    6,349
    
    
    
    27.1
    %
    
    
    4,995
    
    
    
    3.0
    %Average Unit Sales Price
    
    $
    232,699
    
    
    
    8.8
    %
    
    $
    213,825
    
    
    
    1.5
    %Operating Earnings Per Unit
    
    $
    24,667
    
    
    
    22.9
    %
    
    $
    20,073
    
    
    
    8.8
    %Backlog Units
    
    
    14,111
    
    
    
    26.6
    %
    
    
    11,150
    
    
    
    9.8
    %Ending Operating Neighborhoods
    
    
    562
    
    
    
    13.1
    %
    
    
    497
    
    
    
    4.6
    %
 Revenues for the three months ended June 30, 2003 increased 36.1% versus
prior year, primarily due to an increase in units closed and higher unit sales
prices. Units closed during the three months ended June 30, 2003 increased
27.1% from 4,995 units to 6,349 units, and the average unit sales price
increased 8.8% from $213,825 to $232,699. The increase in average units closed
was the result of a higher number of operating neighborhoods in the current
year and an increase in average units closed per neighborhood versus last year. 26




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The increase in the unit sales price was largely driven by higher selling
prices in the California, Washington, D.C. and Florida markets. The relief of capitalized interest is included in Home Buildings cost of
sales. Capitalized interest relieved was $13.2 million and $8.3 million for
the three months ended June 30, 2003 and 2002, respectively. Gross Margin was 25.1% of revenues for the three months ended June 30,
2003 compared to 25.5% of revenues for the same period last year. The decrease
was attributable to margins on Land Sales and Other which may vary
significantly from period to period depending on the timing and amount of the
related revenues. Excluding the effect of Land and Other, margins were 25.4%
of revenues compared to 25.2% of revenues for the same period last year. Selling, general and administrative expenses for the three months ended
June 30, 2003 were $221.7 million, or 14.7% of revenues, as compared to the
$181.8 million and 16.4% of revenues reported for the same period last year.
The dollar increase resulted from incremental costs associated with closing
more homes. The decrease as a percentage of revenues is reflective of the
revenue growth exceeding the incremental selling, general and administrative
costs associated with the growth in home closings. Operating earnings for the three months ended June 30, 2003 were 10.4% of
revenues and approximately $24,667 on a per-unit basis, compared to operating
earnings of 9.1% of revenues and approximately $20,073 on a per-unit basis for
the same period last year. Units in backlog increased 26.6% to 14,111 units at June 30, 2003 compared
to 11,150 units at June 30, 2002. The increase in backlog resulted from a
13.1% increase in ending operating neighborhoods, which helped drive a 24.2%
increase in new sales (orders) versus the prior year. Centex Homes defines
backlog units as units that have been sold, as indicated by a signed contract,
but not closed. Centex Homes ended its first quarter of fiscal 2004 with a
record backlog of home sales. 27




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##### Table of Contents



FINANCIAL SERVICES The Financial Services segment primarily is engaged in the residential
mortgage banking business, as well as in other financial services that are in
large part related to the residential mortgage market. Its operations include
mortgage origination, servicing and other related services for purchasers of
homes sold by our Home Building operations and other homebuilders, as well as
sub-prime home equity lending and the sale of title insurance and various other
insurance coverages. The following summarizes Financial Services results for
the three months ended June 30, 2003 compared to the same period last year
(dollars in millions): For the Three Months Ended June 30,2003
    
    
    2002Revenues
    
    $
    266.9
    
    
    $
    180.5Interest Margin
    
    $
    55.7
    
    
    $
    36.1Operating Earnings
    
    $
    65.6
    
    
    $
    24.3Origination Volume
    
    $
    5,432.1
    
    
    $
    2,979.1Number of Loans OriginatedCTX Mortgage Company, L.L.C.Centex-built Homes (Builder)
    
    
    4,435
    
    
    
    3,378Non-Centex-built Homes (Retail)
    
    
    22,792
    
    
    
    12,40627,227
    
    
    
    15,784Centex Home Equity Company, L.L.C
    
    
    8,995
    
    
    
    6,35936,222
    
    
    
    22,143
  CTX Mortgage
    
    
    Centex Home EquityCompany, L.L.C.
    
    
    Company, L.L.C.For the Three Months
    
    
    For the Three MonthsEnded June 30,
    
    
    Ended June 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Average Interest Earning Assets
    
    $
    307.6
    
    
    $
    182.7
    
    
    $
    4,876.1
    
    
    $
    3,402.4Average Yield
    
    
    5.77
    %
    
    
    7.87
    %
    
    
    8.39
    %
    
    
    8.99
    %Average Interest Bearing
Liabilities
    
    $
    202.6
    
    
    $
    132.5
    
    
    $
    5,065.0
    
    
    $
    3,535.6Average Rate Paid
    
    
    2.01
    %
    
    
    2.91
    %
    
    
    3.88
    %
    
    
    4.83
    % Financial Services results are primarily derived from conforming mortgage
banking and sub-prime home equity lending operations as described below. Conforming Mortgage Banking The revenues and operating earnings of CTX Mortgage Company, L.L.C. and
related entities, or CTX Mortgage, are derived primarily from the sale of
mortgage loans, inclusive of all service rights and, to a lesser extent,
interest income and other fees. CTX Mortgages business strategy of selling
conforming loans reduces our capital investment and related risks, provides
substantial liquidity and is an efficient process given the size and maturity
of the conforming mortgage loan secondary capital markets. CTX Mortgage
originates mortgage loans, holds them for a short period and sells them to Harwood Street
Funding I, L.L.C., or HSF-I, 28




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##### Table of Contents



and investors. HSF-I is an unaffiliated entity
that is not consolidated with Financial Services or Centex Corporation and
subsidiaries at June 30, 2003. HSF-I purchases mortgage loans from CTX Mortgage with the proceeds from the issuance of securitized term debt,
secured liquidity notes and subordinated certificates that are extendable for
up to five years. The debt, interest income and interest expense of HSF-I are
not reflected in the financial statements of Financial Services or Centex
Corporation and subsidiaries at June 30, 2003. CTX Mortgage sold $3.79 billion
and $1.84 billion of mortgage loans to HSF-I and repurchased $0.4 million and
$0.6 million of delinquent or foreclosed mortgage loans from HSF-I during the
three months ended June 30, 2003 and 2002, respectively. CTX Mortgage
recognized gains on the sale of mortgage loans of $87.2 million and $51.0
million for the three months ended June 30, 2003 and 2002, respectively.
Interpretation No. 46, Consolidation of Variable Interest Entities, or FIN
46, will impact CTX Mortgages accounting for HSF-I. For additional
information regarding HSF-I and the implication of recent accounting
pronouncements on HSF-I, see Certain Off-Balance-Sheet and Other Obligations
on pages 40-42 of this Report. Revenues increased 63.5% to $147.0 million for the three months ended June
30, 2003 as compared to the same period last year. The increase in revenues
for the period is primarily related to an increase in CTX Mortgage originations
due to an increase in mortgage loans originated for refinancing and for Centex
Homes buyers, as well as higher revenues from Title and Insurance operations.
Refinanced mortgages accounted for 51% of originations for the quarter this
year compared to 21% for the same quarter last year. CTX Mortgages capture
rate of Centex Homes buyers was 74% for the quarter this year compared to 72%
for the same quarter last year. For the three months ended June 30, 2003, originations totaled 27,227
compared to 15,784 originations in the same period last year; loan volume was
$4.55 billion compared to $2.48 billion for the same period last year; the
per-loan profit was $1,769, an increase of 87.6% compared to $943 for the same
period last year and total mortgage applications increased 96.7% to 31,319 from
15,919 applications for the same period last year. For the three months ended
June 30, 2003, per-loan profit increased due to increased operational leverage
as a result of the increase in the volume of originations, as well as an
increase in Title and Insurance earnings. CTX Mortgages selling, general and administrative expenses increased
$20.6 million to $93.6 million at June 30, 2003. This increase was primarily
due to increased employee related costs and overhead related to the increased
volume in loan originations. CTX Mortgages operating earnings were $48.1
million for the three months ended June 30, 2003, resulting in a 222.8%
increase as compared to the same period last year. The increase in operating
earnings for the period is primarily due to the increase in revenues discussed
above and a decrease in the cost per loan originated. In the normal course of its activities, CTX Mortgage carries inventories
of loans pending sale to investors other than HSF-I and earns an interest
margin, which we define as the difference between interest revenue on mortgage
loans held for sale or investment and interest expense on debt used to fund the
mortgage loans. CTX Mortgage uses short-term mortgage warehouse facilities to
finance these inventories of loans. CTX
Mortgages interest margin increased 4.6% for the three months ended June 30,
2003 as compared to the same period last year, from $2.38 million to $2.49
million. This increase is reflective of an increase in originations,
partially offset by a decrease in the spread between
the average yield on interest earning assets and the average rate paid on
interest bearing liabilities. The results of operations of CTX Mortgage depend to a significant extent
on the level of interest rates. Any significant increases in mortgage rates
above currently prevailing levels could adversely affect the volume of loan originations and may result in a significant curtailment of
refinancing activity, which 29




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##### Table of Contents



represents a substantial portion of our business.
There can be no assurance that mortgage rates will remain at the current level
in the future. Sub-Prime Home Equity Lending The revenues of Centex Home Equity Company, L.L.C., or Home Equity,
increased 32.2% to $119.9 million for the three months ended June 30, 2003, as
compared to the same period last year, as a result of continued growth in our
portfolio of residential mortgage loans held for investment. Interest margin
increased to $53.2 million for the three months ended June 30, 2003 as compared
to $33.8 million for the same period last year. The increase in interest
margin is primarily a result of an increase in the portfolio of mortgage loans
held for investment and a decrease in interest rates on debt used to fund
mortgage loans. Home Equity reported operating earnings of $14.2 million for
the three months ended June 30, 2003, as compared to operating earnings of
$10.7 million for the same period last year. The increase in Home Equitys
operating earnings is primarily the result of the increase in interest margin,
as noted above. Interest income will be positively affected as the portfolio
of mortgage loans held for investment increases and matures. The increase in
interest margin was partially offset by an increase in servicing and production
costs, mostly attributable to loan volume and loan servicing growth, and an
increase in the provision for losses on residential mortgage loans held for
investment. Home Equitys selling, general and administrative expenses
increased $19.3 million to $56.6 million for the three months ended June 30,
2003 as a result of Home Equitys growth. Home Equitys increase in loan
production volume, the expansion of its branch offices and the increase in the
number of its employees has resulted in a corresponding increase in salaries
and related costs, rent expense, group insurance costs and advertising
expenditures of approximately $9.5 million. The remainder of the increase was
due to higher charges to the provision for loan losses, as discussed below. For the three months ended June 30, 2003, originations totaled 8,995
compared to 6,359 originations for the same period last year; origination
volume was $877.5 million compared to $497.9 million for the same period last
year and total applications increased 61.1% to 80,637 from 50,044 applications
for the same period last year. For the three months ended June 30, 2003,
originations increased 41.5% while origination volume increased 76.2% due to an
increase in average loan size. The smaller increase in the number of
originations relative to the larger increase in total applications is
reflective of Home Equitys continued adherence to its credit underwriting
guidelines. Average interest earning assets increased 43.3%, from $3,402.4
million in the three months ended June 30, 2002 to $4,876.1 million in the
three months ended June 30, 2003, and the corresponding average interest
bearing liabilities increased 43.3%, from $3,535.6 million in the three months
ended June 30, 2002 to $5,065.0 million in the three months ended June 30,
2003, primarily due to an increase in the volume of loan originations and an
increase in average loan size. The average yield earned on these assets
decreased from 8.99% in the three months ended June 30, 2002 to 8.39% in the
three months ended June 30, 2003, and the average rate paid on these
liabilities decreased from 4.83% in the three months ended June 30, 2002 to
3.88% in the three months ended June 30, 2003, primarily due to lower interest
rates in fiscal 2004 compared to fiscal 2003. The fact that the average rate
paid on interest bearing liabilities decreased significantly more than the
yield earned on interest earning assets decreased and the increase in
originations noted above led to a 57.5% increase in net interest margin from
$33.8 million in the three months ended June 30, 2002 to $53.2 million in the
three months ended June 30, 2003. At June 30, 2003, Home Equitys total servicing portfolio consisted of
78,126 loans totaling $5.9 billion compared to 65,107 loans
totaling $4.5 billion at June 30, 2002. For the three months ended June 30, 2003, service
fee income related to this servicing was $14.6 million compared to $11.8
million for the same period last year. 30




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##### Table of Contents



The primary risks in Home Equitys operations are consistent with those of
the financial services industry and include credit risk associated with its
loans, liquidity risk related to funding its loans and interest rate risk prior
to securitization of the loans. In addition, as Home Equity services its
loans, it is also subject to customer prepayment risks. Allowance for Losses Home Equity originates and purchases loans in accordance with standard
underwriting criteria. The underwriting standards are primarily intended to
assess the creditworthiness of the borrower and the value of the mortgaged
property and to evaluate the adequacy of the property as collateral for the
home equity loan. Home Equity establishes an allowance for losses by charging the provision
for losses in the statement of consolidated earnings when it believes an event
causing a loss has occurred. When Home Equity determines that a residential
mortgage loan held for investment is partially or fully uncollectible, the
estimated loss is charged against the allowance for losses. Recoveries on
losses previously charged to the allowance are credited to the allowance at the
time the recovery is collected. We believe that the allowance for losses is sufficient to provide for
credit losses in the existing residential mortgage loans held for investment,
which include real estate owned. We evaluate the allowance on an aggregate
basis considering, among other things, the relationship of the allowance to
residential mortgage loans held for investment and historical credit losses.
The allowance reflects our judgment of the present loss exposure at the end of
the reporting period. A range of expected credit losses is estimated using
historical losses, static pool loss curves and delinquency modeling. These
tools take into consideration historical information regarding delinquency and
loss severity experience and apply that information to the portfolio at each
reporting date. Although we consider the allowance for losses on residential mortgage
loans held for investment reflected in our consolidated balance sheet to be
adequate, there can be no assurance that this allowance will prove to be
adequate over time to cover ultimate losses. This allowance may prove to be
inadequate due to unanticipated adverse changes in the economy or discrete
events adversely affecting specific customers or industries. 31




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##### Table of Contents



Changes in the allowance for losses on residential mortgage loans held for
investment were as follows (dollars in thousands): For the Three Months Ended June 30,2003
    
    
    2002Balance at Beginning of Period
    
    $
    28,384
    
    
    $
    14,106Provision for Losses
    
    
    15,762
    
    
    
    7,043Recoveries on Loans Charged Off
    
    
    76
    
    
    
    18Losses Sustained
    
    
    (10,161
    )
    
    
    (3,847
    )Balance at End of Period
    
    $
    34,061
    
    
    $
    17,320Allowance as a Percentage of Gross Loans Held for Investment
    
    
    0.7
    %
    
    
    0.5
    %Allowance as a Percentage of 90+ Days Contractual Delinquency
    
    
    25.1
    %
    
    
    19.8
    %90+ Days Contractual DelinquencyTotal Dollars Delinquent
    
    $
    135,651
    
    
    $
    87,304% Delinquent
    
    
    2.6
    %
    
    
    2.5
    %
 The increase in the allowance for losses in the current quarter occurred
primarily because the amount of the residential mortgage loans held for
investment increased and the residential mortgage loan portfolio continued to
mature. As the age and size of the residential mortgage loan portfolio
continues to mature and grow, we expect the balance in the allowance for
losses, the loans charged off and the allowance ratios to continue to increase.
The increase in 90+ days contractual delinquency at June 30, 2003 occurred
primarily because the residential mortgage loan portfolio continued to mature. CONSTRUCTION PRODUCTS The following summarizes Construction Products results for the three
months ended June 30, 2003 compared to the same period last year (dollars in
millions): For the Three Months Ended June 30,2003
    
    
    2002Revenues
    
    $
    144.1
    
    
    $
    128.8Cost of Sales and Expenses
    
    
    (119.7
    )
    
    
    (99.7
    )Selling, General and Administrative Expenses+
    
    
    (1.5
    )
    
    
    (1.4
    )Operating Earnings *
    
    $
    22.9
    
    
    $
    27.7
  +
 
 Represents Construction Products Corporate general and administrative expenses. *
 
 Before Minority Interest of $7.5 million and $8.9 million for the three months ended June 30, 2003 and 2002,
respectively. Construction Products revenues for the three months ended June 30, 2003
were 11.9% greater than the same period last year. These increases were
primarily the result of a $10.9 million increase in gypsum wallboard revenues
and a $2.5 million increase in paperboard revenues. The increase in gypsum
wallboard and paperboard revenues was primarily caused by higher sales volume
when compared to the same period last year. 32




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##### Table of Contents



Construction Products cost of sales for the three months ended June 30,
2003 was 20.1% higher than the same period last year, primarily due to
increased sales volume in all segments, except aggregates, higher maintenance
costs for cement manufacturing facilities and higher energy costs for gypsum
wallboard and paperboard. Construction Products selling, general and
administrative expenses for the three months ended June 30, 2003 remained
relatively consistent with prior year. For the three months ended June 30, 2003, Construction Products operating
earnings, net of minority interest, decreased 17.3% from results for the same
period a year ago. Operating earnings decreased primarily due to the increase
in gypsum wallboard and paperboard energy costs noted above. CONSTRUCTION SERVICES The following summarizes Construction Services results for the three
months ended June 30, 2003 compared to the same period last year (dollars in
millions): For the Three Months Ended June 30,2003
    
    
    2002Revenues
    
    $
    375.8
    
    
    $
    360.7Operating Earnings
    
    $
    4.6
    
    
    $
    8.1New Contracts Executed and Change Orders
    
    $
    261.3
    
    
    $
    272.3Backlog of Uncompleted Contracts
    
    $
    1,404.8
    
    
    $
    2,091.9
 Construction Services revenues for the three months ended June 30, 2003
were 4.2% higher than revenues for the same period last year. The increase in
revenues was primarily the result of the stage of execution of certain
longer-term contracts, as well as an increase in the volume of shorter-term
contracts. Operating earnings for the group decreased 43.2% in the three
months ended June 30, 2003 compared to the same period last year primarily as a
result of the prior year including certain high margin contracts. For the
three months ended June 30, 2003, new contracts executed and change orders
decreased 4.0% from the same period last year, and backlog of uncompleted
contracts decreased 32.8% from June 30, 2002. The decrease in backlog is
primarily due to delays in the execution of contracts for awarded projects.
Construction Services defines backlog as the uncompleted portion of all signed
contracts. In addition to backlog, Construction Services has been awarded work
that is pending execution of a signed contract. At June 30, 2003 and 2002,
respectively, such work, which is not included in backlog, was approximately
$2.02 billion and $1.46 billion, respectively. There is no guarantee that
these unsigned contracts will result in future revenues. The Construction Services segment provided a positive average net cash
flow in excess of our investment in the segment of $126.9 million for the three
months ended June 30, 2003 compared to $129.3 million for the same period last
year. 33




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INVESTMENT REAL ESTATE The following summarizes Investment Real Estates results for the three
months ended June 30, 2003 compared to the same period last year (dollars in
millions): For the Three Months Ended June 30,2003
    
    
    2002Revenues
    
    $
    2.7
    
    
    $
    6.6Earnings (Loss) from Unconsolidated Entities
and Other
    
    $
    3.9
    
    
    $
    (0.7
    )Operating Earnings
    
    $
    4.7
    
    
    $
    3.4
 Investment Real Estates revenues for the three months ended June 30, 2003
were 59.1% lower than revenues for the same period last year. Operating
earnings from Investment Real Estate for the three months ended June 30, 2003
totaled $4.7 million compared to $3.4 million in the same period last year.
The fluctuations in revenues and operating earnings were primarily related to
the receipt of a cash settlement from litigation in the prior year and, as discussed below, fluctuations in results from Investment
Real Estates investment in Centex Development Company, L.P., or the
Partnership. Property sales contributed operating earnings of $1.8 million for the
three months ended June 30, 2003 and $1.8 million for the same period last
year. The timing of land sales is uncertain and can vary significantly from
period to period. Included in Investment Real Estates operating earnings for the three
months ended June 30, 2003 were earnings of $4.5 million derived from its
investment in the Partnership compared to a loss of $0.8 million for the same
period last year. As noted in Note (H), Centex Development Company, L.P., of
the Notes to Consolidated Financial Statements of Centex, the investment in the
Partnership is not consolidated and is accounted for on the equity method of
accounting. The largest component of the Partnership is its International Home
Building segment, based near London, England. Included in Investment Real
Estates operating earnings were earnings of $4.8 million and a loss of $0.4
million for the three months ended June 30, 2003 and 2002, respectively,
derived from International Home Building. The increase in earnings from last
year was primarily due to an improvement in homebuilding operating margins and
an increase in the number of units closed. For the three months ended June 30,
2003 and 2002, this segment closed 313 units at an average sales price per unit
of $283,534 and 269 units at an average sales price per unit of
$226,662,
respectively. Operating earnings per unit, before interest, were $17,083 and
$461 for the three months ended June 30, 2003 and 2002, respectively. It is not currently anticipated that any significant capital will be
allocated to Investment Real Estate for new business development. Through its
investment in the Partnership, Investment Real Estate will focus on the
International Home Building operations and evaluate opportunistic real estate
transactions. OTHER Our Other segment includes Corporate general and administrative expense,
interest expense and minority interest. Also included in our Other segment are
the Companys home services operations, which are not material for purposes of
segment reporting. In June 2003, the Company spun off its manufactured housing 34




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operations which had previously been included in the Other segment. As a
result of the spin-off, manufactured housing operations are reflected as a
discontinued operation and not included in the segment information below.
Earnings related to the operations that were spun off have been reclassified to
discontinued operations. Other consisted of the following (dollars in millions): For the Three MonthsEnded June 30,2003
    
    
    2002Operating Loss from Home Services
    
    $
    (1.3
    )
    
    $
    (1.6
    )Corporate
General and Administrative Expense
    
    $
    19.2
    
    
    $
    12.6Interest Expense
    
    $
    17.0
    
    
    $
    15.4Minority Interest
    
    $
    7.5
    
    
    $
    8.9Other
    
    $
    (0.3
    )
    
    $
    (0.6
    )
 The improvement in our home services divisions operating earnings in the
current year is primarily due to lower general and administrative expenses. As noted above, earnings related to the manufactured housing operations
that were spun off have been reclassified to discontinued operations. For the
three months ended June 30, 2003 and 2002, discontinued operations had revenues of $39.5 million and $32.9 million, respectively;
operating earnings of $702 thousand and $746 thousand, respectively; and net
income of $456 thousand and $485 thousand, respectively. Corporate general and administrative expense represents compensation and
other costs not identifiable with a specific segment. The increase in corporate
general and administrative expense is primarily related to an increase in
personnel and higher compensation resulting from continued improvements in our
profitability. The change in interest expense is primarily related to an increase in
average debt outstanding for the three months ended June 30, 2003, as compared
to the same period last year. This increase is offset by slightly lower
borrowing costs during the three months ended June 30, 2003, as compared to the
same period last year. The decrease in minority interest is primarily related to a decrease in
the earnings of Centex Construction Products, Inc. 35




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FINANCIAL CONDITION AND LIQUIDITY At June 30, 2003, we had cash and cash equivalents of $111.0 million,
including $11.5 million in Financial Services and $11.5 million belonging to
our 64.9%-owned Construction Products subsidiary. The net cash used in or
provided by the operating, investing and financing activities for the three
months ended June 30, 2003 and 2002 is summarized below (dollars in thousands).
See Statements of Consolidated Cash Flows with Consolidating Details on
pages 4-5 of this Report for the detail supporting this summary. Note that we
use the term Centex to represent a supplemental consolidating presentation that
reflects the Financial Services segment as if accounted for under the equity
method. For the Three MonthsEnded June 30,2003
    
    
    2002Net Cash (Used in) Provided byCentex*Operating Activities
    
    $
    (326,114
    )
    
    $
    (358,883
    )Investing Activities
    
    
    (41,663
    )
    
    
    85,211Financing Activities
    
    
    12,622
    
    
    
    113,187(355,155
    )
    
    
    (160,485
    )Financial ServicesOperating Activities
    
    
    (5,492
    )
    
    
    (87,044
    )Investing Activities
    
    
    (483,133
    )
    
    
    (239,280
    )Financing Activities
    
    
    485,027
    
    
    
    319,617(3,598
    )
    
    
    (6,707
    )Centex Corporation and SubsidiariesOperating Activities
    
    
    (340,195
    )
    
    
    (303,187
    )Investing Activities
    
    
    (516,207
    )
    
    
    (296,809
    )Financing Activities
    
    
    497,649
    
    
    
    432,804Net Decrease in Cash
    
    $
    (358,753
    )
    
    $
    (167,192
    )
    *
 
 Centex represents a supplemental presentation that reflects the
Financial Services segment as if accounted for under the equity method.
We believe that separate disclosure of the consolidating information is
useful because the Financial Services subsidiaries operate in a distinctly
different financial environment that generally requires significantly less
equity to support their higher debt levels compared to the operations of
our other subsidiaries; the Financial Services subsidiaries have
structured their financing programs substantially on a stand alone basis;
and we have limited obligations with respect to the indebtedness of our
Financial Services subsidiaries. Management uses this information in its
financial and strategic planning. We also use this presentation to allow
investors to compare us to homebuilders that do not have financial
services operations. We generally fund our Centex operating and other short-term needs through
cash from operations, borrowings from commercial paper and other short-term
credit arrangements and the issuance of medium-term notes and other debt
securities. During the three months ended June 30, 2003, cash was primarily
used in Centex Operating Activities to finance increases in housing inventories
relating to the increased level of sales and resulting units under construction
during the year and for the acquisition of land held for development. The
funds provided by Centex Financing Activities were primarily from new debt used
to fund the increased homebuilding activity. We generally fund our Financial Services operating and other short-term
needs through credit facilities, securitizations, proceeds from the sale of
mortgage loans to HSF-I and cash flows from operations, as described below.
During the three months ended June 30, 2003, cash was primarily used in
Financial Services Investing Activities to finance increases in residential
mortgage loans held for investment. The funds 36




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provided by Financial Services Financing Activities were primarily from
new debt used to fund the increased residential mortgage loan activity. Centex Corporation currently has an investment-grade credit rating from
each of the principal credit rating agencies. Our ability to finance our
activities on favorable terms is dependent to a significant extent on whether
we are able to maintain our investment-grade credit ratings. We attempt to
manage our debt levels in order to maintain investment-grade ratings. If,
however, our debt ratings were downgraded, we would not have direct access to
the commercial paper markets and might need to draw on our existing committed
backup facility, which exceeds our commercial paper program size. Our
existing credit facilities and available borrowing capacity as of June 30, 2003
are summarized below (dollars in thousands): Existing Credit
    
    
    AvailableFacilities
    
    
    CapacityCentexCentex
CorporationMulti-Bank Revolving Credit Facility
    
    $
    700,000
    
    
    $
    700,000
    (1)Uncommitted Bank Lines
    
    
    60,000
    
    
    
    60,000Construction
    ProductsSenior Revolving Credit Facility
    
    
    155,000
    
    
    
    87,817
    (2)915,000
    
    
    
    847,817Financial ServicesUnsecured Credit Facilities
    
    
    125,000
    
    
    
    70,800
    (3)Secured Credit Facilities
    
    
    415,000
    
    
    
    199,694
    (4)Harwood Street Funding II, L.L.C. Facility
    
    
    1,500,000
    
    
    
    750,1872,040,000
    
    
    
    1,020,681$
    2,955,000
    
    
    $
    1,868,498
    (5)
  (1)
 
 This is a committed, multi-bank revolving credit facility, maturing in
August 2005, which serves as backup for commercial paper borrowings. As
of June 30, 2003, there were no borrowings under this backup facility, and
our $600 million commercial paper program had no issuance outstanding. We
have not borrowed under this facility since its inception. See
Note (S), Subsequent Events.  (2)
 
 This committed facility was entered into by Construction Products and has
no recourse to Centex Corporation. The Senior Revolving Credit Facility
matures in March 2006. Construction Products terminated its Annually
Renewable Commercial Paper Conduit in June 2003.  (3)
 
 Centex Corporation, CTX Mortgage and Home Equity, on a joint and several
basis, share in a $125 million uncommitted, unsecured credit facility.  (4)
 
 CTX Mortgage and Home Equity share in a $250 million committed secured
credit facility to finance mortgage inventory. CTX Mortgage also
maintains $155 million of committed secured mortgage warehouse facilities
to finance mortgages not sold to HSF-I. Home Equity also maintains a $10
million committed secured mortgage warehouse facility to finance
mortgages.  (5)
 
 The amount of available borrowing capacity consists of $1.74 billion of committed
borrowings and $130.8 million of uncommitted borrowings as of June 30,
2003. Although we believe that the uncommitted capacity is currently
available, there can be no assurance that the lenders under the applicable
facilities would elect to make advances to Centex Corporation or its
subsidiaries if and when requested to do so. 37




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CTX Mortgage finances its inventory of mortgage loans principally through
sales of Jumbo A and conforming loans to HSF-I. HSF-I acquires mortgage
loans from CTX Mortgage, holds them for a period averaging between 45
and 60 days and then resells them into the secondary
market. HSF-I obtains the funds needed to purchase eligible mortgage loans
from CTX Mortgage by issuing investment grade senior debt obligations and
subordinated certificates. The purpose of this arrangement is to allow CTX
Mortgage to reduce the cost of financing the mortgage loans originated by it
and to improve its liquidity. For additional information regarding HSF-I, see
Certain Off-Balance-Sheet and Other Obligations on pages 40-42 of this
Report. Home Equity finances its inventory of mortgage loans through Harwood
Street Funding II, L.L.C., or HSF-II, a wholly-owned, consolidated entity,
under a revolving sales agreement that expires upon final payment of the senior
and subordinated debt issued by HSF-II. This arrangement, where HSF-II has
committed to finance all eligible loans, gives Home Equity daily access to
HSF-IIs borrowing capacity of $1.50 billion. HSF-II obtains funds through the sale of
subordinated notes that are rated BBB by Standard & Poors, or S&P, Baa2 by
Moodys Investors Service, or Moodys, and BBB by Fitch Ratings, or Fitch, and
short-term secured liquidity notes that are rated A1+ by S&P, P1 by Moodys and
F1+ by Fitch. Because HSF-II is a consolidated entity, the debt, interest
income and interest expense of HSF-II are reflected in the financial statements
of Financial Services. Under our debt covenants, we are required to maintain certain leverage and
interest coverage ratios and a minimum tangible net worth. At June 30, 2003,
Centex Corporation was in compliance with all of these covenants. As of June 30, 2003, our short-term debt was $944.3 million, all of which
was applicable to Financial Services. Excluding Financial Services and
Construction Products, our short-term borrowings are generally financed at
prevailing market interest rates from our commercial paper programs and from
uncommitted bank facilities. 38




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Our outstanding debt as of June 30, 2003 was as follows (dollars in
thousands)(1): CentexShort-Term Notes Payable
    
    $
    Senior Debt:Medium-Term Note Programs, weighted-average rate 4.75%, due through
2007
    
    
    281,000Long-Term Notes, weighted-average rate 7.05%, due through 2012
    
    
    1,508,170Other Indebtedness, weighted-average rate 2.67%, due through 2009
    
    
    95,173Subordinated Debt:Subordinated Debentures, 7.38%, due in 2006
    
    
    99,906Subordinated Debentures, 8.75%, due in 2007
    
    
    99,7112,083,960Financial ServicesShort-Term Debt:Short-Term Notes Payable
    
    
    269,506Harwood Street Funding II, L.L.C. Secured Liquidity Notes
    
    
    674,813Home Equity Loans Asset-Backed Certificates, weighted-average rate 3.63%, due
through 2034
    
    
    4,464,527Harwood Street Funding II, L.L.C. Variable Rate Subordinated Notes,
weighted-average rate 3.25%, due through 2008
    
    
    75,0005,483,846Total
    
    $
    7,567,806
  (1)
 
 Certain of the borrowings described in the table above vary on a seasonal
basis and depend on the working capital needs of our operations. Maturities of long-term debt of Centex and Financial Services (in
thousands) during the next five years ending March 31 are: Long-term DebtFinancialCentex
    
    
    Services
    
    
    Total2004
    
    $
    25,475
    
    
    $
    926,518
    
    
    $
    951,9932005
    
    
    31,971
    
    
    
    1,040,844
    
    
    
    1,072,8152006
    
    
    403,310
    
    
    
    798,291
    
    
    
    1,201,6012007
    
    
    290,431
    
    
    
    689,442
    
    
    
    979,8732008
    
    
    359,091
    
    
    
    812,746
    
    
    
    1,171,837Thereafter
    
    
    973,682
    
    
    
    271,686
    
    
    
    1,245,368$
    2,083,960
    
    
    $
    4,539,527
    
    
    $
    6,623,487
 Financial Services debt related to securitized residential mortgage loans
structured as collateralized borrowings (Home Equity Loans Asset-Backed
Certificates) was $4.46 billion at June 30, 2003 and has no recourse to Home
Equity or Centex Corporation. The principal and interest on these notes are
paid using the cash flow from the underlying residential mortgage loans, which
serve as collateral for the debt. Accordingly, the timing of the principal
payments on these notes is dependent upon the payment received on the
underlying residential mortgage loans. The expected maturities of this
component of long-term debt are based on contractual maturities adjusted for
projected repayments and prepayments of principal. As is common in these
structures, Home Equity remains liable for customary loan representations. 39




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CERTAIN OFF-BALANCE-SHEET AND OTHER OBLIGATIONS The following is a summary of certain off-balance-sheet arrangements and
other obligations and their possible effects on our liquidity and capital
resources. Harwood Street Funding I, L.L.C. HSF-I is an unaffiliated entity established in July 1999 that is not
consolidated with Financial Services or Centex Corporation and subsidiaries as
of June 30, 2003. Since December 1999, CTX Mortgage has sold substantially all
of the Jumbo A and conforming mortgage loans that it originates to HSF-I in
accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans,
it typically holds them for a period averaging between 45 and 60 days and then
resells them into the secondary market. HSF-I obtains the funds needed to
purchase eligible mortgage loans from CTX Mortgage by issuing (1) securitized
medium-term debt that is currently rated AAA by S&P and Aaa by Moodys, (2)
short-term secured liquidity notes that are currently rated A1+ by S&P and P1
by Moodys and (3) subordinated certificates maturing in September 2004,
November 2005 and June 2006, extendable for up to five years, that are rated
BBB by S&P and Baa2 by Moodys. This arrangement provides CTX Mortgage with
reduced financing cost for eligible mortgage loans it originates and improves
its liquidity. Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to
sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage
loans that satisfy certain eligibility criteria and portfolio requirements.
The maximum amount of mortgage loans that HSF-I is allowed to carry in its
inventory under the HSF-I Purchase Agreement is limited to $3.00 billion. HSF-Is commitment to purchase eligible mortgage loans continues in effect
until the occurrence of certain termination events described in the HSF-I
Purchase Agreement. These termination events primarily relate to events of
default under, or other failure to comply with, the provisions, including loan
portfolio limitations, of the agreements that govern the mortgage loan
warehouse program but also include a downgrade in Centex Corporations credit
ratings below BB+ by S&P or Ba1 by Moodys. In the event CTX Mortgage was
unable to sell loans to HSF-I, it would draw on existing credit facilities
currently held in addition to HSF-I. In addition, it might need to make other
customary financing arrangements to fund its mortgage loan origination
activities. Although we believe that CTX Mortgage could arrange for
alternative financing that is common for non-investment grade mortgage
companies, there can be no assurance that such financing would be available on
satisfactory terms, and any delay in obtaining such financing could adversely
affect the results of operations of CTX Mortgage. In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as
servicer of the loans owned by HSF-I and arranges for the sale of the eligible
mortgage loans into the secondary market. In its capacity as servicer, CTX
Mortgage must act in the best interests of HSF-I so as to maximize the proceeds
of sales of eligible mortgage loans. The performance of obligations of CTX
Mortgage, solely in its capacity as servicer, is guaranteed by Centex
Corporation. CTX Mortgage received $4.6 million and $2.3 million in fees for
servicing loans owned by HSF-I in the three months ended June 30, 2003 and
2002, respectively. These servicer obligations include repurchasing a mortgage
loan from HSF-I in the event of a breach of the servicers representations and
warranties, which materially and adversely affects the value of the mortgage
loan and is not cured within 60 days. 40




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HSF-I has entered into a swap arrangement with a bank, that we refer to as
the Harwood Swap, under which the bank has agreed to make certain payments to
HSF-I, and HSF-I has agreed to make certain payments to the bank, the net
effect of which is that the bank has agreed to bear certain interest rate
risks, non-credit related market risks and prepayment risks related to the
mortgage loans held by HSF-I. The purpose of this arrangement is to provide
credit enhancement to HSF-I by permitting it to hedge these risks with a
counterparty having a short-term credit rating of A1+ from S&P and P1 from
Moodys. Additionally, we have entered into a separate swap arrangement with
the bank pursuant to which we have agreed to pay to the bank all amounts that
the bank is required to pay to HSF-I pursuant to the Harwood Swap plus a
monthly fee equal to a percentage of the notional amount of the Harwood Swap,
and the bank is required to pay to us all amounts that the bank receives from
HSF-I pursuant to the Harwood Swap. Accordingly, we effectively bear all
interest rate risks, non-credit related market risks and prepayment risks that
are the subject of the Harwood Swap. Financial Services executes the forward
sales of CTX Mortgages loans to hedge the risk of reductions in value of
mortgages sold to HSF-I or maintained under secured financing agreements. This
offsets most of our risk as the counterparty to the swap supporting the payment
requirements of HSF-I. We are also required to reimburse the bank for certain
expenses, costs and damages that it may incur. As of June 30, 2003, HSF-I owned $2.48 billion in securitized residential
mortgage loans sold to it by CTX Mortgage and had $2.34 billion of outstanding
securitized term debt and $0.14 billion of outstanding subordinated
certificates. We do not guarantee the payment of any debt or subordinated
certificates of HSF-I, and we are not liable for credit losses relating to
securitized residential mortgage loans sold to HSF-I. However, we do retain
certain risks related to the portfolio of mortgage loans held by HSF-I. In
particular, CTX Mortgage makes representations and warranties to HSF-I to the
effect that each mortgage loan sold to HSF-I satisfies the eligibility criteria
and portfolio requirements discussed above. CTX Mortgage may be required to
repurchase mortgage loans sold to HSF-I if such mortgage loans are determined
to be ineligible loans or there occur certain other breaches of representations
and warranties of CTX Mortgage, as seller or
servicer. Centex Corporation guarantees CTX Mortgages obligation to
repurchase such loans. CTX Mortgage records a liability for its estimated
losses for these obligations and such amount is included in its loan
origination reserve. CTX Mortgage sold $3.79 billion and $1.84 billion of
mortgage loans to HSF-I and repurchased $0.4 million and $0.6 million of
delinquent or foreclosed mortgage loans from HSF-I during the three months
ended June 30, 2003 and 2002, respectively. CTX Mortgage recognized gains on
the sale of mortgage loans of $87.2 million and $51.0 million for the three
months ended June 30, 2003 and 2002, respectively. In January 2003, the FASB issued FIN 46, which modifies the accounting for
certain entities in which (1) equity investors do not have a controlling
financial interest and/or (2) the entity is unable to finance its activities
without additional subordinated financial support from other parties. Pursuant
to FIN 46, HSF-I is a variable interest entity for which CTX Mortgage is the
primary beneficiary. Accordingly, HSF-I will be consolidated in our financial
statements beginning July 1, 2003. As a result, we anticipate we will record a
charge of approximately $15.0 to $20.0 million representing the cumulative
effect of a change in accounting principle in the quarter ending September 30,
2003. This charge primarily represents the deferral of service release premium income,
which will be recognized as loans are sold into the secondary market. Additionally, the consolidation of HSF-I will result in an increase in
our residential mortgage loans held for sale with a corresponding increase in
our Financial Services debt. HSF-Is debt does not have recourse to us, and the consolidation
of this debt will not change our credit profile or debt ratings. 41




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3333 Holding Corporation, 3333 Development Corporation and Centex Development Company, L.P. 3333 Holding Corporation, 3333 Development Corporation and the Partnership
are entities that are neither affiliates of nor consolidated with Centex
Corporation and subsidiaries at June 30, 2003. These entities were established
in 1987 to broaden the range of business activities that may be conducted for
the benefit of our stockholders to include general real estate development. We
determined that this expansion would improve stockholder value through
longer-term real estate investments, real estate developments and the benefits
of the partnership form of business. The Partnership is managed by its general
partner, 3333 Development Corporation, a wholly-owned subsidiary of 3333
Holding Corporation. We generally are not liable for the obligations of 3333
Holding Corporation, 3333 Development Corporation or the Partnership. However,
as of June 30, 2003, we guaranteed approximately $1.1 million of indebtedness
of the Partnership. In addition, we enter into certain land purchase and other
transactions with the Partnership. For additional information regarding these
entities, see the Joint Explanatory Note at the beginning of this Report and
the financial statements of the Partnership, filed in tandem with this Report.
In addition, for information regarding these entities and Centex Corporation
and subsidiaries, on an aggregate basis, see Note (H), Centex Development
Company, L.P., of the Notes to Consolidated Financial Statements of Centex
Corporation. For a discussion of the impact of FIN 46 on our accounting for
transactions with these entities, see Recent Accounting Pronouncements below. Joint Ventures We conduct a portion of our land acquisition, development and other
activities through our participation in joint ventures in which we hold less
than a majority interest. These joint ventures are typically large in nature,
and partnering with other developers allows Centex Homes to share the risks and
rewards of ownership while providing for efficient asset utilization. Our
investment in these non-consolidated joint ventures, accounted for using the
equity method, was $118.4 million and $102.3 million at June 30, 2003 and March
31, 2003, respectively. These joint ventures had total outstanding secured
construction debt of approximately $236.8 million and $232.5 million at June
30, 2003 and March 31, 2003, respectively. Our liability with respect to this
debt, based on our ownership percentage of the related joint ventures, is
limited to approximately $62.2 million and $56.4 million at
June 30, 2003 and March 31, 2003, respectively. Under the structure of this debt, we become liable up
to these amounts only to the extent that the construction debt exceeds a
certain percentage of the value of the project. At June 30, 2003 and March 31,
2003, we were not liable for any of this debt. For a discussion of the impact
of FIN 46 on our accounting for transactions with non-consolidated joint
ventures, see Recent Accounting Pronouncements below. Letters of Credit and Guarantees At June 30, 2003, we had outstanding letters of credit of $124.7 million
that primarily relate to development obligations of Home Building. We expect
that the obligations secured by these letters of credit will generally be
performed by our subsidiaries in the ordinary course of business and in
accordance with the applicable contractual terms. To the extent that the
underlying commercial obligations are performed by our subsidiaries, the
related letters of credit will be released and we will not have any continuing
obligations. We have no material third-party guarantees. CRITICAL ACCOUNTING POLICIES Some of our critical accounting policies require the use of judgment in
their application or require estimates of inherently uncertain matters.
Although our accounting policies are in compliance with generally 42




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accepted accounting principles, a change in the facts and circumstances of the
underlying transactions could significantly change the application of the
accounting policies and the resulting financial statement impact. Listed below
are those policies that we believe are critical and require the use of complex
judgment in their application. Impairment of Long-Lived Assets Housing projects and land held for development and sale are stated at the
lower of cost (including direct construction costs, capitalized interest and
real estate taxes) or fair value less cost to sell. Property and equipment is
carried at cost less accumulated depreciation. We assess these assets for
recoverability in accordance with the provisions of Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, or SFAS No. 144. SFAS No. 144 requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets is measured by comparing the carrying amount of an
asset to future undiscounted net cash flows expected to be generated by the
asset. These evaluations for impairment are significantly impacted by
estimates of revenues, costs and expenses and other factors. If these assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Goodwill Goodwill represents the excess of purchase price over net assets of
businesses acquired. We adopted the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS
No. 142, effective April 1, 2001. Upon the adoption of SFAS No. 142, goodwill
is no longer subject to amortization. Rather, goodwill is subject to at least
an annual assessment for impairment, at the reporting unit level, by applying a
fair value-based test. If the carrying amount exceeds the fair value, an
impairment has occurred. We continually evaluate whether events and
circumstances have occurred that indicate the remaining balance of goodwill may
not be recoverable. Fair value is estimated using a discounted cash flow or
market valuation approach. Such evaluations for impairment are significantly
impacted by estimates of future revenues, costs and expenses and other factors. If
the goodwill is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the goodwill exceeds the
fair value of the future cash flows. We had no impairment of goodwill in the
three months ended June 30, 2003. Consolidation of Variable Interest Entities In January 2003, the FASB issued FIN 46, which modifies the accounting for
certain entities in which (1) equity investors do not have a controlling
financial interest and/or (2) the entity is unable to finance its activities without
additional subordinated financial support from other parties. FIN 46 applies
immediately to variable interest entities created, or in which an enterprise
obtains an interest, after January 31, 2003. For variable interest entities in
which an enterprise holds a variable interest that it acquired before
February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15,
2003. FIN 46 requires significant use of judgment and estimates in determining
its application. 43




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Valuation of Residential Mortgage Loans Held for Investment Home Equity originates and purchases loans in accordance with standard
underwriting criteria. The underwriting standards are primarily intended to
assess the creditworthiness of the mortgagee and the value of the mortgaged
property and to evaluate the adequacy of the property as collateral for the
home equity loan. Home Equity establishes an allowance for losses by charging the provision
for losses in the statement of consolidated earnings when it believes the event
causing the loss has occurred. When Home Equity determines that a residential
mortgage loan held for investment is partially or fully uncollectible, the
estimated loss is charged against the allowance for losses. Recoveries on
losses previously charged to the allowance are credited to the allowance at the
time the recovery is collected. We believe that the allowance for losses is sufficient to provide for
credit losses in the existing residential mortgage loans held for investment,
which include real estate owned. We evaluate the allowance on an aggregate
basis considering, among other things, the relationship of the allowance to
residential mortgage loans held for investment and historical credit losses.
The allowance reflects our judgment of the present loss exposure at the end of
the reporting period. A range of expected credit losses is estimated using
historical losses, static pool loss curves and delinquency modeling. These
tools take into consideration historical information regarding delinquency and
loss severity experience and apply that information to the portfolio at each
reporting date. Although we consider the allowance for losses on residential mortgage
loans held for investment reflected in our consolidated balance sheet to be
adequate, there can be no assurance that this allowance will prove to be
adequate over time to cover ultimate losses. This allowance may prove to be
inadequate due to unanticipated adverse changes in the economy or discrete
events adversely affecting specific customers or industries. Mortgage Securitization Residual Interest Home Equity uses mortgage securitizations to finance its mortgage loan
portfolio. For securitizations prior to April 2000, which Home Equity
accounted for as sales, Home Equity retained a mortgage securitization residual
interest, or MSRI. The MSRI represents the present value of Home Equitys
right to receive, over the life of the securitization, the excess of the
weighted-average coupon on the loans securitized over the interest rates on the
securities sold, a normal servicing fee, a trustee fee and an insurance fee,
where applicable, net of the credit losses relating to the loans securitized.
Home Equity estimates the fair value of MSRI through the application of
discounted cash flow analysis. Such analysis requires the use of various
assumptions, the most significant of which are anticipated prepayments
(principal reductions in excess of contractually scheduled reductions),
estimated future credit losses and the discount rate applied to future cash
flows. Loan Origination Reserve CTX Mortgage has established a liability for anticipated losses associated
with loans originated and sold to HSF-I or other unaffiliated third parties.
This liability includes losses associated with certain borrower payment
defaults, credit quality issues or misrepresentation. CTX Mortgage estimates
the losses that may be incurred for certain loan originations based on, among
other factors, historical loss rates and current trends in loan originations.
This liability reflects managements judgment of the loss exposure at the end
of the reporting period. 44




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Although we consider the loan origination reserve reflected in our
consolidated balance sheet at June 30, 2003 to be adequate, there can be no
assurance that this reserve will prove to be adequate over time to cover
ultimate losses in connection with our loan originations. This reserve may
prove to be inadequate due to unanticipated adverse changes in the economy or
discrete events adversely affecting specific customers. Insurance Accruals We have certain deductible limits under our workers compensation,
automobile and general liability insurance policies for which reserves are
actuarially determined based on claims filed and an estimate of claims incurred
but not yet reported. Projection of losses concerning these liabilities is
subject to a high degree of variability due to factors such as claim settlement
patterns, litigation trends and legal interpretations, among others. RECENT ACCOUNTING PRONOUNCEMENTS In January 2003, the FASB issued FIN 46, which modifies the accounting for
certain entities in which (1) equity investors do not have a controlling
financial interest and/or (2) the entity is unable to finance its activities
without additional subordinated financial support from other parties. Certain
disclosure requirements of FIN 46 are effective for financial statements of
interim or annual periods issued after January 31, 2003. FIN 46 applies
immediately to variable interest entities created, or in which an enterprise
obtains an interest, after January 31, 2003. For variable interest entities in
which an enterprise holds a variable interest that it acquired before February
1, 2003, FIN 46 applies to interim or annual periods beginning after June 15,
2003. At June 30, 2003, we have interests in the Partnership, HSF-I and
certain joint ventures and land under option agreements that are or may be affected by
this interpretation. The nature of these entities operations, our potential
maximum exposure related to these entities and the applicability of FIN 46 to
these entities are discussed as follows: The Partnership
    
    Financial statements filed in tandem with this ReportNote (H), Centex Development Company, L.P.HSF-I
    
    Note (G), IndebtednessLand Option Agreements
    
    Note (J), Land Held Under Option Agreements notOwned and Other Land
DepositsJoint Ventures
    
    Note (I), Commitments and Contingencies
 We have historically accounted for stock-based compensation in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, or APB No. 25, and related interpretations, as permitted by
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, or SFAS No. 123. On April 1, 2003, we adopted the
fair value measurement provisions of SFAS No. 123 under which we will recognize
compensation expense of a stock-based award to an employee over the vesting
period based on the fair value of the award on the grant date. The fair value
method has been applied only to awards granted or modified on or after April 1,
2003, whereas awards granted prior to such date will continue to be accounted
for under APB No. 25. In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, or SFAS No. 149. The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, or SFAS No. 133, by requiring
that contracts with comparable characteristics be accounted for 45




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##### Table of Contents



similarly, resulting in more consistent reporting of contracts as either derivatives or
hybrid instruments. A portion of this statement is effective for contracts
entered into or modified and for hedging relationships designated after June
30, 2003. The remainder of this statement codifies previously issued
SFAS No. 133 implementation guidance, which retains its original effective dates. We do
not expect the implementation of SFAS No. 149 to have a material impact on our
results of operations or financial position.
  FORWARD-LOOKING STATEMENTS
 Various sections of this Report, including Managements Discussion and
Analysis of Financial Condition and Results of Operations, contain
forward-looking statements within the meaning of Section 27A of
the Securities Exchange 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 we are
discussing our 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 we
express or forecast in these forward-looking statements. In addition to the
specific uncertainties discussed elsewhere in this Report, the following risks
and uncertainties may affect our actual performance and results of operations:  
 
 Our Home Building operations are somewhat cyclical and sensitive to changes in
economic conditions, including levels of employment, consumer confidence and
income, availability of financing, interest rate levels and changes in the economic
condition of the local markets in which we operate.  
 
 Our Home Building operations are also subject to other risks and uncertainties,
including seasonal variations, adverse weather conditions, the availability of
adequate land in desirable locations, the cost and availability of labor and
construction materials, labor disputes, the general demand for housing and new
construction and the resale market for existing homes.  
 
 Our Construction Services operations are also somewhat cyclical and sensitive to
changes in economic conditions, including overall capital spending trends in the
economy, changes in federal and state appropriations for construction projects and
competitive pressures on the availability and pricing of construction projects.  
 
 Our Construction Services operations are also subject to other risks and
uncertainties, including the timing of new awards and the funding of such awards;
adverse weather conditions; cancellations of, or changes in the scope to, existing
contracts; the cost and availability of labor and construction materials; labor
disputes; the ability to meet performance or schedule guarantees and cost overruns.  
 
 Virtually all of our homebuyers finance their home acquisitions through our
Financial Services operations or third party lenders. In general, our Home
Building operations can be adversely affected by increases in interest rates.  
 
 The results of operations of CTX Mortgage depend to a significant extent on the
level of interest rates. Any significant increases in mortgage rates above
currently prevailing levels could adversely affect the volume of loan originations.
There can be no assurance that mortgage rates will remain at the current level in
the future. Our mortgage loan operations are also dependent upon the
securitization market for mortgage-backed securities and the availability of
mortgage warehouse financing. 46




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##### Table of Contents




 
 Our Home Equity operations involve holding residential mortgage loans for
investment and establishing an allowance for credit losses on these loans.
Although the amount of this allowance reflects our judgment as to our present loss
exposure on these loans, there can be no assurance that it will be sufficient to
cover any losses that may ultimately be incurred.  
 
 Demand for the products that our Construction Products operations produce is
directly related to activity in the homebuilding and construction industries and to
general economic conditions. Our Construction Products operations are also
concentrated in particular regional and local markets that may experience cyclical
downturns at different times than the national economy. The price at which we sell
our construction products, particularly gypsum wallboard, is highly sensitive to
changes in supply and demand for such products, energy costs, raw material prices
and competition from other domestic and foreign producers.  
 
 All of our businesses operate in very competitive environments, which are
characterized by competition from a number of other homebuilders, mortgage lenders,
construction products producers and contractors in each of the markets in which we
operate.  
 
 We are subject to various federal, state and local statutes, rules and regulations
that could affect our businesses, including those concerning zoning, construction,
protecting the environment and health. In addition, our businesses could be
affected by changes in federal income tax policy, federal mortgage loan financing
programs and by other changes in regulation or policy. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks related to fluctuations in interest rates
on our direct debt obligations, on mortgage loans receivable, residual interest
in mortgage securitizations and securitizations classified as debt. We utilize
derivative instruments, including interest rate swaps, in conjunction with our
overall strategy to manage the debt outstanding that is subject to changes in
interest rates. We utilize forward sale commitments to mitigate the risk
associated with the majority of our mortgage loan portfolio. Other than the
forward commitments and interest rate swaps discussed earlier, we do 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 our market risk from March 31,
2003. For further information regarding our market risk, refer to our Annual
Report on Form 10-K for the fiscal year ended March 31, 2003. 
 Item 4. Controls and Procedures An evaluation has been performed under the supervision and with the
participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as of June 30, 2003. Based on that
evaluation, our management, including our Chief Executive Officer and Chief
Financial Officer, concluded that our disclosure controls and procedures were
effective as of June 30, 2003 to provide reasonable assurance that information
required to be disclosed in our reports filed or submitted under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange
Commission. There has been no change in our internal controls over financial
reporting that occurred during the three months ended June 30, 2003 that has
materially affected, or is reasonably likely to materially affect, our internal
controls over financial reporting. 47




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##### Table of Contents



Part II. Other Information 
 Item 6. Exhibits and Reports on Form 8-K  (1)
 
 Exhibits 3.2
    
    
    Amended and Restated By-Laws of Centex
Corporation dated May 15, 2003.4.3.2
    
    
    Second Supplement to Nominee Agreement,
dated as of June 1, 2003, by and between Centex, Holding,
the Partnership, and Mellon Investor Services LLC as
successor nominee and successor transfer agent.10.1
    
    
    Centex Corporation Amended and Restated
1987 Stock Option Plan.10.2
    
    
    Seventh Amended and Restated 1998 Centex
Corporation Employee Non-Qualified Stock Option Plan.10.3
    
    
    Amended and Restated Centex Corporation 2001 Stock Option Plan.10.10
    
    
    Amended and Restated Centex Corporation Long Term Incentive Plan.10.13
    
    
    Centex Corporation 2003 Annual Incentive Compensation Plan.10.14
    
    
    Centex Corporation 2003 Equity Incentive Plan.10.15
    
    
    Distribution Agreement between Centex
Corporation, Cavco Industries L.L.C. and Cavco Industries,
Inc.10.16
    
    
    Administrative Services Agreement
between Centex Service Company and Cavco Industries, Inc.10.17
    
    
    Tax Sharing Agreement between Centex
Corporation and affiliates and Cavco Industries, Inc.10.18
    
    
    Agreement to Assign Trademark Rights and
Limited Consent to Use Centex Trademarks between Centex
Corporation and Cavco Industries, Inc.10.19
    
    
    Amendment No. 1 to Distribution
Agreement between Centex Corporation, Cavco Industries
L.L.C. and Cavco Industries, Inc.31.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.31.2
    
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.32.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 48




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##### Table of Contents



32.2
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 (2)
    
    Reports on Form 8-KCurrent Report on Form 8-K of Centex Corporation dated April
23, 2003 announcing (i) the Companys fourth quarter net
earnings for the quarter ended March 31, 2003; and (ii) the
Companys intention to make a tax-free spin-off of its CAVCO
Industries manufactured housing company to the Companys
stockholders.Current Report on Form 8-K of Centex Corporation dated June 23,
2003 announcing that the Registration Statement on Form 10 of
Cavco Industries, Inc. relating to the Cavco common stock
became effective on June 22, 2003, according to the Securities
and Exchange Commission.
 49




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##### Table of Contents



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 CORPORATIONRegistrantAugust 13, 2003
    
    /s/ Leldon E. EcholsLeldon E. Echols
Executive Vice President and
Chief Financial Officer
(principal financial officer)August 13, 2003
    
    /s/ Mark D. KempMark D. Kemp
Vice President- Controller
(principal accounting officer)
 50




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##### Table of Contents



Part I. Financial Information 
 Item 1. Financial
Statements 
 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 June 30,2003
    
    
    2002Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryRevenues
    
    $
    104,513
    
    
    $
    104,500
    
    
    $
    38
    
    
    $
    87,785
    
    
    $
    87,735
    
    
    $
    88Costs and Expenses
    
    
    100,103
    
    
    
    100,066
    
    
    
    62
    
    
    
    88,789
    
    
    
    88,751
    
    
    
    76Earnings (Loss) from Unconsolidated
Entities and Other
    
    
    135
    
    
    
    135
    
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )
    
    
    Earnings (Loss) from ContinuingOperations Before Income Taxes
    
    
    4,545
    
    
    
    4,569
    
    
    
    (24
    )
    
    
    (1,014
    )
    
    
    (1,026
    )
    
    
    12Income Taxes
    
    
    1,045
    
    
    
    1,045
    
    
    
    
    
    
    
    (470
    )
    
    
    (470
    )
    
    
    Earnings (Loss) from Continuing
Operations
    
    
    3,500
    
    
    
    3,524
    
    
    
    (24
    )
    
    
    (544
    )
    
    
    (556
    )
    
    
    12Discontinued Operations:(Loss) Earnings from Discontinued
Operations (Including Loss on Sale
of $32 for the Three Months Ended
June 30, 2003)
    
    
    (87
    )
    
    
    (87
    )
    
    
    
    
    
    
    241
    
    
    
    241
    
    
    
    Net Earnings (Loss)
    
    $
    3,413
    
    
    $
    3,437
    
    
    $
    (24
    )
    
    $
    (303
    )
    
    $
    (315
    )
    
    $
    12Net Earnings (Loss) Allocable to Limited
Partners
    
    
    
    
    
    $
    3,437
    
    
    
    
    
    
    
    
    
    
    $
    (315
    )Earnings (Loss) from Continuing
Operations
Per Unit/Share
    
    
    
    
    
    $
    14.65
    
    
    $
    (24
    )
    
    
    
    
    
    $
    (2.31
    )
    
    $
    12Earnings (Loss) from Discontinued
Operations Per Unit/Share
    
    
    
    
    
    
    (0.36
    )
    
    
    
    
    
    
    
    
    
    
    1.00
    
    
    
    Net Earnings (Loss) Per Unit/Share
    
    
    
    
    
    $
    14.29
    
    
    $
    (24
    )
    
    
    
    
    
    $
    (1.31
    )
    
    $
    12Weighted-Average Units/Shares
Outstanding
    
    
    
    
    
    
    240,591
    
    
    
    1,000
    
    
    
    
    
    
    
    240,591
    
    
    
    1,000
 See Notes to Condensed Combining Financial Statements. Transactions between Centex Development Company, L.P. and Subsidiaries and
3333 Holding Corporation and Subsidiary have been eliminated. 51




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##### Table of Contents



3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Balance Sheets
(Dollars in thousands) June 30, 2003*
    
    
    March 31, 2003**Centex
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryAssetsCash and Cash Equivalents
    
    $
    35,336
    
    
    $
    35,329
    
    
    $
    7
    
    
    $
    
    
    
    
    5,113
    
    
    $
    5,105
    
    
    $
    8Receivables
    
    
    25,990
    
    
    
    30,012
    
    
    
    289
    
    
    
    
    
    
    
    30,813
    
    
    
    34,841
    
    
    
    261Inventories
    
    
    469,284
    
    
    
    469,284
    
    
    
    
    
    
    
    
    
    
    
    447,954
    
    
    
    447,954
    
    
    
    Investments-Commercial Properties, net
    
    
    89,667
    
    
    
    89,667
    
    
    
    
    
    
    
    
    
    
    
    92,003
    
    
    
    92,003
    
    
    
    Real Estate Joint Ventures
    
    
    3,921
    
    
    
    3,921
    
    
    
    
    
    
    
    
    
    
    
    3,973
    
    
    
    3,973
    
    
    
    Affiliate
    
    
    
    
    
    
    
    
    
    
    1,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,191Assets Held for Sale
    
    
    8,291
    
    
    
    8,291
    
    
    
    
    
    
    
    
    
    
    
    7,585
    
    
    
    7,585
    
    
    
    Property and Equipment, net
    
    
    2,494
    
    
    
    2,494
    
    
    
    
    
    
    
    
    
    
    
    2,308
    
    
    
    2,308
    
    
    
    Other Assets-Goodwill, net
    
    
    32,168
    
    
    
    32,168
    
    
    
    
    
    
    
    
    
    
    
    30,698
    
    
    
    30,698
    
    
    
    Deferred Charges and Other
    
    
    21,374
    
    
    
    19,603
    
    
    
    1,771
    
    
    
    
    
    
    
    20,237
    
    
    
    18,466
    
    
    
    1,771$
    688,525
    
    
    $
    690,769
    
    
    $
    3,258
    
    
    
    
    
    
    $
    640,684
    
    
    $
    642,933
    
    
    $
    3,231Liabilities, Stockholders Equity
And Partners CapitalAccounts Payable and
Accrued Liabilities
    
    $
    135,502
    
    
    $
    135,311
    
    
    $
    4,551
    
    
    
    
    
    
    $
    130,282
    
    
    $
    130,120
    
    
    $
    4,500Liabilities Related to Assets Held
for Sale
    
    
    6,941
    
    
    
    6,941
    
    
    
    
    
    
    
    
    
    
    
    6,436
    
    
    
    6,436
    
    
    
    Notes Payable
    
    
    242,985
    
    
    
    242,985
    
    
    
    
    
    
    
    
    
    
    
    215,118
    
    
    
    215,118
    
    
    
    Total Liabilities
    
    
    385,428
    
    
    
    385,237
    
    
    
    4,551
    
    
    
    
    
    
    
    351,836
    
    
    
    351,674
    
    
    
    4,500Stockholders Equity and
Partners Capital
    
    
    303,097
    
    
    
    305,532
    
    
    
    (1,293
    )
    
    
    
    
    
    
    288,848
    
    
    
    291,259
    
    
    
    (1,269
    )$
    688,525
    
    
    $
    690,769
    
    
    $
    3,258
    
    
    
    
    
    
    $
    640,684
    
    
    $
    642,933
    
    
    $
    3,231
  *
 
 Unaudited**
 
 Condensed from audited financial statements. See Notes to Condensed Combining Financial Statements. Transactions between Centex Development Company, L.P. and Subsidiaries and
3333 Holding Corporation and Subsidiary have been eliminated. 52




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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 Three Months Ended June 30,2003
    
    
    2002Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryCash Flows  Operating ActivitiesNet Earnings (Loss)
    
    $
    3,413
    
    
    $
    3,437
    
    
    $
    (24
    )
    
    $
    (303
    )
    
    $
    (315
    )
    
    $
    12Adjustments:Depreciation
    
    
    676
    
    
    
    676
    
    
    
    
    
    
    
    1,123
    
    
    
    1,123
    
    
    
    Amortization
    
    
    168
    
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Tax Benefit
    
    
    (91
    )
    
    
    (91
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity in Earnings (Loss) from
Joint Ventures
    
    
    (135
    )
    
    
    (135
    )
    
    
    
    
    
    
    10
    
    
    
    10
    
    
    
    (Increase) Decrease in Receivables
    
    
    (6,988
    )
    
    
    (6,960
    )
    
    
    (28
    )
    
    
    1,535
    
    
    
    1,582
    
    
    
    (47
    )Decrease in Notes Receivable
    
    
    4,160
    
    
    
    4,160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Increase) Decrease in Inventories
    
    
    (4,698
    )
    
    
    (4,698
    )
    
    
    
    
    
    
    12,430
    
    
    
    12,430
    
    
    
    Decrease (Increase) in Commercial
Properties
    
    
    1,828
    
    
    
    1,828
    
    
    
    
    
    
    
    (6,059
    )
    
    
    (6,059
    )
    
    
    Increase in Other Assets
    
    
    (920
    )
    
    
    (920
    )
    
    
    
    
    
    
    (566
    )
    
    
    (555
    )
    
    
    (11
    )Increase (Decrease) in Payables
and Accruals
    
    
    8,046
    
    
    
    7,995
    
    
    
    51
    
    
    
    (10,248
    )
    
    
    (10,297
    )
    
    
    495,459
    
    
    
    5,460
    
    
    
    (1
    )
    
    
    (2,078
    )
    
    
    (2,081
    )
    
    
    3Cash Flows  Investing ActivitiesDecrease in Advances to Joint
Ventures and Investment in
Affiliate
    
    
    187
    
    
    
    187
    
    
    
    
    
    
    
    92
    
    
    
    92
    
    
    
    Additions of Property and
Equipment, net
    
    
    (238
    )
    
    
    (238
    )
    
    
    
    
    
    
    (78
    )
    
    
    (78
    )
    
    
    (51
    )
    
    
    (51
    )
    
    
    
    
    
    
    14
    
    
    
    14
    
    
    
    Cash Flows  Financing ActivitiesIssuance in Notes Payable
    
    
    24,233
    
    
    
    24,233
    
    
    
    
    
    
    
    2,040
    
    
    
    2,040
    
    
    
    24,233
    
    
    
    24,233
    
    
    
    
    
    
    
    2,040
    
    
    
    2,040
    
    
    
    Effect of Exchange Rate Changes
on Cash
    
    
    582
    
    
    
    582
    
    
    
    
    
    
    
    1,292
    
    
    
    1,292
    
    
    
    Net Increase (Decrease) in Cash
    
    
    30,223
    
    
    
    30,224
    
    
    
    (1
    )
    
    
    1,268
    
    
    
    1,265
    
    
    
    3Cash and Cash Equivalents
at Beginning of Period
    
    
    5,113
    
    
    
    5,105
    
    
    
    8
    
    
    
    22,538
    
    
    
    22,529
    
    
    
    9Cash and Cash Equivalents
at End of Period
    
    $
    35,336
    
    
    $
    35,329
    
    
    $
    7
    
    
    $
    23,806
    
    
    $
    23,794
    
    
    $
    12
 See Notes to Condensed Combining Financial Statements. Transactions between Centex Development Company, L.P. and Subsidiaries and
3333 Holding Corporation and Subsidiary have been eliminated. 53




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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Notes to Condensed Combining Financial Statements
June 30, 2003
(Dollars in thousands, except per share data)
(unaudited) (A) BASIS OF PRESENTATION The condensed combining interim financial statements include the accounts
of 3333 Holding Corporation (Holding) and subsidiary and Centex Development
Company, L.P. (the Partnership) and subsidiaries (collectively, the
Companies) after elimination of all significant intercompany balances and
transactions. These statements have been prepared, without audit, in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted. In the opinion of the Companies, all adjustments (consisting of normal,
recurring adjustments) necessary to present fairly the information in the
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. 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. (B) ORGANIZATION The Partnership is a master limited partnership formed by Centex
Corporation and subsidiaries (Centex) in March 1987 to broaden the range of
business activities that may be conducted for the benefit of Centexs
stockholders to include general real estate development. Centex believed that
this expansion would improve stockholder value through longer-term real estate
investments, real estate developments and the benefits of the partnership form
of business. The Partnership is authorized to issue three classes of limited
partnership interest. Centex Corporation indirectly holds 100% of the
Partnerships Class A and Class C limited partnership units (Class A Units
and Class C Units, respectively), which are collectively convertible into 20%
of the Partnerships Class B limited partnership units (Class B Units). The
Partnership may issue additional Class C Units in connection with the
acquisition of real property and other assets. No Class B Units have been
issued. However, the stockholders of Centex hold warrants to purchase
approximately 80% of the Class B Units. The warrants are held through a
nominee arrangement and trade in tandem with the common stock of Centex. As holder of the Class A and Class C Units, Centex is entitled to a
cumulative preferred return of 9% per annum on the average outstanding balance
of its capital contributions to the Partnership, adjusted for cash and other
distributions representing return of capital. As of June 30, 2003, these
adjusted capital contributions, or Unrecovered Capital, were $241.1 million and
preference payments in arrears totaled $47.4 million. The Partnership is managed by its general partner, 3333 Development
Corporation, a wholly-owned subsidiary of Holding. The common stock of Holding
is held by the stockholders of Centex through a 54




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nominee arrangement and trades in tandem with the common stock of Centex.
The stockholders of Centex elect the four-person board of directors of Holding,
three of whom are independent outside directors who are not directors,
affiliates or employees of Centex. Thus, through Holding, the stockholders of
Centex control the general partner of the Partnership. The general partner,
through its independent board and the independent board of Holding, including
its non-executive Chairman, oversees the Partnerships activities, including
the acquisition, development, maintenance, operation and sale of properties.
Consent of the limited partners for the activities of the Partnership is not
required, and the limited partners cannot remove the general partner. As a
result, Centex accounts for its limited partnership interest in the Partnership
using the equity method of accounting for investments. See Note (H) to the consolidated financial statements of Centex included
elsewhere in this Report for supplementary condensed combined financial
statements for Centex and subsidiaries, Holding and subsidiary, and the
Partnership and subsidiaries. (C) STATEMENTS OF COMBINING CASH FLOWS  SUPPLEMENTAL DISCLOSURES For the Three MonthsEnded June 30,2003
    
    
    2002Cash Paid for Interest
    
    $
    4,210
    
    
    $
    4,678Net Cash Paid for Taxes
    
    $
    
    
    
    $
    
 For the Three MonthsEnded June 30,2003
    
    
    2002Total Interest Incurred
    
    $
    3,581
    
    
    $
    4,732Interest Capitalized
    
    
    (1,367
    )
    
    
    (1,354
    )Interest Expense
    
    $
    2,214
    
    
    $
    3,378
 (D) RELATED PARTY TRANSACTIONS At June 30, 2003 and March 31, 2003, Centex Homes had $7.8 million and
$7.2 million, respectively, deposited with the Partnership as option deposits
for the purchase of land. Centex Homes also entered into agreements to
reimburse the Partnership for certain costs and fees incurred by the
Partnership in the purchase and ownership of these tracts of land. During the
three months ended June 30, 2003 and 2002, Centex Homes paid $0.4 million and
$1.4 million, respectively, to the Partnership in fees and reimbursements
pursuant to these agreements and $12.0 million and $21.1 million, respectively,
for the purchase of residential lots. The Partnership expects Centex Homes to
pay an additional $19.0 million to the Partnership to complete the purchase of
these tracts of land over the next three years. Construction Services has historically executed construction contracts
with the Partnership. At March 31, 2003, contracts for the construction of two
industrial facilities were completed and no additional contracts were
outstanding. At June 30, 2003, a $10.6 million contract for the construction
of an office building had been executed with the Partnership and was
outstanding. During the three months ended June 30, 2003 and 55




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2002, the Partnership paid zero and $3.5 million, respectively, to
Construction Services pursuant to these contracts. (E) COMPREHENSIVE INCOME A summary of comprehensive income for the three months ended June 30, 2003
and 2002 is presented below: For the Three MonthsEnded June 30,2003
    
    
    2002Net Earnings (Loss)
    
    $
    3,413
    
    
    $
    (303
    )Other Comprehensive Income (Loss):Foreign Currency Translation Adjustments
    
    
    10,735
    
    
    
    13,973Unrealized Gain (Loss) on Hedging
Instruments
    
    
    101
    
    
    
    (234
    )Comprehensive Income
    
    $
    14,249
    
    
    $
    13,436
 (F) STOCKHOLDERS EQUITY A summary of changes in stockholders equity is presented below: Centex Development Company
    
    
    3333 Holding CorporationL.P. and Subsidiaries
    
    
    and SubsidiaryClass B
    
    
    General
    
    
    Limited
    
    
    
    
    
    
    Capital in
    
    
    RetainedUnit
    
    
    Partner's
    
    
    Partner's
    
    
    Stock
    
    
    Excess of
    
    
    EarningsCombined
    
    
    Warrants
    
    
    Capital
    
    
    Capital
    
    
    Warrants
    
    
    Par Value
    
    
    (Deficit)Balance at March 31, 2003
    
    $
    288,848
    
    
    $
    500
    
    
    $
    1,142
    
    
    $
    289,617
    
    
    $
    1
    
    
    $
    800
    
    
    $
    (2,070
    )Net Earnings
    
    
    3,413
    
    
    
    
    
    
    
    
    
    
    
    3,437
    
    
    
    
    
    
    
    
    
    
    
    (24
    )Accumulated Other
Comprehensive Income:Foreign Currency Translation Adjustments
    
    
    10,735
    
    
    
    
    
    
    
    
    
    
    
    10,735
    
    
    
    
    
    
    
    
    
    
    
    Unrealized Loss on Hedging Instruments
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    Balance at June 30, 2003
    
    $
    303,097
    
    
    $
    500
    
    
    $
    1,142
    
    
    $
    303,890
    
    
    $
    1
    
    
    $
    800
    
    
    $
    (2,094
    )
 (G) BUSINESS SEGMENTS The Companies operate in three principal business segments: International
Home Building, Commercial Development and Corporate-Other. All of the
segments, except for International Home Building, operate in the United States.
International Home Buildings accounting policies are the same as those
described in the summary of significant accounting policies in the Companies
latest Annual Report on Form 10-K. 56




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International Home Building acquires and develops residential properties
and constructs single and multi-family housing units in the United Kingdom.
Commercial Development develops office, industrial, retail and mixed-use
projects, for sale and for investment. Corporate-Other is involved in the
acquisition and disposition of land and other assets of the Partnership not
identified with another specific business segment. Prior to April 1, 2003, the
Companies operated a multi-family business segment (Multi-Family). Effective April 1, 2003,
the operations of this segment were restructured to focus on leasing and
disposition of remaining projects rather than new development. The operations
of these projects are reflected in the Corporate-Other segment for the current
and prior comparative period. For the Three Months Ended June 30, 2003Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    88,756
    
    
    $
    3,256
    
    
    $
    12,501
    
    
    $
    104,513Cost of Sales
    
    
    (75,087
    )
    
    
    
    
    
    
    (11,962
    )
    
    
    (87,049
    )Selling, General & Administrative Expenses
    
    
    (8,322
    )
    
    
    (1,891
    )
    
    
    (791
    )
    
    
    (11,004
    )Interest Expense
    
    
    (549
    )
    
    
    (1,086
    )
    
    
    (415
    )
    
    
    (2,050
    )Earnings from Unconsolidated Subsidiaries
and Other
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    135Earnings (Loss) from Continuing OperationsBefore Income Taxes
    
    
    4,798
    
    
    
    414
    
    
    
    (667
    )
    
    
    4,545Loss from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    (87
    )
    
    
    
    
    
    
    (87
    )Earnings (Loss) Before Income Taxes
    
    $
    4,798
    
    
    $
    327
    
    
    $
    (667
    )
    
    $
    4,458
 For the Three Months Ended June 30, 2002Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    61,000
    
    
    $
    3,937
    
    
    $
    22,848
    
    
    $
    87,785Cost of Sales
    
    
    (53,765
    )
    
    
    (275
    )
    
    
    (21,163
    )
    
    
    (75,203
    )Selling, General & Administrative Expenses
    
    
    (7,111
    )
    
    
    (2,213
    )
    
    
    (1,798
    )
    
    
    (11,122
    )Interest Expense
    
    
    (494
    )
    
    
    (1,182
    )
    
    
    (788
    )
    
    
    (2,464
    )Loss from Unconsolidated Subsidiaries
and Other
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )Earnings (Loss) from Continuing Operations
Before Income Taxes
    
    
    (370
    )
    
    
    257
    
    
    
    (901
    )
    
    
    (1,014
    )Earnings from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    241Earnings (Loss) Before Income Taxes
    
    $
    (370
    )
    
    $
    498
    
    
    $
    (901
    )
    
    $
    (773
    )
 (H) GOODWILL The Partnerships International Home Building segment carries all of the
Partnerships goodwill, which arose from the April 15, 1999 acquisition of all
of the voting shares of Fairclough Homes Group Limited, a British homebuilder
(Fairclough). The carrying amount of goodwill was $32.2 million and $30.7
million at June 30, 2003 and March 31, 2003, respectively. The increase during
the three months ended June 30, 2003 reflects the impact of foreign currency
translation adjustments. 57




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(I) DERIVATIVES AND HEDGING The Partnership is exposed to the risk of interest rate fluctuations on
its debt obligations. As part of its strategy to manage the obligations that
are subject to changes in interest rates, the Partnership has entered into an
interest rate swap agreement, designated as a cash flow hedge, on a portion of
its debt. The swap agreement is recorded at its fair value in Other Assets or
Accrued Liabilities in the condensed combining balance sheets. To the extent
the hedging relationship is effective, fluctuations in the fair value of the
derivative are deferred as a component of Accumulated Other Comprehensive
Income. Fluctuations in the fair value of the ineffective portion of the
derivative would be reflected in the current period earnings. During the three
months ended June 30, 2003 there was no hedge ineffectiveness related to this
derivative. This swap expires in March 2004. Amounts to be received or paid as a
result of the swap agreement are recognized as adjustments to interest incurred
on the related debt instrument. As of June 30, 2003, the Accumulated Other
Comprehensive Loss was $521 thousand ($365 thousand net of tax). (J) RECENT ACCOUNTING PRONOUNCEMENTS In
August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement was effective for the Companies beginning April 1, 2002. Due to the adoption of SFAS 144, the Companies now report assets
identified subsequent to March 31, 2002 as held for sale (as defined by SFAS
144), if any, and any such assets sold in the current period, as discontinued
operations. All results of these discontinued operations, less applicable
income taxes, are included as discontinued operations in the statements of
operations. Prior periods are restated for comparative purposes. Land assets,
and any other assets sold prior to adoption of SFAS 144, are reported in
continuing operations. In
November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN
45), which requires certain guarantees to be recorded at fair value. FIN 45
also requires a guarantor to make certain disclosures about guarantees,
including product warranties, even when the likelihood of making any payments
under the guarantee is remote. We have applied the recognition and measurement
provisions of FIN 45 to guarantees issued or modified after December 31, 2002.
The implementation of FIN 45 did not have a material impact on the Companies
results of operations or financial position. In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN
46), which modifies the accounting for certain entities in
which (1) equity
investors do not have the characteristics of a controlling financial
interest and/or (2) the entity is unable to finance its
activities without additional subordinated financial support from other
parties. Certain disclosure requirements of FIN 46 are effective for financial
statements of interim or annual periods issued after January 31, 2003. See
Note (K), Investments in Certain Joint Ventures, for disclosure of the
Companies potential maximum exposure related to these entities.
     FIN 46 applies immediately to variable interest entities created, or in
which an enterprise obtains an interest, after January 31, 2003. For variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003, FIN 46 applies to interim or annual periods
beginning after June 15, 2003. As discussed above in Note (B), Organization,
Centex indirectly holds 100% of the Partnerships 58




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Class A and Class C Units.
The manner in which Centex reports its interest in the Partnership may be
affected by this interpretation. Centex and the Companies are in the process
of assessing the impact FIN 46 will have on their respective financial
statements. See Note (P) to the consolidated financial statements of Centex
included elsewhere in this Report for further discussion regarding this
interpretation. In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, or SFAS No. 149. The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, or SFAS No. 133, by requiring
that contracts with comparable characteristics be accounted for similarly,
resulting in more consistent reporting of contracts as either derivatives or
hybrid instruments. A portion of this statement is effective for contracts
entered into or modified and for hedging relationships designated after June
30, 2003. The remainder of this statement codifies previously issued SFAS No.
133 implementation guidance, which retains its original effective dates. The
Companies do not expect the implementation of SFAS No. 149 to have a material
impact on the Companies results of operations or financial position. (K) INVESTMENTS IN CERTAIN JOINT VENTURES The Partnership conducts certain operations through its participation in
joint ventures in which the Partnership holds less than a majority interest.
These non-consolidated joint ventures had total debt outstanding of
approximately $37.8 million as of June 30, 2003 and $35.8 million as of March
31, 2003. The Partnerships liability for the obligations of these
non-consolidated joint ventures is limited to approximately $8.1 million as of
June 30, 2003. (L) COMMITMENTS AND CONTINGENCIES As of June 30, 2003, the Partnership had remaining commitments of
approximately $18.4 million on construction contracts. To obtain construction financing for projects being developed by its
subsidiaries, the Partnership is often required to guarantee, for the benefit
of the construction lender, the completion of the project. In some instances,
the Partnership has also executed recourse payment guarantees. At June 30,
2003, our subsidiaries had outstanding letters of credit of $3.9 million that
primarily relate to development obligations of Multi-Family Communities. Subsidiaries of the Partnership have also obtained demand notes or letters
of credit from Centex for up to 10% of the construction loan commitment amount.
These demand notes or letters of credit have been pledged or endorsed to the
lenders as additional collateral on the construction loans, and may be called
only in the event of an uncured default by the Partnership. This additional
collateral totals approximately $1.1 million as of June 30, 2003. A subsidiary of the Partnership has agreed to develop a mixed-use project
in Saint Paul, Minnesota consisting of various types of residential housing and
ancillary retail space. The subsidiary has performed a
significant portion of the infrastructure work and has sold several of the
development sites to reputable home builders (including a 1.5 acre site to
Centex Homes) pursuant to contracts that obligate the purchasers to fulfill
certain of the sellers development obligations at the project. The subsidiary
of the Partnership (as the seller) 59




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retains the right to repurchase the site if
the purchaser fails to commence the performance of such obligations.
Ultimately, the Partnerships subsidiary remains responsible for the
development of the project. The subsidiary anticipates that the costs expended for infrastructure work
will be reimbursed from the proceeds of a bond offering by a special taxing
district established to aid in the development of the project. These costs
will be reimbursed over time as improvements at the project generate property
taxes sufficient to fund debt service on the bonds. A receivable of
approximately $13.9 million is included in Other Receivables in the
accompanying Combining Balance Sheets. The subsidiary has deferred recognition
of this income as of June 30, 2003 as improvements to the project that will
generate property taxes have just begun. In the normal course of its business, the Partnership issues certain
representations, warranties and guarantees related to its home sales, land
sales and building sales that may be affected by the Financial Accounting
Standards Boards recent issuance of FIN 45. Based on historical evidence, the
Partnership does not believe that any of these representations, warranties or
guarantees would result in a material effect on our consolidated financial
condition or operations. See further discussion on our warranty liability
below. See further discussion of FIN 45 in Note (J), Recent Accounting
Pronouncements. International Home Building offers a ten-year limited warranty for most
homes constructed and sold in the United Kingdom. The warranty covers defects
in materials or workmanship in various components of the home for the first two
years and designated structural elements of the home in the third through tenth
years. International Home Building estimates the costs that may be incurred
under its warranty program for which it will be responsible and records a
liability at the time each home is closed. Factors that affect International
Home Buildings warranty liability include the number of homes closed,
historical and anticipated rates of warranty claims and cost per claim.
International Home Building periodically assesses the adequacy of its recorded
warranty liability and adjusts the amounts as necessary. Changes in International Home Buildings contractual warranty liability
during the period are as follows: Balance as of March 31, 2003
    
    $
    3,390Warranties Issued
    
    
    973Settlements Made
    
    
    (880
    )Balance as of June 30, 2003
    
    $
    3,483
 (M) RECLASSIFICATIONS Certain prior year balances have been reclassified to be consistent with
the June 30, 2003 presentation. (N) SUBSEQUENT EVENTS Subsidiaries of the Partnership have executed contracts to sell four
projects in Charlotte, North Carolina comprising approximately 1,000,000 square
feet of industrial space. The sales are scheduled to close on or before
September 22, 2003. However, the contracts specify various financing
contingencies and, thus, there are no assurances that such sales will be
consummated. 60




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations On a combined basis, our revenues from continuing operations were $104.5
million for the three months ended June 30, 2003, a 19.0% increase over our
revenues from continuing operations of $87.8 million for the same period last
year. The revenue increase is primarily related to an increase in
International Home Buildings unit closings and average unit sales price,
offset by a reduction in Corporate-Others sale of residential lots to Centex
Homes. Revenues from residential lot sales and commercial land sales can vary
significantly from period to period. Our operating earnings from continuing operations for the three months
ended June 30, 2003 were $4.5 million compared to an operating loss from
continuing operations of $1.0 million for the same period last year. Our net
earnings from continuing operations for the three months ended June 30, 2003
were $3.5 million compared to a net loss from continuing operations of $0.5
million for the same period last year. The increase in operating earnings and
net earnings from continuing operations for the three months ended June 30,
2003 is primarily related to increased earnings from the International Home
Building segment. Our net loss from discontinued operations for the three months ended June
30, 2003 was $87 thousand. In accordance with Statement of Financial
Accounting Standards No. 144, or SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, effective for us beginning April 1, 2002, we
now report assets as discontinued operations if such assets are held for sale
(as defined by SFAS 144), or if such assets are sold in the current period. We
sold one of these properties during the three months ended June 30, 2003. Land
assets are reported in continuing operations. Prior to April 1, 2003, the Companies operated a multi-family business
segment. Effective April 1, 2003, the operations of this segment were
restructured to focus on leasing and disposition of remaining projects rather
than new development. The operations of these projects are reflected in the
Corporate-Other segment for the current and prior comparative period. Over the
past year, we have taken advantage of the strong investor demand for
quality properties, selling a number of matured assets and land
positions. It is not currently anticipated that any significant
capital will be allocated to new business development. Instead, our
focus going forward will be on completing and leasing up our existing
portfolio and continuing to take advantage of strong investor
demand. The International Home Building segment will remain a focus
as we continue to build on momentum in this segment. We will
continue to evaluate strategic portfolio acquisitions and strategic
development opportunities. Any reference herein to we, us or our includes 3333 Holding Corporation
and subsidiary and Centex Development Company, L.P. and subsidiaries. 61




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INTERNATIONAL HOME BUILDING The following summarizes International Home Buildings results for the
three months ended June 30, 2003 compared to the same period last year (dollars
in thousands, except per unit data): For the Three Months Ended June 30,2003
    
    2002Revenues  Home Building
    
    $
    88,746
    
    
    
    100.0
    %
    
    $
    60,972
    
    
    
    100.0
    %Revenues  Land Sales & Other
    
    
    10
    
    
    
    
    %
    
    
    28
    
    
    
    
    %Cost of Sales  Home Building
    
    
    (75,079
    )
    
    
    (84.6
    %)
    
    
    (53,765
    )
    
    
    (88.1
    %)Cost of Sales  Land Sales
    
    
    (8
    )
    
    
    
    %
    
    
    
    
    
    
    
    %General and Administrative Expenses
    
    
    (8,322
    )
    
    
    (9.4
    %)
    
    
    (7,111
    )
    
    
    (11.7
    %)Operating Earnings
    
    
    5,347
    
    
    
    6.0
    %
    
    
    124
    
    
    
    0.2
    %Interest
    
    
    (549
    )
    
    
    (0.6
    %)
    
    
    (494
    )
    
    
    (0.8
    %)Earnings (Loss) Before Income Taxes
    
    $
    4,798
    
    
    
    5.4
    %
    
    $
    (370
    )
    
    
    (0.6
    %)% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    313
    
    
    
    16.4
    %
    
    
    269
    
    
    
    (10.0
    %)Average Unit Sales Price
    
    $
    283,534
    
    
    
    25.1
    %
    
    $
    226,662
    
    
    
    20.7
    %Average Operating Earnings Per Unit
    
    $
    17,083
    
    
    
    3,605.6
    %
    
    $
    461
    
    
    
    (94.2
    %)Backlog Units
    
    
    480
    
    
    
    23.4
    %
    
    
    389
    
    
    
    85.2
    %
 International Home Buildings revenues for the three months ended June 30,
2003 increased by $27.8 million from revenues for the same period last year.
This increase is comprised of $15.3 million from an increase in the average
unit sales price and $12.5 million from an increase in the number of units
closed. Home sales totaled 313 units during the three months ended June 30,
2003, compared to 269 units during the same period in the preceding year,
representing a 16.4% increase. International Home Buildings gross homebuilding margins increased for the
three months ended June 30, 2003 to 15.4% from 11.8% in the same period last
year. The improvement in gross margins was primarily due to an increase in the
average unit sales price, partially offset by increases in labor costs caused by a
shortage of skilled labor. International Home Buildings general and administrative expenses, as a
percentage of revenues, decreased 2.3%, for the three months ended June 30,
2003 compared to the same period last year, primarily due to increased
revenues. International Home Buildings financial statements are affected by
fluctuations in exchange rates. International Home Building, whose functional
currency is the British pound sterling, translates its financial statements
into U.S. dollars. Income statement accounts are translated using the average
exchange rate for the period, except for significant, non-recurring
transactions that are translated at the rate in effect as of the date of the
transaction. For the three months ended June 30, 2003 and 2002, respectively,
the average exchange rate used for translation was 1.62 and 1.46, representing
an increase of 10.7%. The backlog of homes sold but not closed at June 30, 2003 was 480 units,
23.4% more than the 389 units at the same point in the preceding year. 62




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COMMERCIAL DEVELOPMENT The following summarizes Commercial Developments results for the three
months ended June 30, 2003, compared to the same period last year (dollars and
square feet in thousands): For the Three MonthsEnded June 30,2003
    
    
    2002Sales Revenues
    
    $
    
    
    
    $
    725Rental Income and Other Revenues
    
    
    3,256
    
    
    
    3,212Cost of Sales
    
    
    
    
    
    
    (275
    )Selling, General and Administrative Expense
    
    
    (1,309
    )
    
    
    (1,843
    )Interest
    
    
    (1,086
    )
    
    
    (1,182
    )Operating Earnings Before Depreciation
    
    
    861
    
    
    
    637Depreciation and Amortization
    
    
    (582
    )
    
    
    (370
    )Earnings (Loss) from Unconsolidated
Subsidiaries and Other
    
    
    135
    
    
    
    (10
    )Operating Earnings
    
    
    414
    
    
    
    257Earnings (Loss) from Discontinued Operations
    
    
    (87
    )
    
    
    241Earnings Before Income Taxes
    
    $
    327
    
    
    $
    498Operating Square Footage at June 30
    
    
    2,176
    
    
    
    2,626
 Commercial Developments operations during the three months ended June 30, 2003
included:  
 
 completion of shell construction for a 138,000 square foot retail project in Santa Clara, California;  
 
 continued construction of a 62,000 square foot light industrial project in Camarillo, California;  
 
 continued construction of a 39,000 square foot light industrial project in Oxnard, California; and  
 
 commencement of construction on a 160,000 square foot office building in Lewisville, Texas. Commercial Developments discontinued operations during the three months ended
June 30, 2003 consisted of the sale of a 68,000 square foot industrial project
in Gardner, Massachusetts. Sales revenues and cost of sales for the three months ended June 30, 2002
reflect the sale of a pad site at a retail project in Lewisville, Texas.
Rental income and other revenues increased slightly as the result of the late
fiscal 2003 completion and leasing of a retail center in Lewisville, Texas.
Selling, general and administrative expense decreased as the result of staffing
reductions, a decrease in incentive compensation and a decrease in property
operation expenses. Interest expense has decreased slightly as the result of interest rate
reductions on Commercial Developments variable rate debt, and depreciation and
amortization has increased as the result of the addition of approximately
300,000 square feet of projects not in service as of June, 2002. Earnings from
unconsolidated entities have increased as the result of leasing at a retail
project in Santa Clara, California. 63




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June 30, 2003
    
    
    June 30, 2002(000's)
    
    
    Weighted
    
    
    (000's)
    
    
    WeightedRentable
    
    
    Average
    
    
    Rentable
    
    
    AverageSq. Ft.
    
    
    Occupancy
    
    
    Sq. Ft.
    
    
    OccupancyOperating Properties*Industrial
    
    
    1,636
    
    
    
    83.5
    %
    
    
    2,024
    
    
    
    92.4
    %Office/Medical
    
    
    344
    
    
    
    82.0
    %
    
    
    602
    
    
    
    84.2
    %Retail
    
    
    196
    
    
    
    94.9
    %
    
    
    
    
    
    
    2,176
    
    
    
    84.3
    %
    
    
    2,626
    
    
    
    90.5
    %(000's)
    
    
    
    
    
    (000's)Rentable
    
    
    
    
    
    RentableSq. Ft.
    
    
    
    
    
    Sq. Ft.Projects Under Construction*Industrial
    
    
    150
    
    
    
    
    
    
    
    308Office/Medical
    
    
    160
    
    
    
    
    
    
    
    Retail
    
    
    
    
    
    
    
    
    
    
    194310
    
    
    
    
    
    
    
    502
 * Includes assets classified as Held for Sale. CORPORATE-OTHER The following summarizes the results of Corporate-Other for the three
months ended June 30, 2003, compared to the same period last year (dollars in
thousands): For the Three MonthsEnded June 30,2003
    
    
    2002Revenues
    
    $
    12,501
    
    
    $
    22,848Cost of Sales
    
    
    (11,962
    )
    
    
    (21,163
    )Selling, General and Administrative Expenses
    
    
    (791
    )
    
    
    (1,798
    )Interest Expense
    
    
    (415
    )
    
    
    (788
    )Operating Loss
    
    $
    (667
    )
    
    $
    (901
    )
 Our Corporate-Other segment acquires and disposes of land and other assets
that are not identified with another specific business segment. Revenues and
cost of sales for the three months ended June 30, 2003 relate primarily to the
sale of residential lots to Centex Homes. Revenues and cost of sales for the
three months ended June 30, 2002 also relate primarily to sales of residential
lots to Centex Homes and an unaffiliated third party. Selling, general and administrative expenses decreased 56.0% for the three
months ended June 30, 2003 compared to the same period last year, primarily due
to staffing reductions in the former Multi-Family 64




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##### Table of Contents



segment. Interest expense for the three months ended June 30, 2003 relates
primarily to debt incurred to finance the purchase of these residential lots. LIQUIDITY AND CAPITAL RESOURCES We finance land acquisition and development activities primarily from
financial institution borrowings, equity contributions from third-party
investors in project-specific joint ventures, seller financing, issuance of
Class C limited partnership units to Centex affiliates and cash flow from
operations, which is comprised largely of proceeds from the sale of real estate
and operating projects. We typically finance properties under development through short-term
variable and fixed-rate secured construction loans, and to a limited extent
depending on the timing of the project construction, cash flow from operations.
Construction loans totaled $75.7 million, including $0.4 million related to
assets held for sale, at June 30, 2003. Under the terms of various
construction loan agreements, we are required to maintain certain minimum
liquidity and net worth levels. At June 30, 2003, we were in compliance with
these covenants. Permanent commercial project loans outstanding at June 30, 2003 totaled
$44.0 million, including $6.4 million related to assets held for sale. The
project loans are collateralized by completed commercial properties and have
original terms ranging from ten to twenty-two years with fixed interest rates
ranging from 7.20% to 8.72%. These loans are non-recourse to the Partnership
and its subsidiaries. No new seller-financed land loans were obtained during the quarters ended
June 30, 2003 and 2002. Outstanding balances on seller-financed loans at June
30, 2003 totaled $19.5 million, with terms of up to three years and fixed
interest rates ranging from 8.00% to 9.50%. The International Home Building segment has secured a revolving bank
credit facility of 100 million in British pounds sterling. This facility
expires in April 2006 and may be extended for up to two years with lender
approval. Advances under this facility totaled £67.0 million, or $110.6
million, at June 30, 2003. Under the terms of this facility, the International
Home Building segment is required to maintain certain leverage and interest
coverage ratios and a minimum tangible net worth. At June 30, 2003, the
International Home Building segment was in compliance with all of these
covenants. No new Class C units were issued during the quarter ended June 30, 2003. We believe that the revenues, earnings, and liquidity from the sale of
single-family homes, land sales, the sale and permanent financing of
development projects and issuance of Class C units will be sufficient to
provide the necessary funding for our current and future needs. CERTAIN OFF-BALANCE-SHEET AND OTHER OBLIGATIONS The following is a summary of certain off-balance-sheet arrangements and
other obligations and their possible effects on our liquidity and capital
resources. Joint Ventures We conduct certain operations through our participation in joint ventures
in which we hold less than a majority interest. These non-consolidated joint
ventures had total debt outstanding of approximately $37.8 65




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##### Table of Contents



million as of June 30, 2003 and $35.8 million as of March 31, 2003. Our
liability for the obligations of these non-consolidated joint ventures is
limited to approximately $8.1 million as of June 30, 2003. Letters of Credit, Guarantees and Leases At June 30, 2003, we had outstanding performance bonds and bank guarantees
of $27.7 million that relate to projects undertaken by International Home
Building and development obligations of International Home Building. To obtain construction financing for commercial and multi-family projects
being developed by our subsidiaries, we are often required to guarantee, for
the benefit of the construction lender, the completion of the project. In some
instances, we have also executed partial recourse payment guarantees. At June
30, 2003, our subsidiaries had outstanding letters of credit of $3.9 million
that primarily relate to development obligations of Multi-Family Communities. We expect that our subsidiaries will satisfy their loan and other
contractual obligations in the ordinary course of business and in accordance
with applicable contractual terms. As that occurs, our liability exposure will
be decreased and, eventually, we will not have any continuing obligations with
respect to these projects. We have no material capital or operating leases. RECENT ACCOUNTING PRONOUNCEMENTS In
August 2001, the Financial Accounting Standards Board, or FASB,
issued Statement of Financial Accounting Standards No. 144, or SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. The statement was effective for us beginning April 1, 2002. Due to the adoption of SFAS 144, we now report assets identified
subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any,
and any such assets sold in the current period, as discontinued operations.
All results of these discontinued operations, less applicable income taxes, are
included as discontinued operations in the statements of operations. Prior
periods are restated for comparative purposes. Land assets, and any other
assets sold prior to adoption of SFAS 144, are reported in continuing
operations. In
November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, or FIN
45, which requires certain guarantees to be recorded at fair value. FIN 45
also requires a guarantor to make certain disclosures about guarantees,
including product warranties, even when the likelihood of making any payments
under the guarantee is remote. We have applied the recognition and measurement
provisions of FIN 45 to guarantees issued or modified after December 31, 2002.
The implementation of FIN 45 did not have a material impact on our results of
operations or financial position. In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, or FIN
46, which modifies the accounting for certain entities in which (1) equity
investors do not have the characteristics of a controlling financial
interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other
parties. Certain disclosure requirements of FIN 46 are effective for financial
statements of interim or annual periods issued after January 31, 2003. FIN 46
applies immediately to variable interest entities created, or in which an
enterprise obtains an interest, after January 31, 2003. For variable interest
entities in which an enterprise holds a variable interest that it acquired before 66




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February 1, 2003, FIN 46 applies to
interim or annual periods beginning after June 15, 2003. As discussed in Note
(B), Organization, of our Notes to Condensed Combining Financial Statements,
Centex indirectly holds 100% of the Partnerships Class A and Class C Units.
The manner in which Centex reports its interest in the Partnership may be
affected by this interpretation. Centex and the Companies are in the process
of assessing the impact FIN 46 will have on their respective financial
statements. See Note (P) to the consolidated financial statements of Centex
included elsewhere in this Report for further discussion regarding this
interpretation. In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, or SFAS No. 149. The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, or SFAS No. 133, by requiring
that contracts with comparable characteristics be accounted for similarly,
resulting in more consistent reporting of contracts as either derivatives or
hybrid instruments. A portion of this statement is effective for contracts
entered into or modified and for hedging relationships designated after June
30, 2003. The remainder of this statement codifies previously issued SFAS No.
133 implementation guidance, which retains its original effective dates. The
Companies do not expect the implementation of SFAS No. 149 to have a material
impact on the Companies results of operations or financial position.  FORWARD-LOOKING STATEMENTS
 Various sections of this Report, including Managements Discussion and
Analysis of Financial Condition and Results of Operations, 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 we
are discussing our beliefs, estimates or expectations. These statements are
not guarantees of future performance and involve a number of risks and
uncertainties. Actual results and outcomes may differ materially from what is
expressed or forecasted in these forward-looking statements. In addition to
the specific uncertainties discussed elsewhere in this Report, the following
risks and uncertainties may affect the actual performance and results of
operations of the Companies:  
 
 Our homebuilding, commercial, multi-family and land sales operations
are somewhat cyclical and sensitive to changes in economic conditions,
including levels of employment, consumer confidence and income,
availability of financing, interest rate levels and changes in the
economic condition of the local markets in which we operate.  
 
 Our homebuilding, commercial, multi-family and land sales operations
are also subject to other risks and uncertainties, including seasonal
variations, adverse weather conditions, the availability of adequate
land in desirable locations, the cost and availability of labor and
construction materials, labor disputes, the general demand for housing
and new construction and the resale market for existing homes.  
 
 All of our businesses operate in very competitive environments, which
are characterized by competition from a number of other homebuilders,
developers and landowners in each of the markets in which we operate. 67




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##### Table of Contents




 
 We are subject to various federal, state and local statutes, rules
and regulations that could affect our businesses, including those
concerning zoning, construction, protecting the environment and health.
In addition, our businesses could be affected by changes in federal
income tax policy, federal mortgage loan financing programs and by other
changes in regulation or policy. Other risks and uncertainties may also affect the outcome of the actual
performance and results of operations of the Partnership and Holding. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the Companies market risk from
March 31, 2003. For further information regarding the Companies market risk,
refer to the Companies Annual Report on Form 10-K for the fiscal year ended
March 31, 2003. 
 Item 4. Controls and Procedures An evaluation has been performed under the supervision and with the
participation of the management of 3333 Holding Corporation and of Centex
Development Company, L.P. (through its general partner, 3333 Holding
Corporation), including the Chief Executive Officer and Chief Financial Officer
of both 3333 Holding Corporation and 3333 Development Corporation, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of June 30, 2003. Based on that evaluation, the management of
3333 Holding Corporation and of Centex Development Company, L.P. (through its
general partner, 3333 Holding Corporation), including the Chief Executive
Officer and Chief Financial Officer of both 3333 Holding Corporation and 3333
Development Corporation, concluded that our disclosure controls and procedures
were effective as of June 30, 2003 to provide reasonable assurance that
information required to be disclosed in our reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. There has been no change in our internal
controls over financial reporting that occurred during the three months ended
June 30, 2003 that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting. 
 Part II. Other Information 
 Item 6. Exhibits and Reports on Form 8-K  (3)
 
 Exhibits 4.3.2
    
    
    Second Supplement to
Nominee Agreement, dated as of June 1, 2003, by and between
Centex, Holding, the Partnership, and Mellon Investor Services LLC as
successor nominee and successor transfer agent.31.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.
 68




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##### Table of Contents



31.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.32.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
  (4)
   
   Reports on Form 8-KThe Registrant filed no reports on
Form 8-K during the quarter ended June 30, 2003. 69




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##### Table of Contents



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 CORPORATIONRegistrantAugust 13, 2003
    
    /s/ Todd D. NewmanTodd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial officer and
principal accounting officer)
 70




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##### Table of Contents



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 PartnerAugust 13, 2003
    
    /s/ Todd D. NewmanTodd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial officer and
principal accounting officer)
 71




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##### Table of Contents



EXHIBIT INDEX 3.2
    
    
    Amended and Restated By-Laws of Centex
Corporation dated May 15, 2003.4.3.2
    
    
    Second Supplement to Nominee Agreement,
dated as of June 1, 2003, by and between Centex, Holding,
the Partnership, and Mellon Investor Services LLC as
successor nominee and successor transfer agent.10.1
    
    
    Centex Corporation Amended and Restated
1987 Stock Option Plan.10.2
    
    
    Sixth Amended and Restated 1998 Centex
Corporation Employee Non-Qualified Stock Option Plan.10.3
    
    
    Amended and Restated Centex Corporation 2001 Stock Option Plan.10.10
    
    
    Amended and Restated Centex Corporation Long Term Incentive Plan.10.13
    
    
    Centex Corporation 2003 Annual Incentive Compensation Plan.10.14
    
    
    Centex Corporation 2003 Equity Incentive Plan.10.15
    
    
    Distribution Agreement between Centex
Corporation, Cavco Industries L.L.C. and Cavco Industries,
Inc.10.16
    
    
    Administrative Services Agreement
between Centex Service Company and Cavco Industries, Inc.10.17
    
    
    Tax Sharing Agreement between Centex
Corporation and affiliates and Cavco Industries, Inc.10.18
    
    
    Agreement to Assign Trademark Rights and
Limited Consent to Use Centex Trademarks between Centex
Corporation and Cavco Industries, Inc.10.19
    
    
    Amendment No. 1 to Distribution
Agreement between Centex Corporation, Cavco Industries
L.L.C. and Cavco Industries, Inc.31.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.31.2
    
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.31.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.32.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.