##### 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

September 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
by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act). Yes x No o

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 November 7, 2003:

Centex Corporation
    
    Common Stock
    
    62,157,591 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
    211,142 units






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TABLE OF CONTENTS



|                                                   |                                                                                               |                                                                  |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- |  |  |  |  |  | 
|Part I. Financial Information                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | Statements of Consolidated Earnings                             
|                                                   |                                                                                               | Consolidated Balance Sheets with Consolidating Details          
|                                                   |                                                                                               | Statements of Consolidated Cash Flows with Consolidating Details
|                                                   |                                                                                               | Notes to Consolidated Financial Statements                      
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                   | Item 4. Controls and Procedures                                                              
|Part II. Other Information                        
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|Signatures                                        
|Part I. Financial Information                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | Condensed Combining Statements of Operations                    
|                                                   |                                                                                               | Condensed Combining Balance Sheets                              
|                                                   |                                                                                               | Notes to Condensed Combining Financial Statements               
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                   | Item 4. Controls and Procedures                                                              
|Part II. Other Information                        
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|Signatures                                        
|EX-10.1 Credit Agreement                          
|EX-10.1 Amendment No. 2 to Partnership Agreement  
|EX-10.2 Letter of Credit & Reimbursement Agreement
|EX-31.1 Certification of CEO-Rule 13a-14 & 15d-14 
|EX-31.2 Certification of CFO-Rule 13a-14 & 15d-14 
|EX-31.3 Certification of CEO-Rule 13a-14 & 15d-14 
|EX-31.4 Certification of CFO-Rule 13a-14 & 15d-14 
|EX-31.5 Certification of CEO-Rule 13a-14 & 15d-14 
|EX-31.6 Certification of CFO-Rule 13a-14 & 15d-14 
|EX-32.1 Certification of CEO - Section 906        
|EX-32.2 Certification of CFO - Section 906        
|EX-32.3 Certification of CEO - Section 906        
|EX-32.4 Certification of CFO - Section 906        
|EX-32.5 Certification of CEO - Section 906        
|EX-32.6 Certification of CFO - Section 906        



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##### 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

September 30, 2003

Centex Corporation and Subsidiaries

Part I.
    
    Financial Information
    
    PageItem 1.
    
    
    Financial StatementsStatements of Consolidated Earnings
    
    
    1Consolidated Balance Sheets with Consolidating Details
    
    
    3Statements of Consolidated Cash Flows with Consolidating Details
    
    
    5Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    29Item 3.
    
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    52Item 4.
    
    
    Controls and Procedures
    
    
    52Part II.
    
    Other InformationItem 4.
    
    
    Submission of Matters to a Vote of Security Holders
    
    
    53Item 6.
    
    
    Exhibits and Reports on Form 8-K
    
    
    54Signatures
    
    
    
    
    
    
    55


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##### Table of Contents



3333 Holding Corporation and Subsidiary
Centex Development Company, L.P. and Subsidiaries

Part I.
    
    Financial Information
    
    PageItem 1.
    
    
    Financial StatementsCondensed Combining Statements of Operations
    
    
    56Condensed Combining Balance Sheets
    
    
    58Condensed Combining Statements of Cash Flows
    
    
    59Notes to Condensed Combining Financial Statements
    
    
    60Item 2.
    
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    70Item 3.
    
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    79Item 4.
    
    
    Controls and Procedures
    
    
    79Part II.
    
    Other InformationItem 4.
    
    
    Submission of Matters to a Vote of Security Holders
    
    
    80Item 6.
    
    
    Exhibits and Reports on Form 8-K
    
    
    81Signatures
    
    
    
    
    
    
    82


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 September 30,2003
    
    
    2002RevenuesHome Building
    
    $
    1,709,139
    
    
    $
    1,282,316Financial Services
    
    
    290,551
    
    
    
    204,819Construction Products
    
    
    154,798
    
    
    
    135,993Construction Services
    
    
    386,629
    
    
    
    391,740Investment Real Estate
    
    
    22,673
    
    
    
    2,992Other
    
    
    19,334
    
    
    
    26,2542,583,124
    
    
    
    2,044,114Costs and ExpensesHome Building
    
    
    1,504,741
    
    
    
    1,154,916Financial Services
    
    
    214,049
    
    
    
    168,244Construction Products
    
    
    125,175
    
    
    
    109,250Construction Services
    
    
    382,069
    
    
    
    382,539Investment Real Estate
    
    
    3,892
    
    
    
    1,420Other
    
    
    20,210
    
    
    
    27,477Corporate General and Administrative
    
    
    22,473
    
    
    
    14,447Interest Expense
    
    
    17,403
    
    
    
    16,529Minority Interest
    
    
    10,090
    
    
    
    8,5012,300,102
    
    
    
    1,883,323Earnings from Unconsolidated Entities
    
    
    15,080
    
    
    
    3,563Earnings from Continuing Operations Before Income Taxes and Cumulative Effect
of a Change in Accounting Principle
    
    
    298,102
    
    
    
    164,354Income Taxes
    
    
    98,504
    
    
    
    49,358Earnings from Continuing Operations Before Cumulative Effect of a Change in
Accounting Principle
    
    
    199,598
    
    
    
    114,996(Loss) Earnings from Discontinued Operations, net of Taxes of $(113) and $330
    
    
    (209
    )
    
    
    613Earnings Before Cumulative Effect of a Change in Accounting Principle
    
    
    199,389
    
    
    
    115,609Cumulative Effect of a Change in Accounting Principle, net of Taxes of $(8,303)
    
    
    (13,260
    )
    
    
    Net Earnings
    
    $
    186,129
    
    
    $
    115,609Basic Earnings Per ShareContinuing Operations
    
    $
    3.23
    
    
    $
    1.89Discontinued Operations
    
    
    
    
    
    
    0.01Cumulative Effect of a Change in Accounting Principle
    
    
    (0.21
    )
    
    
    $
    3.02
    
    
    $
    1.90Diluted Earnings Per ShareContinuing Operations
    
    $
    3.09
    
    
    $
    1.82Discontinued Operations
    
    
    
    
    
    
    0.01Cumulative Effect of a Change in Accounting Principle
    
    
    (0.21
    )
    
    
    $
    2.88
    
    
    $
    1.83Average Shares OutstandingBasic
    
    
    61,713,825
    
    
    
    60,875,672Dilutive Securities:Options
    
    
    2,609,080
    
    
    
    1,619,150Other
    
    
    215,532
    
    
    
    541,468Diluted
    
    
    64,538,437
    
    
    
    63,036,290Cash 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
Statements of Consolidated Earnings
(Dollars in thousands, except per share data)
(unaudited)

For the Six Months Ended September 30,2003
    
    
    2002RevenuesHome Building
    
    $
    3,213,632
    
    
    $
    2,387,831Financial Services
    
    
    557,411
    
    
    
    385,359Construction Products
    
    
    298,887
    
    
    
    264,768Construction Services
    
    
    762,384
    
    
    
    752,461Investment Real Estate
    
    
    25,418
    
    
    
    9,635Other
    
    
    42,110
    
    
    
    55,4734,899,842
    
    
    
    3,855,527Costs and ExpensesHome Building
    
    
    2,853,782
    
    
    
    2,160,368Financial Services
    
    
    415,310
    
    
    
    324,478Construction Products
    
    
    246,385
    
    
    
    210,293Construction Services
    
    
    753,265
    
    
    
    735,180Investment Real Estate
    
    
    5,882
    
    
    
    3,968Other
    
    
    44,559
    
    
    
    58,901Corporate General and Administrative
    
    
    41,705
    
    
    
    27,081Interest Expense
    
    
    34,367
    
    
    
    31,863Minority Interest
    
    
    17,575
    
    
    
    17,3834,412,830
    
    
    
    3,569,515Earnings from Unconsolidated Entities
    
    
    20,160
    
    
    
    3,068Earnings from Continuing Operations Before Income Taxes and Cumulative Effect
of a Change in Accounting Principle
    
    
    507,172
    
    
    
    289,080Income Taxes
    
    
    165,240
    
    
    
    86,814Earnings from Continuing Operations Before Cumulative Effect of a Change in
Accounting Principle
    
    
    341,932
    
    
    
    202,266Earnings from Discontinued Operations, net of Taxes of $133 and $591
    
    
    247
    
    
    
    1,098Earnings Before Cumulative Effect of a Change in Accounting Principle
    
    
    342,179
    
    
    
    203,364Cumulative Effect of a Change in Accounting Principle, net of Taxes of $(8,303)
    
    
    (13,260
    )
    
    
    Net Earnings
    
    $
    328,919
    
    
    $
    203,364Basic Earnings Per ShareContinuing Operations
    
    $
    5.56
    
    
    $
    3.30Discontinued Operations
    
    
    
    
    
    
    0.03Cumulative Effect of a Change in Accounting Principle
    
    
    (0.21
    )
    
    
    $
    5.35
    
    
    $
    3.33Diluted Earnings Per ShareContinuing Operations
    
    $
    5.32
    
    
    $
    3.19Discontinued Operations
    
    
    
    
    
    
    0.02Cumulative Effect of a Change in Accounting Principle
    
    
    (0.20
    )
    
    
    $
    5.12
    
    
    $
    3.21Average Shares OutstandingBasic
    
    
    61,480,825
    
    
    
    61,021,424Dilutive Securities:Options
    
    
    2,565,772
    
    
    
    1,808,690Other
    
    
    187,908
    
    
    
    539,670Diluted
    
    
    64,234,505
    
    
    
    63,369,784Cash Dividends Per Share
    
    $
    0.08
    
    
    $
    0.08


See Notes to Consolidated Financial Statements.

2



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##### Table of Contents









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

Centex Corporation and SubsidiariesSeptember 30, 2003
    
    
    March 31, 2003AssetsCash and Cash Equivalents
    
    $
    89,514
    
    
    $
    469,778Restricted Cash
    
    
    290,618
    
    
    
    172,321Receivables -Residential Mortgage Loans Held for Investment, net
    
    
    5,618,547
    
    
    
    4,642,826Residential Mortgage Loans Held for Sale
    
    
    1,980,941
    
    
    
    303,328Construction Contracts
    
    
    305,661
    
    
    
    251,024Trade, including Notes of $59,228 and $31,315
    
    
    409,277
    
    
    
    406,008Inventories -Housing Projects
    
    
    3,947,876
    
    
    
    3,306,655Land Held for Development and Sale
    
    
    91,292
    
    
    
    106,057Land Held Under Option Agreements Not Owned
    
    
    296,586
    
    
    
    Construction Products
    
    
    52,375
    
    
    
    58,254Other
    
    
    14,459
    
    
    
    15,278Investments -Centex Development Company, L.P.
    
    
    298,384
    
    
    
    281,100Joint Ventures and Other
    
    
    132,888
    
    
    
    102,277Unconsolidated Subsidiaries
    
    
    
    
    
    
    Property and Equipment, net
    
    
    666,061
    
    
    
    681,165Other Assets -Deferred Income Taxes
    
    
    70,226
    
    
    
    52,929Goodwill
    
    
    304,957
    
    
    
    304,780Mortgage Securitization Residual Interest
    
    
    102,514
    
    
    
    108,102Deferred Charges and Other, net
    
    
    185,005
    
    
    
    238,290Assets of Discontinued Operations
    
    
    5,777
    
    
    
    110,364$
    14,862,958
    
    
    $
    11,610,536Liabilities and Stockholders EquityAccounts Payable
    
    $
    621,293
    
    
    $
    630,118Accrued Liabilities
    
    
    1,035,432
    
    
    
    1,028,211Debt -Centex
    
    
    2,194,386
    
    
    
    2,105,880Financial Services
    
    
    7,638,274
    
    
    
    4,998,819Payables to Affiliates
    
    
    
    
    
    
    Liabilities of Discontinued Operations
    
    
    
    
    
    
    19,435Minority Interests
    
    
    456,157
    
    
    
    170,227Stockholders Equity -Preferred Stock: Authorized 5,000,000 Shares, None Issued
    
    
    
    
    
    
    Common Stock: $.25 Par Value; Authorized 100,000,000
Shares; Outstanding 61,581,858 and 60,836,091 Shares,
Respectively
    
    
    15,793
    
    
    
    15,483Capital in Excess of Par Value
    
    
    173,740
    
    
    
    98,711Unamortized Value of Deferred Compensation
    
    
    (29,173
    )
    
    
    (2,398
    )Retained Earnings
    
    
    2,828,097
    
    
    
    2,597,078Treasury Stock, at Cost; 1,588,948 and 1,096,844 Shares,
Respectively
    
    
    (81,506
    )
    
    
    (45,037
    )Accumulated Other Comprehensive Income (Loss)
    
    
    10,465
    
    
    
    (5,991
    )Total Stockholders Equity
    
    
    2,917,416
    
    
    
    2,657,846$
    14,862,958
    
    
    $
    11,610,536


See Notes to Consolidated Financial Statements.

3



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##### Table of Contents



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

Centex*
    
    
    Financial ServicesSeptember 30, 2003
    
    
    March 31, 2003
    
    
    September 30, 2003
    
    
    March 31, 2003$
    78,497
    
    
    $
    454,696
    
    
    $
    11,017
    
    
    $
    15,08234,567
    
    
    
    8,349
    
    
    
    256,051
    
    
    
    163,972
    
    
    
    
    
    
    
    5,618,547
    
    
    
    4,642,826
    
    
    
    
    
    
    
    1,980,941
    
    
    
    303,328305,661
    
    
    
    251,024
    
    
    
    
    
    
    
    229,715
    
    
    
    207,704
    
    
    
    179,562
    
    
    
    198,3043,947,876
    
    
    
    3,306,655
    
    
    
    
    
    
    
    91,292
    
    
    
    106,057
    
    
    
    
    
    
    
    296,586
    
    
    
    
    
    
    
    
    
    
    
    52,375
    
    
    
    58,254
    
    
    
    
    
    
    
    4,697
    
    
    
    6,832
    
    
    
    9,762
    
    
    
    8,446298,384
    
    
    
    281,100
    
    
    
    
    
    
    
    132,888
    
    
    
    102,277
    
    
    
    
    
    
    
    457,043
    
    
    
    405,407
    
    
    
    
    
    
    
    624,323
    
    
    
    639,069
    
    
    
    41,738
    
    
    
    42,096(32,687
    )
    
    
    (36,534
    )
    
    
    102,913
    
    
    
    89,463288,355
    
    
    
    287,725
    
    
    
    16,602
    
    
    
    17,055
    
    
    
    
    
    
    
    102,514
    
    
    
    108,102120,343
    
    
    
    156,650
    
    
    
    64,662
    
    
    
    81,6405,777
    
    
    
    110,364
    
    
    
    
    
    
    
    $
    6,935,692
    
    
    $
    6,345,629
    
    
    $
    8,384,309
    
    
    $
    5,670,314$
    597,460
    
    
    $
    589,530
    
    
    $
    23,833
    
    
    $
    40,588772,050
    
    
    
    804,447
    
    
    
    263,382
    
    
    
    223,7642,194,386
    
    
    
    2,105,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,638,274
    
    
    
    4,998,819
    
    
    
    
    
    
    
    (55
    )
    
    
    25,736
    
    
    
    19,435
    
    
    
    
    
    
    
    454,380
    
    
    
    168,491
    
    
    
    1,777
    
    
    
    1,736
    
    
    
    
    
    
    
    
    
    
    
    15,793
    
    
    
    15,483
    
    
    
    1
    
    
    
    1173,740
    
    
    
    98,711
    
    
    
    200,467
    
    
    
    200,467(29,173
    )
    
    
    (2,398
    )
    
    
    
    
    
    
    2,828,097
    
    
    
    2,597,078
    
    
    
    273,540
    
    
    
    198,145(81,506
    )
    
    
    (45,037
    )
    
    
    
    
    
    
    10,465
    
    
    
    (5,991
    )
    
    
    (16,910
    )
    
    
    (18,942
    )2,917,416
    
    
    
    2,657,846
    
    
    
    457,098
    
    
    
    379,671$
    6,935,692
    
    
    $
    6,345,629
    
    
    $
    8,384,309
    
    
    $
    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.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 Corporation and SubsidiariesFor the Six Months Ended September 30,2003
    
    
    2002Cash Flows  Operating ActivitiesNet Earnings
    
    $
    328,919
    
    
    $
    203,364Adjustments-Cumulative Effect of a Change in Accounting Principle
    
    
    13,260
    
    
    
    Depreciation, Depletion and Amortization
    
    
    57,394
    
    
    
    47,052Provision for Losses on Residential Mortgage Loans Held for Investment
    
    
    34,894
    
    
    
    13,556Deferred Income Tax (Benefit) Provision
    
    
    (13,731
    )
    
    
    29,118Equity in Earnings of Centex Development Company, L.P.
and Joint Ventures
    
    
    (18,276
    )
    
    
    (3,202
    )Equity in Earnings of Unconsolidated Subsidiaries
    
    
    
    
    
    
    Minority Interest, net of Taxes
    
    
    11,321
    
    
    
    11,562Changes in Assets and Liabilities, Excluding Effect of AcquisitionsIncrease in Restricted Cash
    
    
    (111,000
    )
    
    
    (21,000
    )Increase in Receivables
    
    
    (91,577
    )
    
    
    (89,215
    )Decrease in Residential Mortgage Loans Held for Sale
    
    
    765,815
    
    
    
    40,198Increase in Housing Projects and Land Held for Development
and Sale Inventories
    
    
    (660,851
    )
    
    
    (582,832
    )Decrease (Increase) in Construction Products and Other Inventories
    
    
    5,630
    
    
    
    1,136(Decrease) Increase in Accounts Payable and Accrued Liabilities
    
    
    5,890
    
    
    
    8,113Decrease (Increase) in Other Assets, net
    
    
    35,634
    
    
    
    15,592Increase (Decrease) in Payables to Affiliates
    
    
    
    
    
    
    Other
    
    
    8,238
    
    
    
    2,971371,560
    
    
    
    (323,587
    )Cash Flows  Investing ActivitiesIncrease in Residential Mortgage Loans Held for Investment
    
    
    (1,010,615
    )
    
    
    (574,669
    )Increase in Investment and Advances to Centex Development Company, L.P.
and Joint Ventures
    
    
    (8,022
    )
    
    
    (32,588
    )Decrease in Investment and Advances to Unconsolidated Subsidiaries
    
    
    
    
    
    
    Purchases of Property and Equipment, net
    
    
    (21,474
    )
    
    
    (48,083
    )Discontinued Operations
    
    
    (7,808
    )
    
    
    (831
    )Harwood Street Funding I, LLC Cash Consolidated
    
    
    18,000
    
    
    
    (1,029,919
    )
    
    
    (656,171
    )Cash Flows  Financing ActivitiesIncrease in Short-Term Debt, net
    
    
    (426,394
    )
    
    
    532,896CentexIssuance of Long-Term Debt
    
    
    7,193
    
    
    
    255,638Repayment of Long-Term Debt
    
    
    (58,437
    )
    
    
    (107,582
    )Financial ServicesIssuance of Long-Term Debt
    
    
    3,292,866
    
    
    
    620,723Repayment of Long-Term Debt
    
    
    (2,546,765
    )
    
    
    (454,946
    )Proceeds from Stock Option Exercises
    
    
    48,756
    
    
    
    9,439Treasury Stock, net
    
    
    (34,184
    )
    
    
    (28,936
    )Dividends Paid
    
    
    (4,940
    )
    
    
    (4,887
    )278,095
    
    
    
    822,345Net Decrease in Cash and Cash Equivalents
    
    
    (380,264
    )
    
    
    (157,413
    )Cash and Cash Equivalents at Beginning of Period
    
    
    469,778
    
    
    
    218,869Cash and Cash Equivalents at End of Period
    
    $
    89,514
    
    
    $
    61,456


See Notes to Consolidated Financial Statements.

5



---



##### Table of Contents



Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
(Dollars in thousands)
(unaudited)

Centex *
    
    
    Financial ServicesFor the Six Months Ended September 30,
    
    
    For the Six Months Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002$
    328,919
    
    
    $
    203,364
    
    
    $
    75,395
    
    
    $
    67,128
    
    
    
    
    
    
    
    13,260
    
    
    
    48,744
    
    
    
    38,682
    
    
    
    8,650
    
    
    
    8,370
    
    
    
    
    
    
    
    34,894
    
    
    
    13,556(7,405
    )
    
    
    29,118
    
    
    
    (6,326
    )
    
    
    (9,963
    )(18,276
    )
    
    
    (3,202
    )
    
    
    
    
    
    
    (75,395
    )
    
    
    (67,128
    )
    
    
    
    
    
    
    11,321
    
    
    
    11,562
    
    
    
    
    
    
    
    (26,218
    )
    
    
    (880
    )
    
    
    (84,782
    )
    
    
    (20,120
    )(76,648
    )
    
    
    (51,035
    )
    
    
    (14,929
    )
    
    
    (38,180
    )
    
    
    
    
    
    
    
    765,815
    
    
    
    40,198(660,851
    )
    
    
    (582,832
    )
    
    
    
    
    
    
    6,946
    
    
    
    1,118
    
    
    
    (1,316
    )
    
    
    18(37,883
    )
    
    
    (39,306
    )
    
    
    27,152
    
    
    
    52,68430,300
    
    
    
    12,850
    
    
    
    5,334
    
    
    
    (2,700
    )
    
    
    
    
    
    
    
    (7,138
    )
    
    
    (69,067
    )8,197
    
    
    
    3,159
    
    
    
    41
    
    
    
    (188
    )(468,249
    )
    
    
    (444,530
    )
    
    
    816,050
    
    
    
    41,736
    
    
    
    
    
    
    
    (1,010,615
    )
    
    
    (574,669
    )(8,022
    )
    
    
    (32,588
    )
    
    
    
    
    
    
    23,759
    
    
    
    110,322
    
    
    
    
    
    
    
    (14,017
    )
    
    
    (47,154
    )
    
    
    (7,457
    )
    
    
    (7,044
    )(7,808
    )
    
    
    (831
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    (6,088
    )
    
    
    29,749
    
    
    
    (1,000,072
    )
    
    
    (581,713
    )139,750
    
    
    
    137,992
    
    
    
    (566,144
    )
    
    
    394,9047,193
    
    
    
    255,638
    
    
    
    
    
    
    
    (58,437
    )
    
    
    (107,582
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,292,866
    
    
    
    620,723
    
    
    
    
    
    
    
    (2,546,765
    )
    
    
    (454,946
    )48,756
    
    
    
    9,439
    
    
    
    
    
    
    
    (34,184
    )
    
    
    (28,936
    )
    
    
    
    
    
    
    (4,940
    )
    
    
    (4,887
    )
    
    
    
    
    
    
    (25,000
    )98,138
    
    
    
    261,664
    
    
    
    179,957
    
    
    
    535,681(376,199
    )
    
    
    (153,117
    )
    
    
    (4,065
    )
    
    
    (4,296
    )454,696
    
    
    
    191,744
    
    
    
    15,082
    
    
    
    27,125$
    78,497
    
    
    $
    38,627
    
    
    $
    11,017
    
    
    $
    22,829




|* |  | 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



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##### Table of Contents









Centex Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 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 Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Cash Paid for Interest
    
    $
    100,202
    
    
    $
    87,978
    
    
    $
    171,393
    
    
    $
    155,696Net Cash Paid for Taxes
    
    $
    125,706
    
    
    $
    45,151
    
    
    $
    171,868
    
    
    $
    82,282


Interest expense relating to the Financial Services segment is included in
Financial Services costs and expenses. 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 costs and
expenses. Capitalized interest relieved was $14.7 million and $10.5 million
for the three months ended September 30, 2003 and 2002, respectively, and $27.9
million and $18.8 million for the six months ended September 30, 2003 and 2002,
respectively. Interest expense related to segments other than Financial
Services and Home Building is included as a separate line item in the
Statements of Consolidated Earnings.

7



---



##### Table of Contents



For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Total Interest Incurred
    
    $
    95,551
    
    
    $
    80,663
    
    
    $
    183,858
    
    
    $
    159,195Less  Interest Capitalized
    
    
    (20,204
    )
    
    
    (18,447
    )
    
    
    (40,519
    )
    
    
    (36,998
    )Financial Services Interest Expense
    
    
    (57,944
    )
    
    
    (45,687
    )
    
    
    (108,972
    )
    
    
    (90,334
    )Interest Expense, net
    
    $
    17,403
    
    
    $
    16,529
    
    
    $
    34,367
    
    
    $
    31,863


Effective July 1, 2003 the Company consolidated Harwood Street Funding I,
LLC (HSF-I) pursuant to the provisions of Financial Accounting Standards
Board (FASB) Interpretation No. 46, Consolidation of Variable Interest
Entities (FIN 46). As of July 1, 2003, assets and liabilities consolidated
were as follows:

Cash and Cash Equivalents
    
    $
    18,000Residential Mortgage Loans Held for Sale
    
    
    2,443,428Other Assets
    
    
    (36,100
    )Accounts Payable
    
    
    20,910Financial Services Debt
    
    
    (2,459,498
    )Cumulative Effect of a Change in Accounting Principle
    
    $
    (13,260
    )


(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 and $5.8 million, respectively, related to these stock options was
recognized during the three and six month periods ended September 30, 2003.

8



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##### Table of Contents



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 and six
month periods ended September 30, 2003 and 2002, consistent with the provisions
of SFAS No. 123.

For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Net Earnings  as Reported
    
    $
    186,129
    
    
    $
    115,609
    
    
    $
    328,919
    
    
    $
    203,364Stock-Based Employee Compensation
Included in Reported Net Income,
net of Related Tax Effects
    
    
    3,612
    
    
    
    1,058
    
    
    
    7,197
    
    
    
    2,115Total Stock-Based Employee Compensation
Expense Determined Under Fair Value
Based Method, net of Related Tax Effects
    
    
    (8,151
    )
    
    
    (6,559
    )
    
    
    (16,340
    )
    
    
    (13,355
    )Pro Forma Net Earnings
    
    $
    181,590
    
    
    $
    110,108
    
    
    $
    319,776
    
    
    $
    192,124Earnings Per Share:Basic  as Reported
    
    $
    3.02
    
    
    $
    1.90
    
    
    $
    5.35
    
    
    $
    3.33Basic  Pro Forma
    
    $
    2.94
    
    
    $
    1.81
    
    
    $
    5.20
    
    
    $
    3.15Diluted  as Reported
    
    $
    2.88
    
    
    $
    1.83
    
    
    $
    5.12
    
    
    $
    3.21Diluted  Pro Forma
    
    $
    2.81
    
    
    $
    1.76
    
    
    $
    4.97
    
    
    $
    3.03


(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
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Par Value
    
    
    Compensation
    
    
    Earnings
    
    
    at 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
    
    
    64
    
    
    
    16
    
    
    
    32,038
    
    
    
    (32,054
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock Compensation
Expense
    
    
    
    
    
    
    
    
    
    
    5,799
    
    
    
    5,279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,078Exercise of Stock,
Options, Including
Tax Benefits
    
    
    775
    
    
    
    194
    
    
    
    35,192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,386Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,940
    )
    
    
    
    
    
    
    
    
    
    
    (4,940
    )Purchases of Common
Stock for Treasury
    
    
    (493
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,469
    )
    
    
    
    
    
    
    (36,469
    )Exercise of Convertible
Debenture
    
    
    400
    
    
    
    100
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,100Cavco Spin-off
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,960
    )
    
    
    
    
    
    
    
    
    
    
    (92,960
    )Net Earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328,919
    
    
    
    
    
    
    
    
    
    
    
    328,919Unrealized Gain
on Hedging
Instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,171
    
    
    
    3,171Foreign Currency
Translation
Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,279
    
    
    
    13,279Other Comprehensive
Income Items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    6Balance, September 30,
2003
    
    
    61,582
    
    
    $
    15,793
    
    
    $
    173,740
    
    
    $
    (29,173
    )
    
    $
    2,828,097
    
    
    $
    (81,506
    )
    
    $
    10,465
    
    
    $
    2,917,416


9



---



##### Table of Contents



(E) RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT

Residential
mortgage loans held for investment by Centex Home Equity Company, LLC, including real estate
owned, consisted of the following:

September 30, 2003
    
    
    March 31, 2003Residential Mortgage Loans Held for Investment
    
    $
    5,660,923
    
    
    $
    4,671,210Allowance for Losses on Residential Mortgage Loans
Held for Investment
    
    
    (42,376
    )
    
    
    (28,384
    )Residential Mortgage Loans Held for Investment,
net of Allowance for Losses
    
    $
    5,618,547
    
    
    $
    4,642,826


Changes in the allowance for losses on residential mortgage loans held for
investment were as follows:

For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Balance at Beginning of Period
    
    $
    34,061
    
    
    $
    17,320
    
    
    $
    28,384
    
    
    $
    14,106Provision for Losses
    
    
    19,132
    
    
    
    7,670
    
    
    
    34,894
    
    
    
    13,556Recoveries on Loans Charged Off
    
    
    20
    
    
    
    33
    
    
    
    96
    
    
    
    51Losses Sustained
    
    
    (10,837
    )
    
    
    (3,880
    )
    
    
    (20,998
    )
    
    
    (6,570
    )Balance at End of Period
    
    $
    42,376
    
    
    $
    21,143
    
    
    $
    42,376
    
    
    $
    21,143


September 30,2003
    
    
    2002Allowance as a Percentage of Gross Loans Held for Investment
    
    
    0.75
    %
    
    
    0.55
    %Allowance as a Percentage of 90+ Days Contractual Delinquency
    
    
    28.18
    %
    
    
    20.76
    %90+ Days Contractual DelinquencyTotal Dollars Delinquent
    
    $
    150,376
    
    
    $
    101,863% Delinquent
    
    
    2.66
    %
    
    
    2.64
    %


10



---



##### Table of Contents



(F) GOODWILL

A summary of changes in goodwill by segment for the six months ended
September 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
    )
    
    
    
    
    
    
    
    
    
    
    630
    
    
    
    177Balance as of September 30,
2003
    
    $
    123,011
    
    
    $
    16,602
    
    
    $
    40,290
    
    
    $
    1,007
    
    
    $
    124,047
    
    
    $
    304,957


Goodwill for the Other segment at September 30, 2003 includes $73.2
million related to the Companys home services operations and $50.8 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.

(G) INDEBTEDNESS

Short-term Debt

Balances of short-term debt were:

September 30, 2003
    
    
    March 31, 2003Financial
    
    
    
    
    
    
    
    
    
    
    FinancialCentex
    
    
    
    
    
    
    Services
    
    
    Centex
    
    
    
    
    
    
    ServicesFinancial Institutions
    
    $
    
    
    
    
    
    
    
    $
    949,752
    (1)
    
    $
    25,257
    (2)
    
    
    
    
    
    $
    283,146Commercial Paper
    
    
    165,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secured Liquidity Notes
    
    
    
    
    
    
    
    
    
    
    1,552,831
    (3)
    
    
    
    
    
    
    
    
    
    
    559,083
    (4)Other
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    165,007
    
    
    
    
    
    
    $
    2,502,583
    
    
    $
    25,257
    
    
    
    
    
    
    $
    842,229Consolidated Short-term Debt
    
    
    
    
    
    $
    2,667,590
    
    
    
    
    
    
    
    
    
    
    $
    867,486




|(1) |  | Approximately $650 million relates to Harwood Street Funding I, LLC.
|--- |  | --------------------------------------------------------------------



|(2) |  | Debt relates entirely to Construction Products.
|--- |  | -----------------------------------------------



|(3) |  | Debt relates to Harwood Street Funding I, LLC and Harwood Street Funding
II, LLC.
|--- |  | ---------------------------------------------------------------------------------



|(4) |  | Debt relates entirely to Harwood Street Funding II, LLC.
|--- |  | --------------------------------------------------------

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 September 30, 2003 and March 31, 2003
were 1.2% and 1.6%, respectively.

11



---



##### Table of Contents



Long-term Debt

Balances
of long-term debt (debt instruments with original maturities
greater than one year) and weighted-average interest rates at September 30,
2003 and March 31, 2003 were:

September 30, 2003
    
    
    March 31, 2003CentexMedium-term Note Programs, due through 2006
    
    $
    258,000
    
    
    
    4.67
    %
    
    $
    281,000
    
    
    
    4.79
    %Long-term Notes, due through 2012
    
    
    1,508,224
    
    
    
    7.05
    %
    
    
    1,508,116
    
    
    
    7.05
    %Other Indebtedness, due through 2008
    
    
    63,509
    
    
    
    2.76
    %
    
    
    91,919
    
    
    
    2.81
    %Subordinated Debt:Subordinated Debentures, due in 2005
    
    
    99,918
    
    
    
    7.38
    %
    
    
    99,894
    
    
    
    7.38
    %Subordinated Debentures, due in 2007
    
    
    99,728
    
    
    
    8.75
    %
    
    
    99,694
    
    
    
    8.75
    %2,029,379
    
    
    
    
    
    
    
    2,080,623Financial ServicesCentex Home Equity Company, LLC
Asset-Backed Certificates, due through 2033
    
    
    4,921,691
    
    
    
    3.13
    %
    
    
    4,081,590
    
    
    
    3.67
    %Harwood Street Funding I, LLC Variable Rate
Subordinated Extendable Certificates,
due through 2006
    
    
    139,000
    
    
    
    3.27
    %
    
    
    
    
    
    
    Harwood Street Funding II, LLC Variable
Rate Subordinated Notes, due through 2008
    
    
    75,000
    
    
    
    3.25
    %
    
    
    75,000
    
    
    
    3.38
    %5,135,691
    
    
    
    
    
    
    
    4,156,590Total
    
    $
    7,165,070
    
    
    
    
    
    
    $
    6,237,213


The weighted-average interest rates for long-term debt during the six
months ended September 30, 2003 and 2002 were:

For the Six MonthsEnded September 30,2003
    
    
    2002CentexMedium-term Note Programs
    
    
    5.32
    %
    
    
    5.28
    %Long-term Notes
    
    
    7.04
    %
    
    
    8.08
    %Other Indebtedness
    
    
    2.50
    %
    
    
    3.41
    %Subordinated Debentures
    
    
    8.05
    %
    
    
    8.05
    %Financial ServicesCentex Home Equity Company, LLC Long-Term
Debt(1)
    
    
    3.69
    %
    
    
    4.79
    %CTX Mortgage Company, LLC Long-Term
Debt(2)
    
    
    2.92
    %
    
    
    




|(1) |  | Consists of Centex Home Equity Company, LLC Asset-Backed Certificates and
Harwood Street Funding II, LLC Variable Rate Subordinated Notes.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Consists of Harwood Street Funding I, LLC Variable Rate Subordinated
Extendable Certificates.
|--- |  | ---------------------------------------------------------------------------------------------

12



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##### Table of Contents



Maturities of Centex and Financial Services long-term debt during the next
five years ending March 31 are:

FinancialCentex
    
    
    Services
    
    
    Total2004
    
    $
    1,538
    
    
    $
    693,336
    
    
    $
    694,8742005
    
    
    32,593
    
    
    
    1,340,026
    
    
    
    1,372,6192006
    
    
    372,735
    
    
    
    984,684
    
    
    
    1,357,4192007
    
    
    290,448
    
    
    
    1,036,595
    
    
    
    1,327,0432008
    
    
    358,840
    
    
    
    555,371
    
    
    
    914,211Thereafter
    
    
    973,225
    
    
    
    525,679
    
    
    
    1,498,904$
    2,029,379
    
    
    $
    5,135,691
    
    
    $
    7,165,070


Financial Services long-term debt associated with Centex Home Equity
Company, LLC related to securitized residential mortgage loans structured as
collateralized borrowings includes Asset-Backed Certificates of $4.9
billion at September 30,
2003. The holders of such debt have no recourse for non-payment to Centex Home
Equity Company, LLC (Home Equity) or Centex Corporation; however, Home Equity
remains liable for customary loan representations. The principal and interest
on these notes are paid from the liquidation of 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.

Financial Services long-term debt associated with CTX Mortgage Company,
LLC is comprised of Variable Rate Subordinated Extendable Certificates issued
by HSF-I. HSF-I is a variable interest entity for which the Company is the
primary beneficiary pursuant to FIN 46. Accordingly, HSF-I was consolidated in
the Companys financial statements beginning July 1, 2003. The amount
outstanding related to these certificates was $139.0 million at September 30,
2003. The principal and interest on these certificates are paid from the
liquidation of the underlying residential mortgage loans, which serve as
collateral for the debt. The holders of this debt have no recourse for
non-payment to CTX Mortgage Company, LLC or Centex Corporation and the
consolidation of this debt does not change the Companys credit profile or debt
ratings.

Under the Companys debt covenants, Centex is required to maintain certain
leverage and interest coverage ratios and a minimum tangible net worth. At
September 30, 2003, the Company was in compliance with all of these covenants.

13



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##### Table of Contents



Credit Facilities

The Companys existing credit facilities and available borrowing capacity
as of September 30, 2003 are summarized below:

Existing Credit
    
    
    AvailableFacilities
    
    
    CapacityCentexCentex CorporationMulti-Bank Revolving Credit Facility
    
    $
    800,000
    
    
    $
    800,000
    (1)Multi-Bank Revolving Letter of Credit Facility
    
    
    250,000
    
    
    
    129,283
    (2)Construction Products
Senior Revolving Credit Facility
    
    
    155,000
    
    
    
    118,317
    (3)1,205,000
    
    
    
    1,047,600Financial ServicesUnsecured Credit Facility
    
    
    125,000
    
    
    
    71,100
    (4)Secured Credit Facilities
    
    
    715,000
    
    
    
    468,987
    (5)Harwood Street Funding I, LLC Facility
    
    
    3,000,000
    
    
    
    1,444,821Harwood Street Funding II, LLC Facility
    
    
    1,500,000
    
    
    
    638,6695,340,000
    
    
    
    2,623,577$
    6,545,000
    
    
    $
    3,671,177
    (6)




|(1) |  | This is a committed, multi-bank revolving credit facility, maturing in
August 2006, which serves as backup for commercial paper borrowings. As
of September 30, 2003, there were no borrowings under this backup
facility, and the Companys $700 million commercial paper program had $165
million outstanding. There have been no borrowings under this facility
since inception.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | This is a committed, multi-bank revolving letter of credit facility,
maturing in August 2004. Letters of credit issued under this facility may
expire no later than August 2005.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | This is a committed, senior revolving credit facility, maturing in March
2006. This facility was entered into by Construction Products and has no
recourse to Centex Corporation.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Centex Corporation, CTX Mortgage Company, LLC (CTX Mortgage) and Home
Equity, on a joint and several basis, share in a $125 million uncommitted,
unsecured credit facility.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | CTX Mortgage and Home Equity share in a $550 million committed secured
credit facility to finance mortgage inventory. Effective October 2003,
this facility and available capacity were reduced to $250 million. CTX
Mortgage also maintains $155 million of committed secured mortgage
warehouse facilities to finance mortgages. Home Equity also maintains a
$10 million committed secured mortgage warehouse facility to finance
mortgages.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) |  | The amount of available borrowing capacity includes $3.6 billion of
committed borrowings and $71.1 million of uncommitted borrowings as of
September 30, 2003. Although the Company believes that the uncommitted
capacity is currently available, there can be no assurance that the
lenders under this facility would elect to make advances to the Company or
its subsidiaries if and when requested to do so.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CTX Mortgage Company, LLC and Harwood Street Funding I, LLC

CTX Mortgage finances its inventory of mortgage loans held for sale
principally through sales of conforming and Jumbo A loans to HSF-I, pursuant
to a mortgage loan purchase agreement (the HSF-I Purchase Agreement). Since
1999, CTX Mortgage has sold substantially all of the conforming and Jumbo A
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

14



---



##### Table of Contents



from CTX Mortgage by issuing (1) short-term secured liquidity notes that are
currently rated A1+ by Standard & Poors (S & P) and P-1 by Moodys Investors Service
(Moodys), (2) medium-term debt that is
currently rated A1+ by S&P and P-1 by Moodys and (3) subordinated certificates
maturing in September 2004, November 2005 and June 2006, extendable for up to
five years, that are currently rated BBB by S&P and Baa2 by Moodys. 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 September
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 $3.0 billion.
This arrangement provides CTX Mortgage with reduced financing cost for
eligible mortgage loans it originates and improves its liquidity.

In January 2003, the FASB issued FIN 46, which modified 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 the Company is the
primary beneficiary. Accordingly, HSF-I was consolidated in the Companys
financial statements beginning July 1, 2003. Prior to the implementation of
FIN 46, HSF-I was not consolidated in
the Companys financial statements. As a result of the consolidation of HSF-I,
the Company recorded a cumulative effect of a change in accounting principle of
$13.3 million, net of tax, in the quarter ended September 30, 2003. This
cumulative effect of a change in accounting principle primarily represents the
deferral of servicing released premium income offset to a lesser extent by the
deferral of certain loan origination costs, which will be recognized as loans
are sold into the secondary market. The consolidation of HSF-I resulted in an
increase in the Companys residential mortgage loans held for sale with a
corresponding increase in the Companys debt of approximately $1.6 billion at
September 30, 2003. In addition, interest income and interest expense of HSF-I
subsequent to June 30, 2003, are reflected in the Companys financial
statements. HSF-Is debt does not have recourse to the Company, and the
consolidation of this debt did not change the Companys credit profile or debt
ratings. Because HSF-I is a consolidated entity as of July 1, 2003, all
transactions between the Company and HSF-I subsequent to June 30, 2003 are
eliminated in consolidation.

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 would 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.

15



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##### Table of Contents



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
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. See additional discussion of interest
rate risks in Note (N), Derivatives and Hedging. 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 noted above, because HSF-I is a consolidated entity as of July
1, 2003, all transactions between the Company and HSF-I subsequent to June 30,
2003, including those related to the Harwood Swap, are eliminated in
consolidation.

The Company does not guarantee the payment of any debt or subordinated
extendable 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 Company, LLC and HSF-I together sold $5.16 billion and $9.59
billion of mortgage loans to investors during the three and six months ended
September 30, 2003, respectively. CTX Mortgage Company, LLC sold $3.39 billion
and $5.91 billion of mortgage loans to HSF-I and other investors during the
three and six months ended September 30, 2002, respectively. CTX Mortgage
recognized gains on the sale of mortgage loans of $70.1 million and $69.6
million for the three months ended September 30, 2003 and 2002, respectively.
For the six months ended September 30, 2003 and 2002, gains on the sale of
mortgage loans were $157.3 million and $121.5 million, respectively.

Centex Home Equity Company, LLC and Harwood Street Funding II, LLC

Home Equity finances its inventory of mortgage loans held for investment
through Harwood Street Funding II, LLC (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 $1.5 billion. HSF-II obtains funds
through the sale of subordinated notes that are currently rated BBB by S&P, Baa2 by Moodys and BBB by Fitch Ratings
(Fitch) and short-term secured liquidity notes that are currently 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.

16



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##### Table of Contents



(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 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 Centex Corporation 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 September 30, 2003, these
adjusted capital contributions, or Unrecovered Capital, were $243.9 million and
preference payments in arrears totaled $52.9 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 Centex Corporation
through a nominee arrangement and trades with the common stock of Centex
Corporation. The stockholders of Centex Corporation 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 Centex Corporation 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 September 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.

17



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##### Table of Contents



Supplementary Condensed Combined Balance Sheets of Centex Corporation and
Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

September 30,
    
    
    March 31,2003
    
    
    2003AssetsCash and Cash Equivalents
    
    $
    113,101
    
    
    $
    474,891Restricted Cash
    
    
    290,618
    
    
    
    172,321Receivables
    
    
    8,355,063
    
    
    
    5,633,905Inventories
    
    
    4,945,739
    
    
    
    3,982,880Investments in Joint Ventures and Other
    
    
    136,910
    
    
    
    106,250Assets Held for Sale and Discontinued Operations
    
    
    7,765
    
    
    
    165,860Property and Equipment, net
    
    
    668,205
    
    
    
    683,473Other Assets
    
    
    714,944
    
    
    
    750,585$
    15,232,345
    
    
    $
    11,970,165Liabilities and Stockholders EquityAccounts Payable and Accrued Liabilities
    
    $
    1,815,116
    
    
    $
    1,794,261Liabilities Related to Assets Held for Sale and
Discontinued Operations
    
    
    1,113
    
    
    
    65,643Short-term Debt
    
    
    2,860,074
    
    
    
    1,027,182Long-term Debt
    
    
    7,182,499
    
    
    
    6,255,016Minority Stockholders Interest
    
    
    456,127
    
    
    
    170,217Stockholders Equity
    
    
    2,917,416
    
    
    
    2,657,846$
    15,232,345
    
    
    $
    11,970,165


Supplementary Condensed Combined Statements of Earnings of Centex Corporation
and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

For the Six MonthsEnded September 30,2003
    
    
    2002Revenues
    
    $
    5,089,361
    
    
    $
    4,017,111Costs and Expenses
    
    
    4,592,140
    
    
    
    3,729,340Earnings from Unconsolidated Entities
    
    
    737
    
    
    
    30Earnings Before Income Taxes
    
    
    497,958
    
    
    
    287,801Income Taxes
    
    
    165,240
    
    
    
    86,814Earnings from Continuing Operations
    
    
    332,718
    
    
    
    200,987Earnings from Discontinued Operations
    
    
    9,461
    
    
    
    2,377Earnings Before Cumulative Effect of a Change in Accounting
Principle
    
    
    342,179
    
    
    
    203,364Cumulative Effect of a Change in Accounting Principle
    
    
    (13,260
    )
    
    
    Net Earnings
    
    
    328,919
    
    
    
    203,364Other Comprehensive Income
    
    
    16,456
    
    
    
    4,228Comprehensive Income
    
    $
    345,375
    
    
    $
    207,592


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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 $132.9 million and $102.3 million at September 30, 2003 and March
31, 2003, respectively. These joint ventures had total outstanding secured
construction debt of approximately $231.1 million and $232.5 million at
September 30, 2003 and March 31, 2003, respectively. The Companys maximum
potential liability with respect to this debt, based on its ownership
percentage of the related joint ventures, is approximately $58.8 million and
$56.4 million at September 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 September 30, 2003 and March 31, 2003, the Company
was not liable for any of this debt. The Company believes that these joint
ventures are not variable interest entities for purposes of FIN 46; therefore,
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.
The Company believes that it has established the necessary accruals for these
representations, warranties and guarantees. 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 six
months ended September 30, 2003 are as follows:

For the Three Months
    
    
    For the Six MonthsEnded September 30, 2003
    
    
    Ended September 30, 2003Balance at Beginning of Period
    
    $
    16,133
    
    
    $
    16,125Warranties Issued
    
    
    4,109
    
    
    
    8,003Settlements Made
    
    
    (4,865
    )
    
    
    (9,202
    )Changes in Liability of Pre-Existing
Warranties, Including Expirations
    
    
    165
    
    
    
    616Balance at End of Period
    
    $
    15,542
    
    
    $
    15,542


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##### Table of Contents



CTX Mortgage has established a liability for anticipated losses associated
with loans originated. Changes in CTX Mortgages mortgage loan origination
reserve for the three and six months ended September 30, 2003 are as follows:

For the Three Months
    
    
    For the Six MonthsEnded September 30, 2003
    
    
    Ended September 30, 2003Balance at Beginning of Period
    
    $
    29,177
    
    
    $
    28,594Provision for Losses
    
    
    900
    
    
    
    1,837Settlements
    
    
    (994
    )
    
    
    (1,348
    )Balance at End of Period
    
    $
    29,083
    
    
    $
    29,083


(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, expire at various dates through the year 2010.

The Company has evaluated lot 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. The Company has determined that it is the
primary beneficiary of several such agreements at September 30, 2003. As a
result, the Company recorded $268.3 million of land as inventory under the
caption Land Held Under Option Agreements Not Owned, with a corresponding
increase to Minority Interests. In addition, the Company reclassified $28.3
million of deposits related to these options, previously included in Land Held
for Development and Sale, to Land Held Under Option Agreements Not Owned.

The Company also has option agreements entered into before February 1,
2003. These agreements must be evaluated for consolidation under FIN 46 as of
December 31, 2003. Management is in the process of determining the impact of
FIN 46 on these lot option agreements on the Companys results of operations
and financial position.

At September 30, 2003, the Company had deposited or invested with third
parties $70.5 million (excluding the $28.3 million of deposits discussed above)
related to lot option agreements. The lot option agreements related to these
deposits had a total remaining purchase price of approximately $2.8 billion.

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##### Table of Contents



(K) COMPREHENSIVE INCOME

A summary of comprehensive income for the three and six months ended
September 30, 2003 and 2002 is presented below:

For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Net Earnings
    
    $
    186,129
    
    
    $
    115,609
    
    
    $
    328,919
    
    
    $
    203,364Other Comprehensive Income (Loss),
net of Tax:Unrealized Gain (Loss) on Hedging
Instruments
    
    
    4,423
    
    
    
    (4,991
    )
    
    
    3,171
    
    
    
    (11,942
    )Foreign Currency Translation Adjustments
    
    
    2,559
    
    
    
    3,632
    
    
    
    13,279
    
    
    
    17,608Other
    
    
    4
    
    
    
    (504
    )
    
    
    6
    
    
    
    (1,438
    )Comprehensive Income
    
    $
    193,115
    
    
    $
    113,746
    
    
    $
    345,375
    
    
    $
    207,592


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 $298.4 million as of September 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 $139.8 million and $85.6 million for the three months and
$246.5 million and $166.4 million for the six months ended September 30, 2003
and 2002,

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##### Table of Contents



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 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 64.6% of Centex
Construction Products, Inc. at September 30, 2003 and 65.2% at September 30,
2002. Construction Products results are shown before minority interest in the
tables presented below.

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 in early 2004.

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 $1.0 million and $1.2 million for the
three months and $2.4 million and $2.8 million for the six months ended
September 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 earnings from
unconsolidated entities any income or loss from its investment in the
Partnership, including the International Home Building business located in the
United Kingdom. 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

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
substantially all of its manufactured housing operations, which had previously
been included in the Other segment. All remaining manufactured housing
operations and related assets 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.

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##### Table of Contents



The following are included in Other in the tables below (dollars in
millions):

For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Operating Loss from Home Services
    
    $
    (1.1
    )
    
    $
    (1.0
    )
    
    $
    (2.4
    )
    
    $
    (2.6
    )Corporate General and Administrative
Expenses
    
    
    (22.5
    )
    
    
    (14.4
    )
    
    
    (41.7
    )
    
    
    (27.1
    )Interest Expense
    
    
    (17.4
    )
    
    
    (16.5
    )
    
    
    (34.4
    )
    
    
    (31.9
    )Minority Interest
    
    
    (10.1
    )
    
    
    (8.5
    )
    
    
    (17.6
    )
    
    
    (17.4
    )Other
    
    
    0.3
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.8
    )$
    (50.8
    )
    
    $
    (40.6
    )
    
    $
    (96.1
    )
    
    $
    (79.8
    )


For the Three Months Ended September 30, 2003(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    1,709.1
    
    
    $
    290.6
    
    
    $
    154.8
    
    
    $
    386.6
    
    
    $
    22.7
    
    
    $
    19.3
    
    
    $
    2,583.1Cost of Sales
    
    
    (1,259.8
    )
    
    
    (57.9
    )
    
    
    (122.8
    )
    
    
    (366.7
    )
    
    
    (0.1
    )
    
    
    (9.4
    )
    
    
    (1,816.7
    )Selling, General and
Administrative
Expenses
    
    
    (244.9
    )
    
    
    (156.2
    )
    
    
    (2.4
    )+
    
    
    (15.3
    )
    
    
    (3.9
    )
    
    
    (60.7
    )
    
    
    (483.4
    )Earnings from Unconsolidated Entities
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.7
    
    
    
    
    
    
    
    15.1Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    205.8
    
    
    $
    76.5
    
    
    $
    29.6
    *
    
    $
    4.6
    
    
    $
    32.4
    
    
    $
    (50.8
    )
    
    $
    298.1




|+ |  | 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 September 30, 2002(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    1,282.3
    
    
    $
    204.8
    
    
    $
    136.0
    
    
    $
    391.7
    
    
    $
    3.0
    
    
    $
    26.3
    
    
    $
    2,044.1Cost of Sales
    
    
    (960.8
    )
    
    
    (45.7
    )
    
    
    (107.9
    )
    
    
    (366.2
    )
    
    
    0.4
    
    
    
    (10.3
    )
    
    
    (1,490.5
    )Selling, General and
Administrative Expenses
    
    
    (194.1
    )
    
    
    (122.5
    )
    
    
    (1.4
    )+
    
    
    (16.3
    )
    
    
    (1.9
    )
    
    
    (56.6
    )
    
    
    (392.8
    )Earnings (Loss) from
Unconsolidated Entities
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.4
    
    
    
    
    
    
    
    3.6Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    126.6
    
    
    $
    36.6
    
    
    $
    26.7
    *
    
    $
    9.2
    
    
    $
    5.9
    
    
    $
    (40.6
    )
    
    $
    164.4




|+ |  | 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
|- |  | ------------------------

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For the Six Months Ended September 30, 2003(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    3,213.6
    
    
    $
    557.4
    
    
    $
    298.9
    
    
    $
    762.4
    
    
    $
    25.4
    
    
    $
    42.1
    
    
    $
    4,899.8Cost of Sales
    
    
    (2,387.2
    )
    
    
    (109.0
    )
    
    
    (242.5
    )
    
    
    (723.5
    )
    
    
    (1.0
    )
    
    
    (18.8
    )
    
    
    (3,482.0
    )Selling, General and
Administrative
Expenses
    
    
    (466.6
    )
    
    
    (306.3
    )
    
    
    (3.9
    )+
    
    
    (29.7
    )
    
    
    (4.9
    )
    
    
    (119.4
    )
    
    
    (930.8
    )Earnings from
Unconsolidated
Entities
    
    
    2.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17.6
    
    
    
    
    
    
    
    20.2Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    362.4
    
    
    $
    142.1
    
    
    $
    52.5
    *
    
    $
    9.2
    
    
    $
    37.1
    
    
    $
    (96.1
    )
    
    $
    507.2




|+ |  | Represents Construction Products Corporate general and administrative
expenses. General and administrative expenses related to Construction
Products operating units of $13.0 million are classified as Cost of Sales.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|* |  | Before Minority Interest
|- |  | ------------------------

For the Six Months Ended September 30, 2002(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    2,387.8
    
    
    $
    385.4
    
    
    $
    264.8
    
    
    $
    752.5
    
    
    $
    9.6
    
    
    $
    55.4
    
    
    $
    3,855.5Cost of Sales
    
    
    (1,784.4
    )
    
    
    (90.3
    )
    
    
    (207.5
    )
    
    
    (701.6
    )
    
    
    
    
    
    
    (21.8
    )
    
    
    (2,805.6
    )Selling, General and
Administrative Expenses
    
    
    (375.9
    )
    
    
    (234.2
    )
    
    
    (2.8
    )+
    
    
    (33.6
    )
    
    
    (4.0
    )
    
    
    (113.4
    )
    
    
    (763.9
    )Earnings (Loss) from
Unconsolidated Entities
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    3.1Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    226.9
    
    
    $
    60.9
    
    
    $
    54.5
    *
    
    $
    17.3
    
    
    $
    9.3
    
    
    $
    (79.8
    )
    
    $
    289.1




|+ |  | Represents Construction Products Corporate general and administrative
expenses. General and administrative expenses related to Construction
Products operating units of $12.5 million are classified as Cost of Sales.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|* |  | Before Minority Interest
|- |  | ------------------------

(M) INCOME TAXES

Income tax expense, excluding taxes related to cumulative effect of a
change in accounting principle, for the Company increased from $49.4 million to
$98.5 million and the effective tax rate increased from approximately 30.0% to
33.0% for the three months ended September 30, 2002 and 2003, respectively.
Income tax expense, excluding taxes related to cumulative effect of a change in
accounting principle, also increased from $86.8 million to $165.2 million and
the effective tax rate increased from approximately 30.0% to 32.6% for the six
months ended September 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. The
swap agreements are recorded at their fair value in Other Assets or Accrued
Liabilities in the consolidated balance sheets. To the

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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 September 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 and
six months ended September 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 Income at September 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
September 30, 2003, the balance in Accumulated Other Comprehensive Income
related to this derivative was $2.8 million ($1.8 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.
At September 30, 2003, Home Equity had $120.0 million of
these interest rate swap hedging instruments in place at a weighted-average
interest rate of 3.5%.
Changes in fair value
of these derivatives are deferred in Accumulated Other Comprehensive (Loss)
Income 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
interest rate swap agreements are recognized as adjustments to interest
incurred on the related debt instrument. At September 30, 2003, Home Equity
was hedging $1.55 billion of its outstanding debt with these interest rate
swaps at a weighted-average interest rate of 2.1%. These swaps expire at
varying times through September 2006. Based on the balance in Accumulated
Other Comprehensive Income at September 30, 2003 related to interest rate
hedging activities, the Company estimates increases in interest incurred over
the next 12 months to be approximately $7.7 million. During the three and six
months ended September 30, 2003, the hedges related to all of Home Equitys
interest rate swaps were effective. As of September 30, 2003, the balance in
Accumulated Other Comprehensive Income related to Home Equitys derivatives was $10.6
million ($6.9 million net of tax).

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. Initially, the fair value of
the IRLCs is recorded on the balance sheet in Other Assets or Accrued
Liabilities. Subsequent changes in the fair value of the IRLCs are recorded as
an adjustment to earnings. To hedge the interest rate risk related to its
IRLCs, CTX Mortgage executes mandatory forward trade commitments (i.e.,
forward trade commitments). CTX Mortgage also executes forward trade
commitments to hedge the interest rate risk related to its portfolio of
mortgage loans held for sale, including mortgage loans held by HSF-I. As
discussed in Note G, HSF-I is a variable interest entity that has been
consolidated with Financial Services and the Company effective July 1, 2003,
pursuant to FIN 46. In connection with the consolidation of HSF-I, CTX
Mortgage elected as of July 1, 2003 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 forward trade
commitments. These forward trade commitments have been designated as fair
value hedges. Accordingly, changes in the fair value of the forward trade
commitments and the mortgage loans hedged by these commitments are recorded as
an adjustment to earnings. To the extent the hedge is effective, gains or
losses in the value of the hedged loans due to interest rate movement will be
offset by an equal and opposite gain or loss in the value of the forward trade
commitment. This will result in net zero impact to earnings. To the

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extent the hedge contains some ineffectiveness, the ineffectiveness is
recognized immediately in earnings. The amount of hedge ineffectiveness
included in earnings during the quarter ended September 30, 2003 was
approximately an $8 million gain. The net change in the estimated fair value
of derivative positions not designated as hedges resulted in a loss of approximately $4
million and $13 million for the three and six months ended September 30,
2003.

(O) RELATED PARTY TRANSACTIONS

At September 30, 2003 and March 31, 2003, Centex Homes had $6.2 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 September 30, 2003 and 2002, Centex Homes paid $0.7 million
and $0.2 million, respectively, to the Partnership in fees and reimbursements
pursuant to these agreements and $1.6 million and $3.0 million, respectively,
for the purchase of residential lots. During the six months ended September
30, 2003 and 2002, Centex Homes paid $1.1 million and $1.6 million,
respectively, to the Partnership in fees and reimbursements pursuant to these
agreements and $13.6 million and $24.1 million, respectively, for the purchase
of residential lots. 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 September 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 September 30, 2003 and 2002,
the Partnership paid $0.5 million and $1.2 million, respectively, to
Construction Services pursuant to these contracts. During the six months ended
September 30, 2003 and 2002, the Partnership paid $0.5 million and $4.7
million, respectively, to Construction Services pursuant to these contracts.

During the six months ended September 30, 2003, the Partnership issued
2,812 Class C Units to Centex Homes in exchange for land with a fair market
value of $2.8 million.

During the six months ended September 30, 2003, a subsidiary of the
Partnership entered into a lease agreement (the Lease) with a Company
subsidiary for 160,000 square feet of office space currently under construction
in Lewisville, Texas. The Lease is for a ten-year primary term commencing upon
the date that the premises is ready for occupancy.

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(P) RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FIN 46, which modified 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 ending after December 15, 2003. At September 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. Variable interest entities owned or acquired before February
1, 2003 are: the Partnership, HSF-I, certain land option agreements and joint
ventures. The Company has completed its analysis of FIN 46 effects on HSF-I,
see Note (G), Indebtedness. The Company continues to evaluate the impacts of
FIN 46 on the Partnership, land option agreements and joint ventures entered
into prior to February 1, 2003. In accordance with FIN 46, the nature 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 with this ReportNote (H), Centex Development Company, L.P.HSF-I
    
    Note (G), IndebtednessLand Option Agreements
    
    Note (J), Land Held Under Option Agreements not Owned 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 implementation of SFAS No. 149 did not have a
material impact on the Companys results of operations or financial position.

In May 2003, the FASB issued Statement Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity, (SFAS No. 150). The statement establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Certain provisions of this Statement are
effective for financial instruments entered into or modified after May 31,
2003. In October 2003, FASB

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deferred indefinitely certain provisions of this Statement pertaining to
non-controlling interests in limited life entities. The implementation of the provisions of SFAS No. 150
which are effective did not have an impact on the Companys 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 (H), Centex Development Company, L.P., Note (I),
Commitments and Contingencies, and Note (J), Land Held Under Option
Agreements Not Owned and Other Land Deposits.

(R) SPIN-OFF OF MANUFACTURED HOUSING

In June 2003, the Company spun off substantially all of 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 September 30, 2003 presentation. All
assets related to these discontinued operations that remain with the Company at
September 30, 2003 are in the process of being sold and/or disposed. For the
three months ended September 30, 2003 and 2002, discontinued operations had
revenues of $6.2 million and $36.1 million, respectively, and operating
earnings (loss) of $(322) thousand and $943 thousand, respectively. For the
six months ended September 30, 2003 and 2002, discontinued operations had
revenues of $45.7 million and $69.0 million, respectively, and operating
earnings of $380 thousand and $1.7 million, respectively.

(S) SUBSEQUENT EVENTS

On October 6, 2003, the Company issued $300 million of unsecured senior
notes maturing in 2013. The notes bear interest at 5.125% per annum. The
first interest installment is payable on April 1, 2004 with regular interest
payments scheduled semi-annually in April and October.

(T) RECLASSIFICATIONS

Certain prior year balances have been reclassified to be consistent with
the September 30, 2003 presentation.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

For the three months ended September 30, 2003, our consolidated revenues
were $2.58 billion, a 26.5% increase over $2.04 billion for the same period
last year. Earnings from continuing operations before income taxes and
cumulative effect of a change in accounting principle were $298.1 million,
81.3% higher than $164.4 million for the same period last year. For the six
months ended September 30, 2003, our consolidated revenues were $4.90 billion,
a 26.9% increase over $3.86 billion for the same period last year. Earnings
from continuing operations before income taxes and cumulative effect of a
change in accounting principle were $507.2 million, 75.4% higher than $289.1
million for the same period last year. The changes in our revenues and
earnings from continuing operations before income taxes and cumulative effect
of a change in accounting principle are explained below by segment. The
principal reasons for the increases in consolidated revenues and income from
continuing operations before income taxes and cumulative effect of a change in
accounting principle are the continued growth of our Home Building operations, continued growth in Home Equitys servicing portfolio
and a substantial increase in CTX Mortgages refinancing activity as compared to the prior year.

Earnings from continuing operations before cumulative effect of a change
in accounting principle for the three months ended September 30, 2003 were
$199.6 million, 73.6% higher than $115.0 million for the same period last year.
Earnings from continuing operations before cumulative effect of a change in accounting principle
for the six months ended September 30, 2003 were $341.9
million, 69.0% higher than $202.3 million for the same period last year. The
increase in earnings from continuing operations before cumulative effect of a change
in accounting principle is less than the increase in
earnings from continuing operations before income taxes and cumulative effect
of a change in accounting principle due to an increase in our effective tax
rate. Our effective tax rate related to continuing operations increased to
33.0% and 32.6% for the three months and six months ended September 30, 2003
from 30.0% for the same periods last year. 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.

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HOME BUILDING

The following summarizes the results of our Home Building operations for
the three and six months ended September 30, 2003 compared to the same periods
last year (dollars in millions, except per unit data):

For the Three Months Ended September 30,2003
    
    
    2002% of Revenues
    
    
    
    
    
    
    % of RevenuesRevenues  Housing
    
    $
    1,687.8
    
    
    
    98.8
    %
    
    $
    1,262.7
    
    
    
    98.5
    %Revenues  Land Sales and Other
    
    
    21.3
    
    
    
    1.2
    %
    
    
    19.6
    
    
    
    1.5
    %Cost of Sales  Housing
    
    
    (1,229.4
    )
    
    
    (71.9
    %)
    
    
    (941.6
    )
    
    
    (73.4
    %)Cost of Sales  Land Sales and Other
    
    
    (30.4
    )
    
    
    (1.8
    %)
    
    
    (19.2
    )
    
    
    (1.5
    %)Selling, General and Administrative Expenses
    
    
    (244.9
    )
    
    
    (14.3
    %)
    
    
    (194.1
    )
    
    
    (15.1
    %)Earnings (Loss) from Unconsolidated Entities
    
    
    1.4
    
    
    
    
    
    
    
    (0.8
    )
    
    
    (0.1
    %)Operating Earnings
    
    $
    205.8
    
    
    
    12.0
    %
    
    $
    126.6
    
    
    
    9.9
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    6,906
    
    
    
    19.3
    %
    
    
    5,788
    
    
    
    6.8
    %Average Unit Sales Price
    
    $
    244,393
    
    
    
    12.0
    %
    
    $
    218,167
    
    
    
    1.9
    %Operating Earnings Per Unit
    
    $
    29,805
    
    
    
    36.3
    %
    
    $
    21,873
    
    
    
    3.6
    %Backlog Units
    
    
    15,244
    
    
    
    20.8
    %
    
    
    12,619
    
    
    
    26.5
    %Ending Operating Neighborhoods
    
    
    561
    
    
    
    5.8
    %
    
    
    530
    
    
    
    9.3
    %


For the Six Months Ended September 30,2003
    
    
    2002% of Revenues
    
    
    
    
    
    
    % of RevenuesRevenues  Housing
    
    $
    3,165.2
    
    
    
    98.5
    %
    
    $
    2,330.8
    
    
    
    97.6
    %Revenues  Land Sales and Other
    
    
    48.4
    
    
    
    1.5
    %
    
    
    57.0
    
    
    
    2.4
    %Cost of Sales  Housing
    
    
    (2,331.9
    )
    
    
    (72.6
    %)
    
    
    (1,740.1
    )
    
    
    (72.9
    %)Cost of Sales  Land Sales and Other
    
    
    (55.3
    )
    
    
    (1.7
    %)
    
    
    (44.3
    )
    
    
    (1.9
    %)Selling, General and Administrative Expenses
    
    
    (466.6
    )
    
    
    (14.5
    %)
    
    
    (375.9
    )
    
    
    (15.7
    %)Earnings (Loss) from Unconsolidated Entities
    
    
    2.6
    
    
    
    0.1
    %
    
    
    (0.6
    )
    
    
    Operating Earnings
    
    $
    362.4
    
    
    
    11.3
    %
    
    $
    226.9
    
    
    
    9.5
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    13,255
    
    
    
    22.9
    %
    
    
    10,783
    
    
    
    5.0
    %Average Unit Sales Price
    
    $
    238,792
    
    
    
    10.5
    %
    
    $
    216,156
    
    
    
    1.7
    %Operating Earnings Per Unit
    
    $
    27,344
    
    
    
    30.0
    %
    
    $
    21,039
    
    
    
    6.2
    %Backlog Units
    
    
    15,244
    
    
    
    20.8
    %
    
    
    12,619
    
    
    
    26.5
    %Ending Operating Neighborhoods
    
    
    561
    
    
    
    5.8
    %
    
    
    530
    
    
    
    9.3
    %


Revenues for the three and six months ended September 30, 2003 increased
33.3% and 34.6%, respectively, versus the same periods last year primarily due
to an increase in units closed and higher unit sales prices. Units closed
during the three months ended September 30, 2003 increased 19.3% from 5,788
units to 6,906 units, and the average unit sales price increased 12.0% from
$218,167 to $244,393. Units closed during the six months ended September 30,
2003 increased 22.9% from 10,783 units to 13,255 units, and the average unit
sales price increased 10.5% from $216,156 to $238,792. The increase in units
closed was due to a higher number of operating neighborhoods in the current
year coupled with an increase in units closed per neighborhood versus last
year. The increase in the unit sales price was due to general price increases,
a

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shift at the neighborhood level to a higher priced product, and the California
markets, which generally have higher unit prices, making up a greater
percentage of total closings as compared to last year.

The relief of capitalized interest is included in Home Buildings cost of
sales. Capitalized interest relieved was $14.7 million and $10.5 million for
the three months ended September 30, 2003 and 2002, respectively, and $27.9
million and $18.8 million for the six months ended September 30, 2003 and 2002,
respectively.

Housing margin, defined as housing revenues less housing cost of sales,
was 27.2% and 26.3% of housing revenues for the three and six months ended
September 30, 2003, respectively, compared to 25.4% and 25.3% of housing
revenues for the same periods last year. The increase in housing margin for
the three months ended September 30, 2003 can be attributed to the average
unit sales price increase of 12.0%, as noted above, combined with Home
Buildings continued focus on reducing construction costs and increasing
productivity.

Selling, general and administrative expenses for the three months ended
September 30, 2003 were $244.9 million, or 14.3% of revenues, as compared to
the $194.1 million and 15.1% of revenues reported for the same period last
year. Selling, general and administrative expenses for the six months ended
September 30, 2003 were $466.6 million, or 14.5% of revenues, as compared to
the $375.9 million and 15.7% of revenues reported for the same period last
year. The dollar increase resulted from incremental expenses associated with
closing more homes. Compared to the prior year, Home Buildings selling,
general and administrative expenses as a percentage of revenue have decreased.

Operating earnings for the three months ended September 30, 2003 were
12.0% of revenues and approximately $29,805 on a per-unit basis compared to
operating earnings of 9.9% of revenues and approximately $21,873 on a per-unit
basis for the same period last year. Operating earnings for the six months
ended September 30, 2003 were 11.3% of revenues and approximately $27,344 on a
per-unit basis compared to operating earnings of 9.5% of revenues and
approximately $21,039 on a per-unit basis for the same period last year. The
increase in operating earnings is a direct result of the increase in housing
margin and Home Buildings leverage of its selling, general and administrative
expenses.

Centex Homes ended its second quarter of fiscal 2004 with a record backlog
of home sales. Units in backlog increased 20.8% to 15,244 units at September
30, 2003 compared to 12,619 units at September 30, 2002. The increase in
backlog resulted from a 5.8% increase in ending operating neighborhoods, which
helped drive a 10.8% 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.

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FINANCIAL SERVICES

The Financial Services segment is primarily 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 and six months ended September 30, 2003 compared to the same periods
last year (dollars in millions):

For the Three Months Ended September 30,2003
    
    
    2002Revenues
    
    $
    290.6
    
    
    $
    204.8Interest Margin
    
    $
    81.8
    
    
    $
    39.9Operating Earnings
    
    $
    76.5
    
    
    $
    36.6Origination Volume
    
    $
    5,463
    
    
    $
    3,943Number of Loans OriginatedCTX Mortgage Company, LLCCentex-built Homes (Builder)
    
    
    4,734
    
    
    
    3,959Non-Centex-built Homes (Retail)
    
    
    21,567
    
    
    
    16,07626,301
    
    
    
    20,035Centex Home Equity Company, LLC
    
    
    9,588
    
    
    
    7,37335,889
    
    
    
    27,408


CTX Mortgage
    
    
    Centex Home EquityCompany, LLC
    
    
    Company, LLCFor the Three Months
    
    
    For the Three MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Average Interest Earning Assets
    
    $
    1,976.5
    
    
    $
    176.0
    
    
    $
    5,370.2
    
    
    $
    3,693.6Average Yield
    
    
    6.11
    %
    
    
    7.09
    %
    
    
    8.16
    %
    
    
    8.89
    %Average Interest Bearing Liabilities
    
    $
    1,718.9
    
    
    $
    117.3
    
    
    $
    5,616.0
    
    
    $
    3,849.7Average Rate Paid
    
    
    1.92
    %
    
    
    2.80
    %
    
    
    3.48
    %
    
    
    4.56
    %


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For the Six Months Ended September 30,2003
    
    
    2002Revenues
    
    $
    557.4
    
    
    $
    385.4Interest Margin
    
    $
    137.5
    
    
    $
    76.1Operating Earnings
    
    $
    142.1
    
    
    $
    60.9Origination Volume
    
    $
    10,895
    
    
    $
    6,922Number of Loans OriginatedCTX Mortgage Company, LLCCentex-built Homes (Builder)
    
    
    9,169
    
    
    
    7,337Non-Centex-built Homes (Retail)
    
    
    44,359
    
    
    
    28,48253,528
    
    
    
    35,819Centex Home Equity Company, LLC
    
    
    18,583
    
    
    
    13,73272,111
    
    
    
    49,551


CTX Mortgage
    
    
    Centex Home EquityCompany, LLC
    
    
    Company, LLCFor the Six Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Average Interest Earning Assets
    
    $
    1,255.7
    
    
    $
    180.8
    
    
    $
    5,123.1
    
    
    $
    3,548.0Average Yield
    
    
    5.52
    %
    
    
    7.43
    %
    
    
    8.27
    %
    
    
    8.94
    %Average Interest Bearing Liabilities
    
    $
    1,063.9
    
    
    $
    123.1
    
    
    $
    5,340.5
    
    
    $
    3,692.7Average Rate Paid
    
    
    1.74
    %
    
    
    2.90
    %
    
    
    3.67
    %
    
    
    4.69
    %


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, LLC 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, LLC, or HSF-I, and investors. HSF-I is a variable
interest entity for which the Company is the primary beneficiary and as of July
1, 2003, is consolidated with the Companys financial statements. As a result
of the consolidation of HSF-I, the Company recorded a cumulative effect of a
change in accounting principle of $13.3 million, net of tax, in the quarter
ended September 30, 2003. This cumulative effect of a change in accounting
principle primarily represents the deferral of servicing released premium income
offset to a lesser extent by the deferral of certain loan origination costs,
which will be recognized as loans are sold into the secondary market. The
consolidation of HSF-I resulted in an increase in the Companys residential
mortgage loans held for sale with a corresponding increase in the Companys
debt of approximately $1.6 billion at September 30, 2003. HSF-I

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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. Because HSF-I is a consolidated
entity, the debt, interest income and interest expense of HSF-I are reflected
in the Companys financial statements at September 30, 2003. CTX Mortgage
Company, LLC and HSF-I together sold $5.16 billion and $9.59 billion of
mortgage loans to investors for the three and six months ended September 30,
2003, respectively. CTX Mortgage Company, LLC sold $3.39 billion and $5.91
billion of mortgage loans to HSF-I and other investors during the three months
and six months ended September 30, 2002, respectively. CTX Mortgage recognized
gains on the sale of mortgage loans of $70.1 million and $69.6 million for the
three months ended September 30, 2003 and 2002, respectively. For the six
months ended September 30, 2003 and 2002, gains on the sale of mortgage loans
were $157.3 million and $121.5 million, respectively.

Revenues increased 49.9% to $161.6 million and 56.0% to $308.6 million for
the three and six months ended September 30, 2003, respectively, as compared to
the same periods last year. The increase in revenues is primarily related to
an increase in CTX Mortgage originations due to an increase in mortgage loans
originated for refinancing and mortgage loans originated for Centex Homes
buyers, to a lesser extent higher revenues from Title and Insurance operations
and a net increase in the servicing fee component of gains on sale of mortgages
which is deferred until final mortgage loan settlement. Refinanced mortgages
accounted for 45% and 47% of originations for the three and six months ended
September 30, 2003, respectively, as compared to 42% and 31% for the same
periods last year. CTX Mortgages capture rate of Centex Homes buyers was
73% for the three and six months ended September 30, 2003, and for the same
periods last year.

For the three months ended September 30, 2003, originations totaled 26,301
compared to 20,035 originations in the same period last year; loan volume was
$4.44 billion compared to $3.34 billion for the same period last year; the
per-loan profit was $2,302, an increase of 83.0% compared to $1,258 for the
same period last year and total mortgage applications decreased 6.5% to 22,396
from 23,950 applications for the same period last year. For the six months
ended September 30, 2003, originations totaled 53,528 compared to 35,819
originations in the same period last year; loan volume was $8.99 billion
compared to $5.82 billion for the same period last year; the per-loan profit
was $2,031, an increase of 81.5% compared to $1,119 for the same period last
year and total mortgage applications increased 34.7% to 53,715 from 39,869
applications for the same period last year. For the three and six months ended
September 30, 2003, per-loan profit increased due to increased operational
leverage as a result of the increase in the volume of originations, to a lesser
extent an increase in Title and Insurance earnings, and an increase in the
recognized servicing fee component of gains on sale of mortgages.

CTX Mortgages selling, general and administrative expenses increased
$10.8 million to $91.9 million for the three months ended September 30, 2003
and $30.0 million to $185.5 million for the six months ended September 30,
2003, respectively. 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 $60.6 million and $108.7
million for the three and six months ended September 30, 2003, respectively,
resulting in a 140.5% and 171.1% increase as compared to the same periods last
year. The increase in operating earnings 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 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 HSF-I and other short-term mortgage warehouse
facilities to finance these inventories of loans. CTX Mortgages interest
margin increased from $1.6 million to $21.0 million and from $5.8 million to

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$23.5 million for the three and six months ended September 30, 2003,
respectively, as compared to the same periods last year. These increases are
primarily due to the inclusion in the Companys results of HSF-I interest
income and interest expense, beginning July 1, 2003, as required under the
provisions of FIN 46. Interest income and expense contributed by HSF-I during
the three months ended September 30, 2003 totaled $25.2 million and $5.9
million, respectively. Prior to July 1, 2003, HSF-Is interest margin was
included as a component of Financial Services revenue as a result of the
interest rate swap with HSF-I.

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 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, LLC, or Home Equity, increased
32.9% to $129.0 million and 32.5% to $248.8 million for the three and six
months ended September 30, 2003, respectively, as compared to the same periods
last year, as a result of continued growth in Home Equitys portfolio of
residential mortgage loans held for investment. Interest margin increased to
$60.8 million and $114.0 million for the three and six months ended September
30, 2003, respectively, as compared to $38.2 million and $72.0 million for the
same periods 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 $15.9 million and $30.1 million for the three
and six months ended September 30, 2003, respectively, as compared to operating
earnings of $11.7 million and $22.4 million for the same periods 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. 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 $22.6 million to $64.2 million and $69.1
million to $120.8 million for the three and six months ended September 30,
2003, respectively, 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 $11.2 million and $20.6 million for
the three and six months ended September 30, 2003, respectively. The remainder
of the increase was due to higher charges to the provision for loan losses, as
discussed below.

For the three and six months ended September 30, 2003, respectively,
originations totaled 9,588 and 18,583 compared to 7,373 and 13,732 originations
for the same periods last year; origination volume was $1.02 billion and $1.90
billion compared to $600.7 million and $1.10 billion for the same periods last
year and total applications increased 48.4% and 54.3% to 85,662 and 166,299
from 57,737 and 107,781 applications for the same periods last year. For the
six months ended September 30, 2003, originations increased 35.3% while
origination volume increased 72.7% 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 44.2%, from $3.55 billion in the six months ended September
30, 2002 to $5.12 billion in the six months ended September 30, 2003, and the
corresponding average interest bearing liabilities increased 44.7%, from $3.69
billion in the six months ended September 30, 2002 to $5.34 billion in the six
months ended September 30,

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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 8.94% in the six months ended September 30, 2002 to 8.27% in the
six months ended September 30, 2003, and the average rate paid on these
liabilities decreased from 4.69% in the six months ended September 30, 2002 to
3.67% in the six months ended September 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 58.3% increase in net interest margin from
$72.0 million in the six months ended September 30, 2002 to $114.0 million in
the six months ended September 30, 2003.

At September 30, 2003, Home Equitys total servicing portfolio consisted
of 81,641 loans totaling $6.4 billion compared to 67,400 loans totaling $4.79
billion at September 30, 2002. For the three and six months ended September
30, 2003, service fee income related to this servicing was $17.1 million and
$31.7 million compared to $12.7 million and $24.4 million, respectively, for
the same periods last year.

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.

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Changes in the allowance for losses on residential mortgage loans held for
investment were as follows (dollars in thousands):

For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Balance at Beginning of Period
    
    $
    34,061
    
    
    $
    17,320
    
    
    $
    28,384
    
    
    $
    14,106Provision for Losses
    
    
    19,132
    
    
    
    7,670
    
    
    
    34,894
    
    
    
    13,556Recoveries on Loans Charged Off
    
    
    20
    
    
    
    33
    
    
    
    96
    
    
    
    51Losses Sustained
    
    
    (10,837
    )
    
    
    (3,880
    )
    
    
    (20,998
    )
    
    
    (6,570
    )Balance at End of Period
    
    $
    42,376
    
    
    $
    21,143
    
    
    $
    42,376
    
    
    $
    21,143


September 30,2003
    
    
    2002Allowance as a Percentage of Gross Loans Held for Investment
    
    
    0.75
    %
    
    
    0.55
    %Allowance as a Percentage of 90+ Days Contractual Delinquency
    
    
    28.18
    %
    
    
    20.76
    %90+ Days Contractual DelinquencyTotal Dollars Delinquent
    
    $
    150,376
    
    
    $
    101,863% Delinquent
    
    
    2.66
    %
    
    
    2.64
    %


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 to continue to increase.
The increase in 90+ days contractual delinquency at September 30, 2003
occurred primarily because the residential mortgage loan portfolio continued to
mature.

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##### Table of Contents



CONSTRUCTION PRODUCTS

The following summarizes Construction Products results for the three and
six months ended September 30, 2003 compared to the same periods last year
(dollars in millions):

For the Three Months Ended September 30,2003
    
    
    2002Revenues
    
    $
    154.8
    
    
    $
    136.0Cost of Sales and Expenses
    
    
    (122.8
    )
    
    
    (107.9
    )Selling, General and Administrative Expenses+
    
    
    (2.4
    )
    
    
    (1.4
    )Operating Earnings *
    
    $
    29.6
    
    
    $
    26.7




|+ |  | Represents Construction Products Corporate general and administrative
expenses. General and administrative expenses related to Construction
Products operating units of $6.5 million and $6.5 million are classified as
Cost of Sales for the three months ended September 30, 2003 and 2002,
respectively.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|* |  | Before Minority Interest of $10.1 million and $8.5 million for the three
months ended September 30, 2003 and 2002,
respectively.
|- |  | --------------------------------------------------------------------------------------------------------------------------------

For the Six Months Ended September 30,2003
    
    
    2002Revenues
    
    $
    298.9
    
    
    $
    264.8Cost of Sales and Expenses
    
    
    (242.5
    )
    
    
    (207.5
    )Selling, General and Administrative Expenses+
    
    
    (3.9
    )
    
    
    (2.8
    )Operating Earnings *
    
    $
    52.5
    
    
    $
    54.5




|+ |  | Represents Construction Products Corporate general and administrative
expenses. General and administrative expenses related to Construction
Products operating units of $13.0 million and $12.5 million are classified as
Cost of Sales for the six months ended September 30, 2003 and 2002,
respectively.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|* |  | Before Minority Interest of $17.6 million and $17.4 million for the three
months ended September 30, 2003 and 2002,
respectively.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------

Construction Products revenues for the three and six months ended
September 30, 2003 were 13.8% and 12.9% greater than the same periods last
year. These increases were primarily the result of a $12.5 million and a $23.4
million increase in gypsum wallboard revenues for the three and six months
ended September 30, 2003, respectively, and a $1.6 million and a $4.1 million
increase in paperboard revenues for the three and six months ended September
30, 2003, respectively. The increase in gypsum wallboard and paperboard
revenues was primarily caused by higher sales volume when compared to the same
periods last year.

Construction Products cost of sales for the three and six months ended
September 30, 2003 was 13.8% higher and 16.9% higher, respectively, than the
same periods 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 as a
percentage of revenues for the three and six months ended September 30, 2003
remained relatively consistent with prior year.

For the three months ended September 30, 2003, Construction Products
operating earnings, net of minority interest, increased 10.9% due to increased
paperboard and aggregates operating earnings offset in part by lower operating
earnings of cement and gypsum wallboard. Prior year operating earnings
included

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$2.6 million of costs from the closure of the Georgetown plant. For the six
months ended September 30, 2003, Construction Products operating earnings, net
of minority interest, decreased 3.7% primarily due to higher cement maintenance
costs and lower gypsum wallboard sales prices.

CONSTRUCTION SERVICES

The following summarizes Construction Services results for the three and
six months ended September 30, 2003 compared to the same periods last year
(dollars in millions):

For the Three Months EndedSeptember 30,2003
    
    
    2002Revenues
    
    $
    386.6
    
    
    $
    391.7Operating Earnings
    
    $
    4.6
    
    
    $
    9.2New Contracts Executed and Change Orders
    
    $
    589.6
    
    
    $
    156.6Backlog of Uncompleted Contracts
    
    $
    1,607.8
    
    
    $
    1,856.8


For the Six Months EndedSeptember 30,2003
    
    
    2002Revenues
    
    $
    762.4
    
    
    $
    752.5Operating Earnings
    
    $
    9.2
    
    
    $
    17.3New Contracts Executed and Change Orders
    
    $
    850.9
    
    
    $
    428.9Backlog of Uncompleted Contracts
    
    $
    1,607.8
    
    
    $
    1,856.8


Construction Services revenues for the three and six months ended
September 30, 2003 were 1.3% lower and 1.3% higher, respectively, than revenues
for the same periods last year. The variance in revenues was primarily the
result of the stage of execution of construction projects. Operating earnings
for the group decreased 50.0% and 46.8% in the three and six months ended
September 30, 2003, respectively, compared to the same periods last year
primarily as a result of the prior year including certain high margin
contracts. For the three and six months ended September 30, 2003, new
contracts executed and change orders increased 276.5% and 98.4% from the same
periods last year, and backlog of uncompleted contracts decreased 13.4% from
September 30, 2002. The decrease in backlog is primarily due to reduced
activity in the commercial construction industry. 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 September 30, 2003 and 2002, such
work, which is not included in backlog, was approximately $1.9 billion and $2.1
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 $99.6 million and $113.2
million for the three and six months ended September 30, 2003 compared to
$103.3 million and $116.2 million for the same periods last year.

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INVESTMENT REAL ESTATE

The following summarizes Investment Real Estates results for the three
and six months ended September 30, 2003 compared to the same periods last year
(dollars in millions):

For the Three Months EndedSeptember 30,2003
    
    
    2002Revenues
    
    $
    22.7
    
    
    $
    3.0Earnings from Unconsolidated Entities and Other
    
    $
    13.7
    
    
    $
    4.4Operating Earnings
    
    $
    32.4
    
    
    $
    5.9


For the Six Months EndedSeptember 30,2003
    
    
    2002Revenues
    
    $
    25.4
    
    
    $
    9.6Earnings from Unconsolidated Entities and Other
    
    $
    17.6
    
    
    $
    3.7Operating Earnings
    
    $
    37.1
    
    
    $
    9.3


Investment Real Estates revenues for the three and six months ended
September 30, 2003 were substantially higher than revenues for the same periods
last year. Operating earnings from Investment Real Estate for the three and
six months ended September 30, 2003 totaled $32.4 million and $37.1 million,
respectively, compared to $5.9 million and $9.3 million in the same periods
last year. The fluctuations in revenues and operating earnings were primarily
related to increased property sales 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 $20.7 million and $22.5
million for the three and six months ended September 30, 2003, respectively and $0.4 million
and $1.8 million, respectively for the same periods 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 and
six months ended September 30, 2003 were earnings of $13.7 million and $17.6
million, respectively, derived from its investment in the Partnership compared
to earnings of $4.4 million and $3.7 million for the same periods 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 $6.4 million and $4.2 million for
the three months ended September 30, 2003 and 2002, respectively, and earnings
of $11.2 million and $3.8 million for the six months ended September 30, 2003
and 2002, respectively, derived from International Home Building. The increase
in earnings from last year was primarily due to an improvement in International
Home Buildings operating margins and an increase in the average sales price
per unit. For the three months ended September 30, 2003 and 2002, this segment
closed 379 units at an average sales price per unit of $250,641 and 383 units
at an average sales price per unit of $236,514, respectively. For the six
months ended September 30, 2003 and 2002, this segment closed 692 units at an
average sales price per unit

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##### Table of Contents



of $265,519 and 652 units at an average sales price per unit of $232,449,
respectively. Operating earnings per unit were $18,272 and $12,676 for the
three months ended September 30, 2003 and 2002, respectively. Operating
earnings per unit were $17,734 and $7,637 for the six months ended September
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 expenses,
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 substantially all of its
manufactured housing 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 manufactured housing operations
have been reclassified to discontinued operations.

Other consisted of the following (dollars in millions):

For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Operating Loss from Home Services
    
    $
    (1.1
    )
    
    $
    (1.0
    )
    
    $
    (2.4
    )
    
    $
    (2.6
    )Corporate General and Administrative
Expenses
    
    
    (22.5
    )
    
    
    (14.4
    )
    
    
    (41.7
    )
    
    
    (27.1
    )Interest Expense
    
    
    (17.4
    )
    
    
    (16.5
    )
    
    
    (34.4
    )
    
    
    (31.9
    )Minority Interest
    
    
    (10.1
    )
    
    
    (8.5
    )
    
    
    (17.6
    )
    
    
    (17.4
    )Other
    
    
    0.3
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.8
    )$
    (50.8
    )
    
    $
    (40.6
    )
    
    $
    (96.1
    )
    
    $
    (79.8
    )


As noted above, earnings (loss) related to the manufactured housing
operations have been reclassified to discontinued operations. For the three
months ended September 30, 2003 and 2002, discontinued operations had revenues
of $6.2 million and $36.1 million, respectively; operating earnings (loss) of
$(322) thousand and $943 thousand, respectively; and net earnings (loss) of
$(209) thousand and $613 thousand, respectively. For the six months ended
September 30, 2003 and 2002, discontinued operations had revenues of $45.7
million and $69.0 million, respectively; operating earnings of $380 thousand
and $1.7 million, respectively; and net earnings of $247 thousand and $1.1
million, respectively.

Corporate general and administrative expenses represent compensation and
other costs not identifiable with a specific segment. The increase in corporate
general and administrative expenses is primarily related to an increase in
personnel to support the growth in the Companys operations and higher
compensation resulting from continued improvements in our profitability.

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The change in interest expense is primarily related to an increase in
average debt outstanding for the three and six months ended September 30, 2003,
as compared to the same periods last year. This increase is offset by slightly
lower borrowing costs during the three and six months ended September 30, 2003,
as compared to the same periods last year.

FINANCIAL CONDITION AND LIQUIDITY

At September 30, 2003, we had cash and cash equivalents of $89.5 million,
including $11.0 million in Financial Services and $13.9 million belonging to
our 64.6%-owned Construction Products subsidiary. The net cash used in or
provided by the operating, investing and financing activities for the three and
six months ended September 30, 2003 and 2002 is summarized below (dollars in
thousands). See Statements of Consolidated Cash Flows with Consolidating
Details on pages 5-6 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 Six Months EndedSeptember 30,2003
    
    
    2002Net Cash (Used in) Provided byCentex*Operating Activities
    
    $
    (468,249
    )
    
    $
    (444,657
    )Investing Activities
    
    
    (6,088
    )
    
    
    29,876Financing Activities
    
    
    98,138
    
    
    
    261,664(376,199
    )
    
    
    (153,117
    )Financial ServicesOperating Activities
    
    
    816,050
    
    
    
    41,736Investing Activities
    
    
    (1,000,072
    )
    
    
    (581,713
    )Financing Activities
    
    
    179,957
    
    
    
    535,681(4,065
    )
    
    
    (4,296
    )Centex Corporation and SubsidiariesOperating Activities
    
    
    371,560
    
    
    
    (323,714
    )Investing Activities
    
    
    (1,029,919
    )
    
    
    (656,044
    )Financing Activities
    
    
    278,095
    
    
    
    822,345Net Decrease in Cash
    
    $
    (380,264
    )
    
    $
    (157,413
    )




|* |  | 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 senior notes. During the six months
ended September 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.

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We generally fund our Financial Services operating and other short-term
needs through credit facilities, securitizations, proceeds from the sale of
mortgage loans to investors and cash flows from operations, as described below.
During the six months ended September 30, 2003, cash was primarily used in
Financial Services Investing Activities to finance increases in residential
mortgage loans held for investment. The funds 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
September 30, 2003 are summarized below (dollars in thousands):

Existing Credit
    
    
    AvailableFacilities
    
    
    CapacityCentexCentex CorporationMulti-Bank Revolving Credit Facility
    
    $
    800,000
    
    
    $
    800,000
    (1)Multi-Bank Revolving Letter of Credit Facility
    
    
    250,000
    
    
    
    129,283
    (2)Construction Products
Senior Revolving Credit Facility
    
    
    155,000
    
    
    
    118,317
    (3)1,205,000
    
    
    
    1,047,600Financial ServicesUnsecured Credit Facility
    
    
    125,000
    
    
    
    71,100
    (4)Secured Credit Facilities
    
    
    715,000
    
    
    
    468,987
    (5)Harwood Street Funding I, LLC Facility
    
    
    3,000,000
    
    
    
    1,444,821Harwood Street Funding II, LLC Facility
    
    
    1,500,000
    
    
    
    638,6695,340,000
    
    
    
    2,623,577$
    6,545,000
    
    
    $
    3,671,177
    (6)




|(1) |  | This is a committed, multi-bank revolving credit facility, maturing in
August 2006, which serves as backup for commercial paper borrowings. As
of September 30, 2003, there were no borrowings under this backup
facility, and our $700 million commercial paper program had $165 million
outstanding. We have not borrowed under this facility since its
inception.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | This is a committed, multi-bank revolving letter of credit facility,
maturing in August 2004. Letters of credit issued under this facility may
expire no later than August 2005.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | This is a committed, senior revolving credit facility, maturing in March
2006. This facility was entered into by Construction Products and has no
recourse to Centex Corporation.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Centex Corporation, CTX Mortgage and Home Equity, on a joint and several
basis, share in a $125 million uncommitted, unsecured credit facility.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | CTX Mortgage and Home Equity share in a $550 million committed secured
credit facility to finance mortgage inventory. Effective October 2003,
this facility and available capacity were reduced to $250 million. CTX
Mortgage also maintains $155 million of committed secured mortgage
warehouse facilities to finance mortgages. Home Equity also maintains a
$10 million committed secured mortgage warehouse facility to finance
mortgages.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(6) |  | The amount of available borrowing capacity consists of $3.6 billion of
committed borrowings and $71.1 million of uncommitted borrowings as of
September 30, 2003. Although we believe that the uncommitted capacity is
currently available, there can be no assurance that the lenders under this
facility would elect to make advances to Centex Corporation or its
subsidiaries if and when requested to do so.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CTX Mortgage finances its inventory of mortgage loans held for sale
principally through sales of conforming and Jumbo A loans to HSF-I, pursuant
to a mortgage loan purchase agreement (the HSF-I Purchase Agreement). Since
1999, CTX Mortgage has sold substantially all of the conforming and Jumbo A
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) short-term secured liquidity notes that
are currently rated A1+ by S&P and P-1 by Moodys, (2) medium-term debt that is
currently rated A1+ by S&P and P-1 by Moodys and (3) subordinated certificates
maturing in September 2004, November 2005 and June 2006, extendable for up to
five years, that are currently rated BBB by S&P and Baa2 by Moodys. 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
September 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 $3.0
billion. This arrangement provides CTX Mortgage with reduced financing cost
for eligible mortgage loans it originates and improves its liquidity. The
Company does not guarantee the payment of any debt or subordinated certificates
of HSF-I, we are not liable for credit losses relating to securitized
residential mortgage loans sold to HSF-I, and HSF-I debt does not have
recourse to us. The consolidation of this debt will not change our credit
profile or debt ratings.

In the event CTX Mortgage was unable to finance its inventory of loans
through HSF-I, it would draw on existing credit facilities currently held in
addition to HSF-I. In addition, it would 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.

Home Equity finances its inventory of mortgage loans through Harwood
Street Funding II, LLC, 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 borrowing capacity of $1.5 billion. HSF-II obtains funds through the
sale of subordinated notes that are currently rated BBB by S&P,
Baa2 by Moodys and BBB by Fitch, and short-term secured liquidity notes that are currently 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 September 30,
2003, Centex Corporation was in compliance with all of these covenants.

As of September 30, 2003, our short-term debt was $2.7 billion, which was
primarily 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 program and from uncommitted bank facilities.

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Our outstanding debt as of September 30, 2003 was as follows (dollars in
thousands)(1):

CentexShort-Term Notes Payable
    
    $
    165,007Senior Debt:Medium-Term Note Programs, weighted-average rate 4.67%, due through 2006
    
    
    258,000Long-Term Notes, weighted-average rate 7.05%, due through 2012
    
    
    1,508,224Other Indebtedness, weighted-average rate 2.76%, due through 2008
    
    
    63,509Subordinated Debt:Subordinated Debentures, 7.38%, due in 2005
    
    
    99,918Subordinated Debentures, 8.75%, due in 2007
    
    
    99,7282,194,386Financial ServicesShort-Term Debt:Short-Term Notes Payable
    
    
    949,752Harwood Street Funding I and II, LLC Secured Liquidity Notes
    
    
    1,552,831Home Equity Loan Asset-Backed Certificates, weighted-average rate 3.13%, due
through 2033
    
    
    4,921,691Harwood Street Funding I, LLC Variable Rate Subordinated Extendable Certificates,
weighted-average rate 3.27%, due through 2006
    
    
    139,000Harwood Street Funding II, LLC Variable Rate Subordinated Notes,
weighted-average rate 3.25%, due through 2008
    
    
    75,0007,638,274Total
    
    $
    9,832,660




|(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
2005
2006
2007
2008
Thereafter
    
    $
    1,538
32,593
372,735
290,448
358,840
973,225
    
    
    $
    693,336
1,340,026
984,684
1,036,595
555,371
525,679
    
    
    $
    694,874
1,372,619
1,357,419
1,327,043
914,211
1,498,904$
    2,029,379
    
    
    $
    5,135,691
    
    
    $
    7,165,070


Financial
Services long-term debt associated with Centex Home Equity Company, LLC
related to securitized residential mortgage loans structured as collateralized
borrowings includes Asset-Backed Certificates of $4.9 billion at September 30, 2003 and has
no recourse to Home Equity or Centex Corporation; however, Home Equity remains
liable for customary loan representations. The principal and interest on these
notes are paid from the liquidation of 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-

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term debt are based on contractual maturities adjusted for
projected repayments and prepayments of principal.

Financial Services long-term debt associated with CTX Mortgage Company,
LLC is comprised of Variable Rate Subordinated Extendable Certificates issued
by HSF-I. HSF-I is a variable interest entity for which the Company is the
primary beneficiary pursuant to the Financial Accounting Standards Board
(FASB) issued Interpretation No. 46, Consolidation of Variable Interest
Entities (FIN 46). Accordingly, HSF-I was consolidated in the Companys
financial statements beginning July 1, 2003. The amount outstanding related to
these certificates was $139.0 million at September 30, 2003. The principal and
interest on these certificates are paid from the liquidation of the underlying
residential mortgage loans, which serve as collateral for the debt. The
holders of this debt have no recourse for non-payment to CTX Mortgage Company,
LLC or Centex Corporation and this debt does not change the Companys credit
profile or debt ratings.

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.

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 September 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 September 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 financial statements of the Partnership, filed
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 $132.9 million and $102.3 million at September 30, 2003 and
March 31, 2003, respectively. These joint ventures had total outstanding
secured construction debt of approximately $231.1 million and $232.5 million at
September 30, 2003 and March 31, 2003, respectively. Our maximum potential liability with respect to this debt, based on our
ownership percentage of the related joint ventures, is approximately $58.8
million and $56.4 million at September 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

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construction debt exceeds a certain
percentage of the value of the project. At September 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 September 30, 2003, we had outstanding letters of credit of $126.4
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. Our
accounting policies are in compliance with generally accepted accounting
principles; however, 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

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goodwill exceeds the fair value of the future cash flows. We had
no impairment of goodwill in the six months ended September 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 ending
after December 15, 2003. FIN 46 requires significant use of judgment and
estimates in determining its application.

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

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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.

Although we consider the loan origination reserve reflected in our
consolidated balance sheet at September 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.

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RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FIN 46, which modified 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 ending after December 15,
2003. At September 30, 2003, we have interests in the Partnership, HSF-I,
certain joint ventures and land under option agreements that are or may be
affected by this interpretation. Variable interest entities owned or acquired
before February 1, 2003 are: the Partnership, HSF-I, certain land option
agreements and joint ventures. The Company has completed its analysis of FIN
46 effects on HSF-I, see Note (G), Indebtedness. The Company continues to
evaluate the impacts of FIN 46 on the Partnership, land option agreements and
joint ventures entered into prior to February 1, 2003. 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 with this ReportNote (H), Centex Development Company, L.P.HSF-I
    
    Note (G), IndebtednessLand Option Agreements
    
    Note (J), Land Held Under Option Agreements not   Owned
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 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
implementation of SFAS No. 149 did not have a material impact on the Companys
results of operations or financial position.

In May 2003, the FASB issued Statement Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity, (SFAS No. 150). The statement establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is

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within its scope as a liability (or an
asset in some circumstances). Certain provisions of this Statement are
effective for financial instruments entered into or modified after May 31,
2003. In October 2003, FASB deferred indefinitely certain provisions of this
Statement pertaining to non-controlling interests in limited life entities. The implementation of the
provisions of SFAS No. 150 which are effective did not have an impact on the
Companys 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 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.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | 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 September 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 September 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
September 30, 2003 that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.

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Part II. Other Information







Item 4. Submission of Matters to a Vote of Security Holders

On July 17, 2003, we held our Annual Meeting of Stockholders. At the
Annual Meeting, the following matters were resolved by vote:



| | (1) |  | Dan W. Cook, III, Thomas J. Falk, Laurence E. Hirsch
and Thomas M. Schoewe were elected as directors to serve for a
three-year term until the 2006 Annual Meeting. Voting results
for these nominees are summarized as follows:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Number of SharesFor
    
    
    Withheld
    
    
    Broker Non-VotesDan W. Cook, III
    
    
    49,037,538
    
    
    
    2,944,236
    
    
    
    Thomas J. Falk
    
    
    51,177,757
    
    
    
    804,017
    
    
    
    Laurence E. Hirsch
    
    
    50,784,900
    
    
    
    1,196,874
    
    
    
    Thomas M. Schoewe
    
    
    49,038,983
    
    
    
    2,942,791
    
    
    
    




| | (2) |  | Stockholders approved the 2003 Annual Incentive
Compensation Plan as set forth in Item 2 of the Centex
Corporation Proxy Statement dated June 16, 2003. Voting results
are summarized as follows:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Number of SharesFor
    
    
    Against
    
    
    Abstained
    
    
    Broker Non-Votes47,443,296
    
    
    
    4,145,733
    
    
    
    392,745
    
    
    
    




| | (3) |  | Stockholders approved the Centex Corporation 2003
Equity Incentive Plan as set forth in Item 3 of the Centex
Corporation Proxy Statement dated June 16, 2003. Voting results
are summarized as follows:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Number of SharesFor
    
    
    Against
    
    
    Abstained
    
    
    Broker Non-Votes26,612,826
    
    
    
    24,982,959
    
    
    
    383,789
    
    
    
    2,200




| | (4) |  | Stockholders ratified the appointment of independent
auditors for 2004 as set forth in Item 4 of the Centex
Corporation Proxy Statement dated June 16, 2003. Voting results
are summarized as follows:
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Number of SharesFor
    
    
    Against
    
    
    Abstained
    
    
    Broker Non-Votes50,718,224
    
    
    
    822,652
    
    
    
    346,199
    
    
    
    94,699


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Item 6. Exhibits and Reports on Form 8-K



| | (1) |  | Exhibits
| | --- |  | --------

10.1
    
    
    Credit Agreement, dated as of August 7, 2003 among Centex Corporation, Bank of America, N.A., as Administrative Agent, and the lenders named therein.10.2
    
    
    Letter of Credit and Reimbursement Agreement, dated as of August 7, 2003 among Centex Corporation, Bank of America, N.A., as Administrative Agent, and the lenders named therein.10.3
    
    
    Amended and Restated Distribution
Agreement, dated as of November 4, 2003, between Centex Corporation
and Centex Construction Products, Inc. (incorporated by reference
from Amendment No. 3 to Schedule 13D of Centex Corporation filed with
the Securities Exchange Commission on November 5, 2003).10.4
    
    
    Amended and Restated Agreement
and Plan of Merger, dated as of November 4, 2003, among Centex
Corporation, ARG Merger Corporation and Centex Construction Products, Inc. (incorporated by reference
from Amendment No. 3 to Schedule 13D of Centex Corporation filed with
the Securities Exchange Commission on November 5, 2003).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 2002.32.2
    
    
    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-K
| | --- |  | -------------------



| |  |  | Current Report on Form 8-K of Centex Corporation dated July 22,
2003 announcing the Companys first quarter net earnings for
the quarter ended June 30, 2003.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation dated July 22,
2003 announcing that Centex Corporation and Centex Construction
Products, Inc. entered into a Distribution Agreement and a
Merger Agreement in order to provide for the distribution by
Centex Corporation of its entire equity interest in Centex
Construction Products, Inc. to the holders of common stock of
Centex Corporation in a tax-free transaction.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 CORPORATIONRegistrantNovember 10, 2003
    
    /s/ Leldon E. EcholsLeldon E. EcholsExecutive Vice President andChief Financial Officer(principal financial officer)November 10, 2003
    
    /s/ Mark D. KempMark D. KempVice President- Controller(principal accounting officer)


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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 September 30,2003
    
    
    2002Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryRevenues
    
    $
    100,557
    
    
    $
    100,544
    
    
    $
    38
    
    
    $
    101,052
    
    
    $
    101,002
    
    
    $
    87Costs and Expenses
    
    
    94,507
    
    
    
    94,479
    
    
    
    53
    
    
    
    97,867
    
    
    
    97,849
    
    
    
    55Earnings from Unconsolidated Entities
and Other
    
    
    107
    
    
    
    107
    
    
    
    
    
    
    
    585
    
    
    
    585
    
    
    
    Earnings (Loss) from Continuing
OperationsBefore Income Taxes
    
    
    6,157
    
    
    
    6,172
    
    
    
    (15
    )
    
    
    3,770
    
    
    
    3,738
    
    
    
    32Income Taxes
    
    
    1,517
    
    
    
    1,517
    
    
    
    
    
    
    
    779
    
    
    
    779
    
    
    
    Earnings (Loss) from Continuing
Operations
    
    
    4,640
    
    
    
    4,655
    
    
    
    (15
    )
    
    
    2,991
    
    
    
    2,959
    
    
    
    32Discontinued Operations:Earnings from Discontinued
Operations (Including Gain on Sale of
$13,685 and $281 for the Three Months
Ended September 30, 2003 and 2002,
respectively)
    
    
    9,050
    
    
    
    9,050
    
    
    
    
    
    
    
    616
    
    
    
    616
    
    
    
    Net Earnings (Loss)
    
    $
    13,690
    
    
    $
    13,705
    
    
    $
    (15
    )
    
    $
    3,607
    
    
    $
    3,575
    
    
    $
    32Net Earnings Allocable to Limited
Partners
    
    
    
    
    
    $
    13,705
    
    
    
    
    
    
    
    
    
    
    $
    3,575Earnings (Loss) from Continuing
Operations
Per Unit/Share
    
    
    
    
    
    $
    19.20
    
    
    $
    (15
    )
    
    
    
    
    
    $
    12.30
    
    
    $
    32Earnings from Discontinued Operations
Per Unit/Share
    
    
    
    
    
    
    37.32
    
    
    
    
    
    
    
    
    
    
    
    2.56
    
    
    
    Net Earnings (Loss) Per Unit/Share
    
    
    
    
    
    $
    56.52
    
    
    $
    (15
    )
    
    
    
    
    
    $
    14.86
    
    
    $
    32Weighted-Average Units/Shares
Outstanding
    
    
    
    
    
    
    242,486
    
    
    
    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.

56



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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 Six Months Ended September 30,2003
    
    
    2002Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryRevenues
    
    $
    203,581
    
    
    $
    203,555
    
    
    $
    76
    
    
    $
    187,343
    
    
    $
    187,243
    
    
    $
    175Costs and Expenses
    
    
    193,372
    
    
    
    193,307
    
    
    
    115
    
    
    
    185,584
    
    
    
    185,528
    
    
    
    131Earnings from Unconsolidated Entities
and Other
    
    
    242
    
    
    
    242
    
    
    
    
    
    
    
    575
    
    
    
    575
    
    
    
    Earnings (Loss) from Continuing
Operations
Before Income Taxes
    
    
    10,451
    
    
    
    10,490
    
    
    
    (39
    )
    
    
    2,334
    
    
    
    2,290
    
    
    
    44Income Taxes
    
    
    2,562
    
    
    
    2,562
    
    
    
    
    
    
    
    309
    
    
    
    309
    
    
    
    Earnings (Loss) from Continuing
Operations
    
    
    7,889
    
    
    
    7,928
    
    
    
    (39
    )
    
    
    2,025
    
    
    
    1,981
    
    
    
    44Discontinued Operations:Earnings from Discontinued
Operations (Including Gain on Sale
of $13,653 and $281 for the Six
Months
Ended September 30, 2003 and 2002,
respectively)
    
    
    9,214
    
    
    
    9,214
    
    
    
    
    
    
    
    1,279
    
    
    
    1,279
    
    
    
    Net Earnings (Loss)
    
    $
    17,103
    
    
    $
    17,142
    
    
    $
    (39
    )
    
    $
    3,304
    
    
    $
    3,260
    
    
    $
    44Net Earnings Allocable to Limited
Partners
    
    
    
    
    
    $
    17,142
    
    
    
    
    
    
    
    
    
    
    $
    3,260Earnings from Continuing Operations
Per Unit/Share
    
    
    
    
    
    $
    32.83
    
    
    $
    39
    
    
    
    
    
    
    $
    8.23
    
    
    $
    44Earnings from Discontinued Operations
Per Unit/Share
    
    
    
    
    
    
    38.14
    
    
    
    
    
    
    
    
    
    
    
    5.32
    
    
    
    Net Earnings Per Unit/Share
    
    
    
    
    
    $
    70.97
    
    
    $
    39
    
    
    
    
    
    
    $
    13.55
    
    
    $
    44Weighted-Average Units/Shares
Outstanding
    
    
    
    
    
    
    241,543
    
    
    
    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.

57



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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Balance Sheets
(Dollars in thousands)
(unaudited)

September 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
    
    $
    23,587
    
    
    $
    23,573
    
    
    $
    14
    
    
    $
    5,113
    
    
    $
    5,105
    
    
    $
    8Receivables
    
    
    40,637
    
    
    
    44,682
    
    
    
    239
    
    
    
    30,719
    
    
    
    34,747
    
    
    
    261Inventories
    
    
    493,319
    
    
    
    493,319
    
    
    
    
    
    
    
    446,801
    
    
    
    446,801
    
    
    
    Investments-Commercial Properties, net
    
    
    49,849
    
    
    
    49,849
    
    
    
    
    
    
    
    49,790
    
    
    
    49,790
    
    
    
    Real Estate Joint Ventures
    
    
    4,022
    
    
    
    4,022
    
    
    
    
    
    
    
    3,973
    
    
    
    3,973
    
    
    
    Affiliate
    
    
    
    
    
    
    
    
    
    
    1,192
    
    
    
    
    
    
    
    
    
    
    
    1,191Assets Held for Sale
    
    
    1,988
    
    
    
    1,988
    
    
    
    
    
    
    
    55,496
    
    
    
    55,496
    
    
    
    Property and Equipment, net
    
    
    2,144
    
    
    
    2,144
    
    
    
    
    
    
    
    2,308
    
    
    
    2,308
    
    
    
    Other Assets-Goodwill, net
    
    
    32,495
    
    
    
    32,495
    
    
    
    
    
    
    
    30,698
    
    
    
    30,698
    
    
    
    Deferred Charges and Other
    
    
    19,747
    
    
    
    17,976
    
    
    
    1,771
    
    
    
    15,786
    
    
    
    14,015
    
    
    
    1,771$
    667,788
    
    
    $
    670,048
    
    
    $
    3,216
    
    
    $
    640,684
    
    
    $
    642,933
    
    
    $
    3,231Liabilities, Stockholders Equity
And Partners CapitalAccounts Payable and
Accrued Liabilities
    
    $
    133,951
    
    
    $
    133,761
    
    
    $
    4,524
    
    
    $
    128,129
    
    
    $
    127,967
    
    
    $
    4,500Liabilities Related to Assets Held
for Sale
    
    
    1,113
    
    
    
    1,113
    
    
    
    
    
    
    
    46,208
    
    
    
    46,208
    
    
    
    Notes Payable
    
    
    209,913
    
    
    
    209,913
    
    
    
    
    
    
    
    177,499
    
    
    
    177,499
    
    
    
    Total Liabilities
    
    
    344,977
    
    
    
    344,787
    
    
    
    4,524
    
    
    
    351,836
    
    
    
    351,674
    
    
    
    4,500Stockholders Equity and
Partners Capital
    
    
    322,811
    
    
    
    325,261
    
    
    
    (1,308
    )
    
    
    288,848
    
    
    
    291,259
    
    
    
    (1,269
    )$
    667,788
    
    
    $
    670,048
    
    
    $
    3,216
    
    
    $
    640,684
    
    
    $
    642,933
    
    
    $
    3,231


* 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.

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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 Six Months Ended September 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)
    
    $
    17,103
    
    
    $
    17,142
    
    
    $
    (39
    )
    
    $
    3,304
    
    
    $
    3,260
    
    
    $
    44Adjustments:Depreciation
    
    
    1,256
    
    
    
    1,256
    
    
    
    
    
    
    
    2,606
    
    
    
    2,606
    
    
    
    Amortization
    
    
    320
    
    
    
    320
    
    
    
    
    
    
    
    458
    
    
    
    458
    
    
    
    Deferred Tax Provision (Benefit)
    
    
    114
    
    
    
    114
    
    
    
    
    
    
    
    (786
    )
    
    
    (786
    )
    
    
    Equity in Loss from Joint Ventures
    
    
    (242
    )
    
    
    (242
    )
    
    
    
    
    
    
    (575
    )
    
    
    (575
    )
    
    
    (Increase) Decrease in Receivables
    
    
    (21,625
    )
    
    
    (21,647
    )
    
    
    22
    
    
    
    2,617
    
    
    
    2,689
    
    
    
    (72
    )Decrease in Notes Receivable
    
    
    4,160
    
    
    
    4,160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Increase) Decrease in Inventories
    
    
    (22,504
    )
    
    
    (22,504
    )
    
    
    
    
    
    
    12,747
    
    
    
    12,747
    
    
    
    Decrease (Increase) in Commercial
Properties
    
    
    47,716
    
    
    
    47,716
    
    
    
    
    
    
    
    (21,255
    )
    
    
    (21,255
    )
    
    
    Decrease (Increase) in Other Assets
    
    
    2,137
    
    
    
    2,137
    
    
    
    
    
    
    
    (906
    )
    
    
    (895
    )
    
    
    (11
    )Increase (Decrease) in Payables
and Accruals
    
    
    5,285
    
    
    
    5,262
    
    
    
    23
    
    
    
    (3,534
    )
    
    
    (3,578
    )
    
    
    4433,720
    
    
    
    33,714
    
    
    
    6
    
    
    
    (5,324
    )
    
    
    (5,329
    )
    
    
    5Cash Flows  Investing ActivitiesDecrease in Advances to Joint
Ventures and Investment in
Affiliate
    
    
    145
    
    
    
    145
    
    
    
    
    
    
    
    1,550
    
    
    
    1,550
    
    
    
    Decrease (Increase) in Property and
Equipment, net
    
    
    39
    
    
    
    39
    
    
    
    
    
    
    
    (197
    )
    
    
    (197
    )
    
    
    184
    
    
    
    184
    
    
    
    
    
    
    
    1,353
    
    
    
    1,353
    
    
    
    Cash Flows  Financing Activities(Decrease) Increase in Notes Payable
    
    
    (16,008
    )
    
    
    (16,008
    )
    
    
    
    
    
    
    11,807
    
    
    
    11,807
    
    
    
    (16,008
    )
    
    
    (16,008
    )
    
    
    
    
    
    
    11,807
    
    
    
    11,807
    
    
    
    Effect of Exchange Rate Changes
on Cash
    
    
    578
    
    
    
    578
    
    
    
    
    
    
    
    1,822
    
    
    
    1,822
    
    
    
    Net Increase in Cash
    
    
    18,474
    
    
    
    18,468
    
    
    
    6
    
    
    
    9,658
    
    
    
    9,653
    
    
    
    5Cash and Cash Equivalents
at Beginning of Period
    
    
    5,113
    
    
    
    5,105
    
    
    
    8
    
    
    
    22,538
    
    
    
    22,529
    
    
    
    9Cash and Cash Equivalents
at End of Period
    
    $
    23,587
    
    
    $
    23,573
    
    
    $
    14
    
    
    $
    32,196
    
    
    $
    32,182
    
    
    $
    14


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.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Notes to Condensed Combining Financial Statements
September 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 September 30, 2003, these
adjusted capital contributions, or Unrecovered Capital, were $243.9 million and
preference payments in arrears totaled $52.9 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

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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 September 30,2003
    
    
    2002Cash Paid for Interest
    
    $
    3,310
    
    
    $
    4,207Net Cash Paid for Taxes
    
    $
    480
    
    
    $
    31Class C Units Issued for Land
    
    $
    2,812
    
    
    $
    


For the Six MonthsEnded September 30,2003
    
    
    2002Cash Paid for Interest
    
    $
    7,236
    
    
    $
    8,589Net Cash Paid for Taxes
    
    $
    480
    
    
    $
    31Class C Units Issued for Land
    
    $
    2,812
    
    
    $
    


For the Three MonthsEnded September 30,2003
    
    
    2002Total Interest Incurred
    
    $
    3,739
    
    
    $
    4,296Interest Capitalized
    
    
    (1,683
    )
    
    
    (1,459
    )Interest Expense
    
    $
    2,056
    
    
    $
    2,837


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For the Six MonthsEnded September 30,2003
    
    
    2002Total Interest Incurred
    
    $
    7,320
    
    
    $
    8,830Interest Capitalized
    
    
    (3,050
    )
    
    
    (2,615
    )Interest Expense
    
    $
    4,270
    
    
    $
    6,215


(D) RELATED PARTY TRANSACTIONS

At September 30, 2003 and March 31, 2003, Centex Homes had $6.2 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 September 30, 2003 and 2002, Centex Homes paid $0.7 million
and $0.2 million, respectively, to the Partnership in fees and reimbursements
pursuant to these agreements and $1.6 million and $3.0 million, respectively,
for the purchase of residential lots. During the six months ended September
30, 2003 and 2002, Centex Homes paid $1.1 million and $1.6 million,
respectively, to the Partnership in fees and reimbursements pursuant to these
agreements and $13.6 million and $24.1 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 September 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 September 30, 2003 and 2002,
the Partnership paid $0.5 million and $1.2 million, respectively, to
Construction Services pursuant to these contracts. During the six months ended
September 30, 2003 and 2002, the Partnership paid $0.5 million and $4.7
million, respectively, to Construction Services pursuant to these contracts.

During the six months ended September 30, 2003, the Partnership issued
2,812 Class C Units to Centex Homes in exchange for land with a fair market
value of $2.8 million.

During the six months ended September 30, 2003, a subsidiary of the
Partnership entered into a lease agreement (the Lease) with a Centex
subsidiary for 160,000 square feet of office space currently under construction
in Lewisville, Texas. The Lease is for a ten-year primary term commencing upon
the date that the premises is ready for occupancy.

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(E) COMPREHENSIVE INCOME

A summary of comprehensive income for the three months ended September 30,
2003 and 2002 is presented below:

For the Three MonthsEnded September 30,2003
    
    
    2002Net Earnings
    
    $
    13,690
    
    
    $
    3,607Other Comprehensive Income (Loss):Foreign Currency Translation Adjustments
    
    
    2,561
    
    
    
    3,660Unrealized Gain (Loss) on Hedging
Instruments
    
    
    651
    
    
    
    (592
    )Comprehensive Income
    
    $
    16,902
    
    
    $
    6,675


For the Six MonthsEnded September 30,2003
    
    
    2002Net Earnings
    
    $
    17,103
    
    
    $
    3,304Other Comprehensive Income (Loss):Foreign Currency Translation Adjustments
    
    
    13,296
    
    
    
    17,633Unrealized Gain (Loss) on Hedging
Instruments
    
    
    752
    
    
    
    (826
    )Comprehensive Income
    
    $
    31,151
    
    
    $
    20,111


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(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 (Loss)
    
    
    17,103
    
    
    
    
    
    
    
    
    
    
    
    17,142
    
    
    
    
    
    
    
    
    
    
    
    (39
    )Issuance of Class C Units
    
    
    2,812
    
    
    
    
    
    
    
    
    
    
    
    2,812
    
    
    
    
    
    
    
    
    
    
    
    Accumulated OtherComprehensive Income:Foreign Currency
Translation Adjustments
    
    
    13,296
    
    
    
    
    
    
    
    
    
    
    
    13,296
    
    
    
    
    
    
    
    
    
    
    
    Unrealized Gain on
Hedging Instruments
    
    
    752
    
    
    
    
    
    
    
    
    
    
    
    752
    
    
    
    
    
    
    
    
    
    
    
    Balance at September 30,
2003
    
    $
    322,811
    
    
    $
    500
    
    
    $
    1,142
    
    
    $
    323,619
    
    
    $
    1
    
    
    $
    800
    
    
    $
    (2,109
    )


(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.

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.

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.

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For the Three Months Ended September 30, 2003Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    95,981
    
    
    $
    2,244
    
    
    $
    2,332
    
    
    $
    100,557Cost of Sales
    
    
    (80,315
    )
    
    
    
    
    
    
    (1,626
    )
    
    
    (81,941
    )Selling, General and Administrative
Expenses
    
    
    (8,741
    )
    
    
    (1,457
    )
    
    
    (854
    )
    
    
    (11,052
    )Interest Expense
    
    
    (559
    )
    
    
    (513
    )
    
    
    (442
    )
    
    
    (1,514
    )Earnings from Unconsolidated
Subsidiaries
and Other
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    107Earnings (Loss) from Continuing
Operations
Before Income Taxes
    
    
    6,366
    
    
    
    381
    
    
    
    (590
    )
    
    
    6,157Earnings from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    8,603
    
    
    
    447
    
    
    
    9,050Earnings (Loss) Before Income Taxes
    
    $
    6,366
    
    
    $
    8,984
    
    
    $
    (143
    )
    
    $
    15,207


For the Three Months Ended September 30, 2002Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    94,426
    
    
    $
    3,234
    
    
    $
    3,392
    
    
    $
    101,052Cost of Sales
    
    
    (81,979
    )
    
    
    (859
    )
    
    
    (3,015
    )
    
    
    (85,853
    )Selling, General and Administrative
Expenses
    
    
    (7,592
    )
    
    
    (1,623
    )
    
    
    (1,404
    )
    
    
    (10,619
    )Interest Expense
    
    
    (683
    )
    
    
    (548
    )
    
    
    (164
    )
    
    
    (1,395
    )Earnings from Unconsolidated
Subsidiaries
and Other
    
    
    
    
    
    
    585
    
    
    
    
    
    
    
    585Earnings (Loss) from Continuing
Operations
Before Income Taxes
    
    
    4,172
    
    
    
    789
    
    
    
    (1,191
    )
    
    
    3,770Earnings from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    616
    
    
    
    
    
    
    
    616Earnings (Loss) Before Income Taxes
    
    $
    4,172
    
    
    $
    1,405
    
    
    $
    (1,191
    )
    
    $
    4,386


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For the Six Months Ended September 30, 2003Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    184,737
    
    
    $
    4,011
    
    
    $
    14,833
    
    
    $
    203,581Cost of Sales
    
    
    (155,402
    )
    
    
    
    
    
    
    (13,588
    )
    
    
    (168,990
    )Selling, General and Administrative
Expenses
    
    
    (17,063
    )
    
    
    (2,675
    )
    
    
    (1,645
    )
    
    
    (21,383
    )Interest Expense
    
    
    (1,108
    )
    
    
    (1,034
    )
    
    
    (857
    )
    
    
    (2,999
    )Earnings from Unconsolidated
Subsidiaries
and Other
    
    
    
    
    
    
    242
    
    
    
    
    
    
    
    242Earnings (Loss) from Continuing
OperationsBefore Income Taxes
    
    
    11,164
    
    
    
    544
    
    
    
    (1,257
    )
    
    
    10,451Earnings from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    8,767
    
    
    
    447
    
    
    
    9,214Earnings (Loss) Before Income Taxes
    
    $
    11,164
    
    
    $
    9,311
    
    
    $
    (810
    )
    
    $
    19,665


For the Six Months Ended September 30, 2002Intl Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    155,426
    
    
    $
    5,677
    
    
    $
    26,240
    
    
    $
    187,343Cost of Sales
    
    
    (135,744
    )
    
    
    (1,134
    )
    
    
    (24,178
    )
    
    
    (161,056
    )Selling, General and Administrative
Expenses
    
    
    (14,703
    )
    
    
    (3,407
    )
    
    
    (3,202
    )
    
    
    (21,312
    )Interest Expense
    
    
    (1,177
    )
    
    
    (1,087
    )
    
    
    (952
    )
    
    
    (3,216
    )Earnings from Unconsolidated
Subsidiaries
and Other
    
    
    
    
    
    
    575
    
    
    
    
    
    
    
    575Earnings (Loss) from Continuing
Operations
Before Income Taxes
    
    
    3,802
    
    
    
    624
    
    
    
    (2,092
    )
    
    
    2,334Earnings from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    1,279
    
    
    
    
    
    
    
    1,279Earnings (Loss) Before Income Taxes
    
    $
    3,802
    
    
    $
    1,903
    
    
    $
    (2,092
    )
    
    $
    3,613


(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 $32.5 million and $30.7
million at September 30, 2003 and March 31, 2003, respectively. The increase
during the six months ended September 30, 2003 reflects the impact of foreign
currency translation adjustments.

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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
interest rate swap agreements, designated as cash flow hedges, on a portion of
its debt. The swap agreements are recorded at aggregate 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 derivatives are deferred as a component of Accumulated Other
Comprehensive Income. Fluctuations in the fair value of the ineffective
portion of the derivatives would be reflected in the current period earnings.
During the three and six months ended September 30, 2003 there was no hedge
ineffectiveness related to these derivatives.

The swaps expire in March 2006. Amounts to be received or paid as a
result of the swap agreements are recognized as adjustments to interest
incurred on the related debt instrument. As of September 30, 2003, the
Accumulated Other Comprehensive Gain was $408 thousand ($286 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
ending after December 15, 2003. As discussed above in Note (B),
Organization, Centex indirectly holds 100% of the Partnerships

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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
implementation of SFAS No. 149 did not have a material impact on the Companies
results of operations or financial position.

In May 2003, the FASB issued Statement Financial Accounting Standards No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity, (SFAS No. 150). The statement establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Certain provisions of this Statement are
effective for financial instruments entered into or modified after May 31,
2003. In October 2003, FASB deferred indefinitely certain provisions of this
Statement pertaining to non-controlling interests in limited life
entities. The estimated settlement value of non-controlling interests in limited-life entities
subject to the deferral is approximately $1.6 million as of September 30, 2003. The implementation of the
provisions of SFAS No. 150 which are effective did not have an impact on the
Companys 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 $37.7 million as of September 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
September 30, 2003.

(L) COMMITMENTS AND CONTINGENCIES

As of September 30, 2003, the Partnership had remaining commitments of
approximately $14.4 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 September
30, 2003, our subsidiaries had outstanding letters of credit of $3.9 million
that primarily relate to development obligations of Multi-Family Communities.

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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 September 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) 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 $12.4 million is included in Other Receivables in the
accompanying Combining Balance Sheets. The subsidiary has deferred recognition
of this income as of September 30, 2003 as improvements to the project that
will generate property taxes are not yet complete.

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 are affected by the Financial Accounting
Standards Boards recent issuance of FIN 45. The implementation of FIN 45 did
not 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
    
    
    2,552Settlements Made
    
    
    (2,502
    )Balance as of September 30, 2003
    
    $
    3,440


(M) RECLASSIFICATIONS

Certain prior year balances have been reclassified to be consistent with
the September 30, 2003 presentation.

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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 $100.6
million for the three months ended September 30, 2003, a 0.50% decrease
compared to our revenues from continuing operations of $101.1 million for the
same period last year. On a combined basis, our revenues from continuing
operations were $203.6 million for the six months ended September 30, 2003, an
8.7% increase over our revenues from continuing operations of $187.3 million
for the same period last year. The revenue increase for the six months ended
September 30, 2003 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 September 30, 2003 were $6.2 million compared to operating earnings from
continuing operations of $3.8 million for the same period last year. Our
operating earnings from continuing operations for the six months ended
September 30, 2003 were $10.5 million compared to operating
earnings from continuing operations of $2.3 million for the same period last year. Our net
earnings from continuing operations for the three months ended September 30,
2003 were $4.6 million compared to net earnings from continuing operations of
$3.0 million for the same period last year. Our net earnings from continuing
operations for the six months ended September 30, 2003 were $7.9 million
compared to net earnings from continuing operations of $2.0 million for the
same period last year. The increase in operating earnings and net earnings
from continuing operations for the three and six months ended September 30,
2003 is primarily related to increased earnings from the International Home
Building segment.

Our net earnings from discontinued operations for the three and six months
ended September 30, 2003 were $9.1 million and $9.2 million, respectively. 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 eight of these properties
during the six months ended September 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.

Any reference herein to we, us or our includes 3333 Holding Corporation
and subsidiary and Centex Development Company, L.P. and subsidiaries.

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INTERNATIONAL HOME BUILDING

The following summarizes International Home Buildings results for the
three and six months ended September 30, 2003 compared to the same periods last
year (dollars in thousands, except per unit data):

For the Three Months Ended September 30,2003
    
    
    2002Revenues  Home Building
    
    $
    94,993
    
    
    
    99.0
    %
    
    $
    90,585
    
    
    
    95.9
    %Revenues  Land Sales and Other
    
    
    988
    
    
    
    1.0
    %
    
    
    3,841
    
    
    
    4.1
    %Cost of Sales  Home Building
    
    
    (80,299
    )
    
    
    (83.7
    %)
    
    
    (78,159
    )
    
    
    (82.9
    %)Cost of Sales  Land Sales
    
    
    (16
    )
    
    
    
    %
    
    
    (3,820
    )
    
    
    (4.0
    %)General and Administrative Expenses
    
    
    (8,741
    )
    
    
    (9.1
    %)
    
    
    (7,592
    )
    
    
    (8.0
    %)Operating Earnings
    
    
    6,925
    
    
    
    7.2
    %
    
    
    4,855
    
    
    
    5.1
    %Interest
    
    
    (559
    )
    
    
    (0.6
    %)
    
    
    (683
    )
    
    
    (0.7
    %)Earnings (Loss) Before Income Taxes
    
    $
    6,366
    
    
    
    6.6
    %
    
    $
    4,172
    
    
    
    4.4
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    379
    
    
    
    (1.0
    %)
    
    
    383
    
    
    
    21.6
    %Average Unit Sales Price
    
    $
    250,641
    
    
    
    6.0
    %
    
    $
    236,514
    
    
    
    15.4
    %Average Operating Earnings Per Unit
    
    $
    18,272
    
    
    
    44.1
    %
    
    $
    12,676
    
    
    
    (4.5
    %)Backlog Units
    
    
    406
    
    
    
    4.6
    %
    
    
    388
    
    
    
    55.8
    %


For the Six Months Ended September 30,2003
    
    
    2002Revenues  Home Building
    
    $
    183,739
    
    
    
    99.5
    %
    
    $
    151,557
    
    
    
    97.5
    %Revenues  Land Sales and Other
    
    
    998
    
    
    
    0.5
    %
    
    
    3,869
    
    
    
    2.5
    %Cost of Sales  Home Building
    
    
    (155,378
    )
    
    
    (84.2
    %)
    
    
    (131,924
    )
    
    
    (84.9
    %)Cost of Sales  Land Sales
    
    
    (24
    )
    
    
    
    %
    
    
    (3,820
    )
    
    
    (2.4
    %)General and Administrative Expenses
    
    
    (17,063
    )
    
    
    (9.2
    %)
    
    
    (14,703
    )
    
    
    (9.5
    %)Operating Earnings
    
    
    12,272
    
    
    
    6.6
    %
    
    
    4,979
    
    
    
    3.2
    %Interest
    
    
    (1,108
    )
    
    
    (0.6
    %)
    
    
    (1,177
    )
    
    
    (0.8
    %)Earnings (Loss) Before Income Taxes
    
    $
    11,164
    
    
    
    6.0
    %
    
    $
    3,802
    
    
    
    2.4
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    692
    
    
    
    6.1
    %
    
    
    652
    
    
    
    6.2
    %Average Unit Sales Price
    
    $
    265,519
    
    
    
    14.2
    %
    
    $
    232,449
    
    
    
    18.2
    %Average Operating Earnings Per Unit
    
    $
    17,734
    
    
    
    132.2
    %
    
    $
    7,637
    
    
    
    (28.5
    %)Backlog Units
    
    
    406
    
    
    
    4.6
    %
    
    
    388
    
    
    
    55.8
    %


International Home Buildings revenues for the three months ended
September 30, 2003 increased by $1.6 million from revenues for the same period
last year. This increase is comprised of $5.4 million from an increase in the
average unit sales price offset by $0.9 million from a decrease in the number
of units closed and a $2.9 million decline in other revenues. Home sales
totaled 379 units during the three months ended September 30, 2003, compared to
383 units during the same period in the preceding year, representing a 1.0%
decrease. International Home Buildings revenues for the six months ended
September 30, 2003 increased by

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$29.3 million from revenues for the same period last year. This increase is
comprised of $22.9 million from an increase in the average unit sales price,
$9.3 million from an increase in the number of units closed and a $2.9 million
decline in other revenues. Home sales totaled 692 units during the six months
ended September 30, 2003, compared to 652 units during the same period in the
preceding year, representing a 6.1% increase.

International Home Buildings gross homebuilding margins increased for the
three months ended September 30, 2003 to 15.5% from 13.7% and increased for the
six months ended September 30, 2003 to 15.4% from 13.0% compared to the same
periods 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, increased 1.1% and decreased 0.3%, respectively, for
the three and six months ended September 30, 2003 compared to the same periods
last year, primarily due to the addition of personnel, offset by the impact of
increased revenues in the six months ended September 30, 2003.

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 September 30, 2003 and 2002,
respectively, the average exchange rate used for translation was 1.61 and 1.55,
representing an increase of 3.9%. For the six months ended September 30, 2003
and 2002, respectively, the average exchange rate used for translation was 1.62
and 1.51, representing an increase of 7.3%.

The backlog of homes sold but not closed at September 30, 2003 was 406
units, 4.6% more than the 388 units at the same point in the preceding year.

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COMMERCIAL DEVELOPMENT

The following summarizes Commercial Developments results for the three
and six months ended September 30, 2003, compared to the same periods last year
(dollars and square feet in thousands):

For the Three MonthsEnded September 30,2003
    
    
    2002Sales Revenues
    
    $
    
    
    
    $
    1,610Rental Income and Other Revenues
    
    
    2,244
    
    
    
    1,624Cost of Sales
    
    
    
    
    
    
    (859
    )Selling, General and Administrative Expense
    
    
    (1,142
    )
    
    
    (1,381
    )Interest
    
    
    (513
    )
    
    
    (548
    )Operating Earnings Before Depreciation
    
    
    589
    
    
    
    446Depreciation and Amortization
    
    
    (315
    )
    
    
    (242
    )Earnings (Loss) from Unconsolidated Subsidiaries and Other
    
    
    107
    
    
    
    585Operating Earnings
    
    
    381
    
    
    
    789Earnings (Loss) from Discontinued Operations
    
    
    8,603
    
    
    
    616Earnings Before Income Taxes
    
    $
    8,984
    
    
    $
    1,405Operating Square Footage at September 30
    
    
    949
    
    
    
    2,952


For the Six MonthsEnded September 30,2003
    
    
    2002Sales Revenues
    
    $
    
    
    
    $
    2,335Rental Income and Other Revenues
    
    
    4,011
    
    
    
    3,342Cost of Sales
    
    
    
    
    
    
    (1,134
    )Selling, General and Administrative Expense
    
    
    (2,041
    )
    
    
    (2,963
    )Interest
    
    
    (1,034
    )
    
    
    (1,087
    )Operating Earnings Before Depreciation
    
    
    936
    
    
    
    493Depreciation and Amortization
    
    
    (634
    )
    
    
    (444
    )Earnings (Loss) from Unconsolidated Subsidiaries and Other
    
    
    242
    
    
    
    575Operating Earnings
    
    
    544
    
    
    
    624Earnings (Loss) from Discontinued Operations
    
    
    8,767
    
    
    
    1,279Earnings Before Income Taxes
    
    $
    9,311
    
    
    $
    1,903Operating Square Footage at September 30
    
    
    949
    
    
    
    2,952


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Commercial Developments operations during the six months ended September 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 six months ended
September 30, 2003 included:



| |  |  | sale of a 68,000 square foot industrial project in Gardner, Massachusetts;
| | - |  | --------------------------------------------------------------------------



| |  |  | sale of a 55,000 square foot office project in Ann Arbor, Michigan; and
| | - |  | -----------------------------------------------------------------------



| |  |  | sale of six industrial projects totaling approximately 1.2 million
square feet in Charlotte, North Carolina.
| | - |  | ------------------------------------------------------------------------------------------------------------

Sales revenues and cost of sales for the six months ended September 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 2004 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 September, 2002. Earnings
from unconsolidated entities have increased as the result of leasing at a
retail project in Santa Clara, California.

September 30, 2003
    
    
    September 30, 2002(000s)
    
    
    Weighted
    
    
    (000s)
    
    
    WeightedRentable
    
    
    Average
    
    
    Rentable
    
    
    AverageSq. Ft.
    
    
    Occupancy
    
    
    Sq. Ft.
    
    
    OccupancyOperating Properties*Industrial
    
    
    464
    
    
    
    42.0
    %
    
    
    2,292
    
    
    
    80.8
    %Office/Medical
    
    
    289
    
    
    
    97.6
    %
    
    
    602
    
    
    
    82.0
    %Retail
    
    
    196
    
    
    
    93.5
    %
    
    
    58
    
    
    
    63.4
    %949
    
    
    
    69.6
    %
    
    
    2,952
    
    
    
    80.7
    %(000's)
    
    
    
    
    
    
    (000's)Rentable
    
    
    
    
    
    
    RentableSq. Ft.
    
    
    
    
    
    
    Sq. Ft.Projects Under Construction*Industrial
    
    
    150
    
    
    
    
    
    
    
    155Office/Medical
    
    
    
    
    
    
    
    
    
    
    Retail
    
    
    160
    
    
    
    
    
    
    
    136310
    
    
    
    
    
    
    
    291


* Includes assets classified as Held for Sale.

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CORPORATE-OTHER

The following summarizes the results of Corporate-Other for the three and
six months ended September 30, 2003, compared to the same periods last year
(dollars in thousands):

For the Three MonthsEnded September 30,2003
    
    
    2002Revenues
    
    $
    2,332
    
    
    $
    3,392Cost of Sales
    
    
    (1,626
    )
    
    
    (3,015
    )Selling, General and Administrative Expenses
    
    
    (854
    )
    
    
    (1,404
    )Interest Expense
    
    
    (442
    )
    
    
    (164
    )Operating Loss
    
    
    (590
    )
    
    
    (1,191
    )Earnings from Discontinued Operations
    
    
    447
    
    
    
    Loss Before Income Taxes
    
    $
    (143
    )
    
    $
    (1,191
    )


For the Six MonthsEnded September 30,2003
    
    
    2002Revenues
    
    $
    14,833
    
    
    $
    26,240Cost of Sales
    
    
    (13,588
    )
    
    
    (24,178
    )Selling, General and Administrative Expenses
    
    
    (1,645
    )
    
    
    (3,202
    )Interest Expense
    
    
    (857
    )
    
    
    (952
    )Operating Loss
    
    
    (1,257
    )
    
    
    (2,092
    )Earnings from Discontinued Operations
    
    
    447
    
    
    
    Loss Before Income Taxes
    
    $
    (810
    )
    
    $
    (2,092
    )


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 and six months ended September 30, 2003 relate
primarily to the sale of residential lots to Centex Homes. Revenues and cost of
sales for the three and six months ended September 30, 2002 also relate
primarily to sales of residential lots to Centex Homes and an unaffiliated
third party.

Selling, general and administrative expenses decreased 39.2% and 48.6% for
the three and six months ended September 30, 2003 compared to the same periods
last year, primarily due to staffing reductions in the former Multi-Family
segment. Interest expense for the three and six months ended September 30,
2003 relates primarily to debt incurred to finance the purchase of these
residential lots.

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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 $62.6 million, including $0.8 million related to
assets held for sale, at September 30, 2003. Under the terms of various
construction loan agreements, we are required to maintain certain minimum
liquidity and net worth levels. At September 30, 2003, we were in compliance
with these covenants.

Permanent commercial project loans outstanding at September 30, 2003
totaled $17.4 million. The project loan is collateralized by a completed
commercial property and has a fixed interest rate of 7.79%. This loan is
non-recourse to the Partnership and its subsidiaries.

No new seller-financed land loans were obtained during the quarters ended
September 30, 2003 and 2002. Outstanding balances on seller-financed loans at
September 30, 2003 totaled $19.0 million, with terms of up to three years and
fixed interest rates ranging from 8.00% to 9.00%.

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 $111.7
million, at September 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 September
30, 2003, the International Home Building segment was in compliance with all of
these covenants.

During the quarter ended September 30, 2003, the Partnership issued 2,812
Class C Units to Centex Homes in exchange for land with a fair market value of
$2.8 million.

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 $37.7 million as of
September 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 September 30, 2003.

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Letters of Credit, Guarantees and Leases

At September 30, 2003, we had outstanding performance bonds and bank
guarantees of $28.2 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
September 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 February 1, 2003, FIN 46 applies to interim or annual periods ending
after December 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

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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
implementation of SFAS No. 149 did not have a material impact on the Companies
results of operations or financial position.

In May 2003, the FASB issued Statement Financial Accounting Standards No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity, (SFAS No. 150). The statement establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Certain provisions of this Statement are
effective for financial instruments entered into or modified after May 31,
2003. In October 2003, FASB deferred indefinitely certain provisions of this
Statement pertaining to non-controlling interests in limited life entities. The estimated settlement value of
non-controlling interest in limited life entities subject to the
deferral is approximately $ 1.6 million as of September 30, 2003. The implementation of the
provisions of SFAS No. 150 which are effective did not have an impact on the
Companys 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
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 September 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 September 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
September 30, 2003 that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.

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Part II. Other Information







Item 4. Submission of Matters to a Vote of Security Holders

On July 17, 2003, we held our Annual Meeting of Stockholders. At the
Annual Meeting, the following matters were resolved by vote:



| | (1) |  | Josiah O. Low, III, David M. Sherer, Stephen M.
Weinberg and Roger O. West were elected as directors to serve
for a one-year term until the 2004 Annual Meeting. Voting
results for these nominees are summarized as follows:
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Number of SharesFor
    
    
    Withheld
    
    
    Broker Non-VotesJosiah O. Low, III
    
    
    779
    
    
    
    40
    
    
    
    David M. Sherer
    
    
    779
    
    
    
    40
    
    
    
    Stephen M. Weinberg
    
    
    779
    
    
    
    40
    
    
    
    Roger O. West
    
    
    779
    
    
    
    40
    
    
    
    




| | (2) |  | Stockholders ratified the appointment of independent
auditors for 2004 as set forth in Item 4 of the Centex
Corporation Proxy Statement dated June 16, 2003. Voting results
are summarized as follows:
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Number of SharesFor
    
    
    Against
    
    
    Abstained
    
    
    Broker Non-Votes781
    
    
    
    6
    
    
    
    
    
    
    
    


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Item 6. Exhibits and Reports on Form 8-K



| | (3) |  | Exhibits | 
| | --- |  | -------- | 
| |     |  |          | 

10.1
    
    
    Amendment No. 2 to Second Amended
and Restated Agreement of Limited Partnership of the Partnership.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.32.3
    
    
    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-K
| | --- |  | -------------------

The Registrant filed no reports on Form 8-K during the quarter
ended September 30, 2003.

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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 CORPORATIONRegistrantNovember 10, 2003
    
    /s/ Todd D. NewmanTodd D. NewmanSenior Vice President, Chief FinancialOfficer and Treasurer(principal financial officer andprincipal accounting officer)


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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.RegistrantBy 3333 Development CorporationGeneral PartnerNovember 10, 2003
    
    /s/ Todd D. NewmanTodd D. NewmanSenior Vice President, Chief FinancialOfficer and Treasurer(principal financial officer andprincipal accounting officer)


83