##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM          TO
 Commission File Number: 1-6776
 CENTEX CORPORATION
 (Exact name of registrant as specified in its charter)
 Nevada
(State of incorporation)
75-0778259
(I.R.S. Employer Identification No.)
 2728 N. Harwood, Dallas, Texas 75201
(Address of principal executive offices) (Zip Code)
(214) 981-5000
(Registrants telephone number, including area code)
 ü
 ü
 ü




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##### 



Centex Corporation and Subsidiaries
  
 Form 10-Q Table of Contents
 September 30, 2006
 PART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    2Statements of Consolidated Earnings
    
    
    2Statements of Consolidated Earnings
    
    
    3Consolidated Balance Sheets with Consolidating Details
    
    
    4Statements of Consolidated Cash Flows with Consolidating Details
    
    
    6Notes to Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    48Item 4.
    
    Controls and Procedures
    
    
    48PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    49Item 1A.
    
    Risk Factors
    
    
    49Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    50Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    50Item 6.
    
    Exhibits
    
    
    52Signatures
    
    
    
    
    53Specimen Common Stock CertificateAmended and Restated 1997 Stock Option PlanAmended and Restated 1998 Employee Non-qualified Stock Option PlanAmended and Restated 2001 Stock PlanAmended and Restated 2003 Equity Incentive PlanAmended and Restated 2001 Long Term Incentive PlanComputation of Ratio of Earnings to Fixed ChargesCertification of the CEO Pursuant to Rules 13a-14 and 15d-14Certification of the CFO Pursuant to Rules 13a-14 and 15d-14Certification of the CEO Pursuant to Section 906Certification of the CFO Pursuant to Section 906
  1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Centex Corporation and Subsidiaries
 
 Statements of Consolidated Earnings
 
 For the Three Months Ended September 30,2006
    
    
    
    
    
    
    2005RevenuesHome Building
    
    $
    2,658,047
    
    
    
    
    
    
    $
    2,888,409Financial Services
    
    
    120,578
    
    
    
    
    
    
    
    120,882Construction Services
    
    
    546,176
    
    
    
    
    
    
    
    391,922Other, including Intersegment Eliminations
    
    
    (2,010
    )
    
    
    
    
    
    
    23,1673,322,791
    
    
    
    
    
    
    
    3,424,380Costs and ExpensesHome Building
    
    
    2,532,599
    
    
    
    
    
    
    
    2,435,731Financial Services
    
    
    94,414
    
    
    
    
    
    
    
    99,616Construction Services
    
    
    536,431
    
    
    
    
    
    
    
    388,064Other, including Intersegment Eliminations
    
    
    (3,154
    )
    
    
    
    
    
    
    26,054Corporate General and Administrative
    
    
    20,742
    
    
    
    
    
    
    
    23,558Interest Expense
    
    
    
    
    
    
    
    
    
    
    3,0723,181,032
    
    
    
    
    
    
    
    2,976,095Earnings (Loss) from Unconsolidated Entities
    
    
    (687
    )
    
    
    
    
    
    
    6,130Earnings from Continuing Operations Before
Income Taxes
    
    
    141,072
    
    
    
    
    
    
    
    454,415Income Taxes
    
    
    54,594
    
    
    
    
    
    
    
    133,216Earnings from Continuing Operations
    
    
    86,478
    
    
    
    
    
    
    
    321,199Earnings
from Discontinued Operations,
net of Taxes of $32,204 and $35,979
    
    
    50,922
    
    
    
    
    
    
    
    13,331Net Earnings
    
    $
    137,400
    
    
    
    
    
    
    $
    334,530Basic Earnings Per ShareContinuing Operations
    
    $
    0.72
    
    
    
    
    
    
    $
    2.50Discontinued Operations
    
    
    0.43
    
    
    
    
    
    
    
    0.10$
    1.15
    
    
    
    
    
    
    $
    2.60Diluted Earnings Per ShareContinuing Operations
    
    $
    0.70
    
    
    
    
    
    
    $
    2.39Discontinued Operations
    
    
    0.41
    
    
    
    
    
    
    
    0.10$
    1.11
    
    
    
    
    
    
    $
    2.49Average Shares OutstandingBasic
    
    
    119,634,303
    
    
    
    
    
    
    
    128,565,026Dilutive Securities:Options
    
    
    3,858,252
    
    
    
    
    
    
    
    5,714,941Other
    
    
    11,980
    
    
    
    
    
    
    
    246,969Diluted
    
    
    123,504,535
    
    
    
    
    
    
    
    134,526,936Cash Dividends Per Share
    
    $
    0.04
    
    
    
    
    
    
    $
    0.04
 See Notes to Consolidated Financial Statements.
 2




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##### Table of Contents



Centex Corporation and Subsidiaries
 
 Statements of Consolidated Earnings
 
 For the Six Months Ended September 30,2006
    
    
    
    
    
    
    2005RevenuesHome Building
    
    $
    5,307,884
    
    
    
    
    
    
    $
    5,287,586Financial Services
    
    
    243,319
    
    
    
    
    
    
    
    230,870Construction Services
    
    
    1,047,636
    
    
    
    
    
    
    
    757,977Other, including Intersegment Eliminations
    
    
    (2,625
    )
    
    
    
    
    
    
    47,8576,596,214
    
    
    
    
    
    
    
    6,324,290Costs and ExpensesHome Building
    
    
    4,911,728
    
    
    
    
    
    
    
    4,506,418Financial Services
    
    
    194,068
    
    
    
    
    
    
    
    188,327Construction Services
    
    
    1,031,154
    
    
    
    
    
    
    
    751,507Other, including Intersegment Eliminations
    
    
    (349
    )
    
    
    
    
    
    
    53,505Corporate General and Administrative
    
    
    44,975
    
    
    
    
    
    
    
    44,160Interest Expense
    
    
    
    
    
    
    
    
    
    
    5,6966,181,576
    
    
    
    
    
    
    
    5,549,613Earnings from Unconsolidated Entities
    
    
    10,055
    
    
    
    
    
    
    
    18,628Earnings from Continuing Operations Before
Income Taxes
    
    
    424,693
    
    
    
    
    
    
    
    793,305Income Taxes
    
    
    162,648
    
    
    
    
    
    
    
    261,267Earnings from Continuing Operations
    
    
    262,045
    
    
    
    
    
    
    
    532,038Earnings
from Discontinued Operations,
net of Taxes of $22,772 and $48,707
    
    
    35,612
    
    
    
    
    
    
    
    36,162Net Earnings
    
    $
    297,657
    
    
    
    
    
    
    $
    568,200Basic Earnings Per ShareContinuing Operations
    
    $
    2.17
    
    
    
    
    
    
    $
    4.14Discontinued Operations
    
    
    0.29
    
    
    
    
    
    
    
    0.28$
    2.46
    
    
    
    
    
    
    $
    4.42Diluted Earnings Per ShareContinuing Operations
    
    $
    2.09
    
    
    
    
    
    
    $
    3.95Discontinued Operations
    
    
    0.29
    
    
    
    
    
    
    
    0.27$
    2.38
    
    
    
    
    
    
    $
    4.22Average Shares OutstandingBasic
    
    
    120,795,315
    
    
    
    
    
    
    
    128,618,235Dilutive Securities:Options
    
    
    4,037,501
    
    
    
    
    
    
    
    5,714,903Other
    
    
    29,808
    
    
    
    
    
    
    
    392,516Diluted
    
    
    124,862,624
    
    
    
    
    
    
    
    134,725,654Cash Dividends Per Share
    
    $
    0.08
    
    
    
    
    
    
    $
    0.08
 See Notes to Consolidated Financial Statements.
 3




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##### Table of Contents



Centex Corporation and Subsidiaries
 
 Consolidated Balance Sheets with Consolidating Details
 
 Centex Corporation and SubsidiariesSeptember 30, 2006
    
    
    
    
    
    
    March 31, 2006AssetsCash and Cash Equivalents
    
    $
    48,865
    
    
    
    
    
    
    $
    47,168Restricted Cash
    
    
    120,381
    
    
    
    
    
    
    
    135,477Receivables -Residential Mortgage Loans Held for Sale
    
    
    1,887,010
    
    
    
    
    
    
    
    2,129,538Construction Contracts
    
    
    411,039
    
    
    
    
    
    
    
    361,393Trade, including Notes of $20,319 and $31,897
    
    
    273,562
    
    
    
    
    
    
    
    342,786Inventories -Housing Projects
    
    
    9,626,226
    
    
    
    
    
    
    
    8,433,994Land Held for Development and Sale
    
    
    301,931
    
    
    
    
    
    
    
    394,438Land Held Under Option Agreements Not Owned
    
    
    546,643
    
    
    
    
    
    
    
    817,881Other
    
    
    11,252
    
    
    
    
    
    
    
    11,615Investments -Joint Ventures and Other
    
    
    316,089
    
    
    
    
    
    
    
    310,384Financial Services
    
    
    
    
    
    
    
    
    
    
    Property and Equipment, net
    
    
    166,556
    
    
    
    
    
    
    
    182,757Other Assets -Deferred Income Taxes
    
    
    228,537
    
    
    
    
    
    
    
    233,908Goodwill
    
    
    218,740
    
    
    
    
    
    
    
    218,735Deferred Charges and Other, net
    
    
    250,087
    
    
    
    
    
    
    
    234,763Assets of Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    7,510,162$
    14,406,918
    
    
    
    
    
    
    $
    21,364,999Liabilities and Stockholders EquityAccounts Payable
    
    $
    1,034,539
    
    
    
    
    
    
    $
    992,836Accrued Liabilities
    
    
    1,543,907
    
    
    
    
    
    
    
    1,766,844Debt -Centex
    
    
    4,455,149
    
    
    
    
    
    
    
    3,982,193Financial Services
    
    
    1,799,355
    
    
    
    
    
    
    
    2,077,215Receivables from Affiliates
    
    
    
    
    
    
    
    
    
    
    Liabilities of Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    7,001,793Commitments and ContingenciesMinority Interests
    
    
    476,518
    
    
    
    
    
    
    
    532,460Stockholders Equity -Preferred Stock: Authorized 5,000,000 Shares, None
Issued
    
    
    
    
    
    
    
    
    
    
    Common Stock: $.25 Par Value; Authorized 300,000,000
Shares; Outstanding 118,478,521 and 122,103,713
Shares
    
    
    30,730
    
    
    
    
    
    
    
    34,132Capital in Excess of Par Value
    
    
    
    
    
    
    
    
    
    
    580,010Retained Earnings
    
    
    5,298,561
    
    
    
    
    
    
    
    5,251,325Treasury Stock, at Cost; 4,442,401 and 14,424,807 Shares
    
    
    (231,841
    )
    
    
    
    
    
    
    (862,439
    )Accumulated Other Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    8,630Total Stockholders Equity
    
    
    5,097,450
    
    
    
    
    
    
    
    5,011,658$
    14,406,918
    
    
    
    
    
    
    $
    21,364,999
 See Notes to Consolidated Financial Statements.
 4




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##### Table of Contents



Centex Corporation and Subsidiaries
 
 Consolidated Balance Sheets with Consolidating Details
 
 Centex*
    
    
    
    
    
    
    Financial ServicesSeptember 30, 2006
    
    
    
    
    
    
    March 31, 2006
    
    
    
    
    
    
    September 30, 2006
    
    
    
    
    
    
    March 31, 2006$
    42,682
    
    
    
    
    
    
    $
    36,711
    
    
    
    
    
    
    $
    6,183
    
    
    
    
    
    
    $
    10,45765,036
    
    
    
    
    
    
    
    70,824
    
    
    
    
    
    
    
    55,345
    
    
    
    
    
    
    
    64,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,887,010
    
    
    
    
    
    
    
    2,129,538411,039
    
    
    
    
    
    
    
    361,393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232,857
    
    
    
    
    
    
    
    298,912
    
    
    
    
    
    
    
    40,705
    
    
    
    
    
    
    
    43,8749,626,226
    
    
    
    
    
    
    
    8,433,994
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    301,931
    
    
    
    
    
    
    
    394,438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    546,643
    
    
    
    
    
    
    
    817,881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,905
    
    
    
    
    
    
    
    5,361
    
    
    
    
    
    
    
    5,347
    
    
    
    
    
    
    
    6,254316,089
    
    
    
    
    
    
    
    310,384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,988
    
    
    
    
    
    
    
    655,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,882
    
    
    
    
    
    
    
    160,611
    
    
    
    
    
    
    
    17,674
    
    
    
    
    
    
    
    22,146210,494
    
    
    
    
    
    
    
    217,446
    
    
    
    
    
    
    
    18,043
    
    
    
    
    
    
    
    16,462209,788
    
    
    
    
    
    
    
    206,998
    
    
    
    
    
    
    
    8,952
    
    
    
    
    
    
    
    11,737235,833
    
    
    
    
    
    
    
    212,617
    
    
    
    
    
    
    
    14,254
    
    
    
    
    
    
    
    22,146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,510,162$
    12,452,393
    
    
    
    
    
    
    $
    12,182,836
    
    
    
    
    
    
    $
    2,053,513
    
    
    
    
    
    
    $
    9,837,429$
    1,017,358
    
    
    
    
    
    
    $
    977,608
    
    
    
    
    
    
    $
    17,181
    
    
    
    
    
    
    $
    15,2281,407,213
    
    
    
    
    
    
    
    1,680,090
    
    
    
    
    
    
    
    136,694
    
    
    
    
    
    
    
    86,7544,455,149
    
    
    
    
    
    
    
    3,982,193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,799,355
    
    
    
    
    
    
    
    2,077,215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,000
    )
    
    
    
    
    
    
    (9,110
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,001,793475,223
    
    
    
    
    
    
    
    531,287
    
    
    
    
    
    
    
    1,295
    
    
    
    
    
    
    
    1,173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,730
    
    
    
    
    
    
    
    34,132
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    580,010
    
    
    
    
    
    
    
    275,467
    
    
    
    
    
    
    
    275,4675,298,561
    
    
    
    
    
    
    
    5,251,325
    
    
    
    
    
    
    
    (148,480
    )
    
    
    
    
    
    
    380,206(231,841
    )
    
    
    
    
    
    
    (862,439
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,630
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,7025,097,450
    
    
    
    
    
    
    
    5,011,658
    
    
    
    
    
    
    
    126,988
    
    
    
    
    
    
    
    664,376$
    12,452,393
    
    
    
    
    
    
    $
    12,182,836
    
    
    
    
    
    
    $
    2,053,513
    
    
    
    
    
    
    $
    9,837,429
 *
    
    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.
 5




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##### Table of Contents



Centex Corporation and Subsidiaries
 
 Statements of Consolidated Cash Flows with Consolidating Details
 
 Centex Corporation and SubsidiariesFor the Six Months Ended September 30,2006
    
    
    
    
    
    
    2005Cash Flows  Operating ActivitiesNet Earnings
    
    $
    297,657
    
    
    
    
    
    
    $
    568,200Adjustments-Depreciation and Amortization
    
    
    29,747
    
    
    
    
    
    
    
    33,880Stock-based Compensation
    
    
    36,921
    
    
    
    
    
    
    
    34,492Provision for Losses on Residential Mortgage Loans Held for Investment
    
    
    22,364
    
    
    
    
    
    
    
    49,035Impairment and Write-off of Land-related Assets
    
    
    155,811
    
    
    
    
    
    
    
    13,029Deferred Income Tax Provision (Benefit)
    
    
    75,364
    
    
    
    
    
    
    
    (164,506
    )Undistributed Loss (Earnings) of Joint Ventures
    
    
    16,580
    
    
    
    
    
    
    
    (6,214
    )Distributions in Excess of Earnings (Undistributed Earnings) of
Unconsolidated Subsidiaries
    
    
    
    
    
    
    
    
    
    
    Minority Interest, net of Taxes
    
    
    454
    
    
    
    
    
    
    
    (299
    )Gain on Sale of Businesses
    
    
    (114,638
    )
    
    
    
    
    
    
    (10,740
    )Changes in
Assets and Liabilities, Excluding Effect of Dispositions(Increase) Decrease in Restricted Cash
    
    
    (15,042
    )
    
    
    
    
    
    
    (94,882
    )Decrease (Increase) in Receivables
    
    
    8,597
    
    
    
    
    
    
    
    23,121Decrease (Increase) in Residential Mortgage Loans Held for Sale
    
    
    242,528
    
    
    
    
    
    
    
    (238,631
    )Increase in Housing Projects and Land Held for Development and Sale
    
    
    (1,215,379
    )
    
    
    
    
    
    
    (1,556,700
    )Decrease (Increase) in Other Inventories
    
    
    394
    
    
    
    
    
    
    
    1,654(Decrease) Increase in Accounts Payable and Accrued Liabilities
    
    
    (225,062
    )
    
    
    
    
    
    
    122,806(Increase) Decrease in Other Assets, net
    
    
    (12,238
    )
    
    
    
    
    
    
    (36,418
    )(Decrease) Increase in Payables to Affiliates
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    71
    
    
    
    
    
    
    
    (695,871
    )
    
    
    
    
    
    
    (1,262,173
    )Cash Flows  Investing ActivitiesPayments Received on Notes Receivable, net
    
    
    11,578
    
    
    
    
    
    
    
    23,014Increase in Residential Mortgage Loans Held for Investment
    
    
    (292,448
    )
    
    
    
    
    
    
    (671,337
    )Investments in and Advances to Joint Ventures
    
    
    (122,033
    )
    
    
    
    
    
    
    (198,534
    )Distributions from Joint Ventures
    
    
    98,813
    
    
    
    
    
    
    
    85,214Decrease (Increase) in Investments in and Advances to Unconsolidated
Subsidiaries
    
    
    
    
    
    
    
    
    
    
    Purchases of Property and Equipment, net
    
    
    (13,134
    )
    
    
    
    
    
    
    (31,006
    )Proceeds from Dispositions
    
    
    495,276
    
    
    
    
    
    
    
    331,388Other
    
    
    (3,861
    )
    
    
    
    
    
    
    (1,387
    )174,191
    
    
    
    
    
    
    
    (462,648
    )Cash Flows  Financing ActivitiesIncrease (Decrease) in Short-term Debt, net
    
    
    165,109
    
    
    
    
    
    
    
    1,586,440Centex
Issuance of Long-term Debt
    
    
    500,564
    
    
    
    
    
    
    
    971,874Repayment of Long-term Debt
    
    
    (117,373
    )
    
    
    
    
    
    
    (301,151
    )Financial
Services
Issuance of Long-term Debt
    
    
    961,126
    
    
    
    
    
    
    
    1,055,206Repayment of Long-term Debt
    
    
    (746,680
    )
    
    
    
    
    
    
    (1,722,150
    )Proceeds from Stock Option Exercises
    
    
    35,401
    
    
    
    
    
    
    
    18,061Purchases of Common Stock, net
    
    
    (266,008
    )
    
    
    
    
    
    
    (120,295
    )Dividends Paid
    
    
    (9,549
    )
    
    
    
    
    
    
    (10,271
    )522,590
    
    
    
    
    
    
    
    1,477,714Effect of Exchange Rate on Cash
    
    
    
    
    
    
    
    
    
    
    (1,479
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    910
    
    
    
    
    
    
    
    (248,586
    )Cash and Cash Equivalents at Beginning of Period(1)
    
    
    47,955
    
    
    
    
    
    
    
    502,586Cash and Cash Equivalents at End of Period(2)
    
    $
    48,865
    
    
    
    
    
    
    $
    254,000
 See Notes to Consolidated Financial Statements.
 (1)
    
    Amount includes cash and cash equivalents of discontinued operations of $787 as of March 31,
2006 and $650 as of March 31, 2005.(2)
    
    Amount includes cash and cash equivalents of discontinued operations of $0 as of September
30, 2006 and $138 as of September 30, 2005.
 6




---



##### Table of Contents



Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
 
 Centex*
    
    
    
    
    
    
    Financial ServicesFor the Six Months Ended September 30,
    
    
    
    
    
    
    For the Six Months Ended September 30,2006
    
    
    
    
    
    
    2005
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2005$
    297,657
    
    
    
    
    
    
    $
    568,200
    
    
    
    
    
    
    $
    67,092
    
    
    
    
    
    
    $
    56,31924,306
    
    
    
    
    
    
    
    24,940
    
    
    
    
    
    
    
    5,441
    
    
    
    
    
    
    
    8,94036,921
    
    
    
    
    
    
    
    34,492
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,364
    
    
    
    
    
    
    
    49,035155,811
    
    
    
    
    
    
    
    13,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,139
    
    
    
    
    
    
    
    (25,351
    )
    
    
    
    
    
    
    68,225
    
    
    
    
    
    
    
    (139,155
    )16,580
    
    
    
    
    
    
    
    (6,214
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    528,688
    
    
    
    
    
    
    
    (31,319
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    332
    
    
    
    
    
    
    
    (547
    )
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    248(4,772
    )
    
    
    
    
    
    
    (10,740
    )
    
    
    
    
    
    
    (109,866
    )
    
    
    
    
    
    
    5,788
    
    
    
    
    
    
    
    3,007
    
    
    
    
    
    
    
    (20,830
    )
    
    
    
    
    
    
    (97,889
    )3,305
    
    
    
    
    
    
    
    25,686
    
    
    
    
    
    
    
    5,292
    
    
    
    
    
    
    
    (2,565
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    242,528
    
    
    
    
    
    
    
    (238,631
    )(1,215,379
    )
    
    
    
    
    
    
    (1,556,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (513
    )
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    907
    
    
    
    
    
    
    
    1,711(220,926
    )
    
    
    
    
    
    
    130,444
    
    
    
    
    
    
    
    (12,838
    )
    
    
    
    
    
    
    (7,666
    )(26,338
    )
    
    
    
    
    
    
    (46,153
    )
    
    
    
    
    
    
    14,100
    
    
    
    
    
    
    
    9,735
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,167
    )
    
    
    
    
    
    
    141,42271
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,330
    )
    
    
    
    
    
    
    (877,283
    )
    
    
    
    
    
    
    255,370
    
    
    
    
    
    
    
    (218,496
    )11,472
    
    
    
    
    
    
    
    22,899
    
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (292,448
    )
    
    
    
    
    
    
    (671,337
    )(122,033
    )
    
    
    
    
    
    
    (198,534
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,813
    
    
    
    
    
    
    
    85,214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,590
    
    
    
    
    
    
    
    (141,394
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,053
    )
    
    
    
    
    
    
    (22,319
    )
    
    
    
    
    
    
    (5,081
    )
    
    
    
    
    
    
    (8,687
    )
    
    
    
    
    
    
    
    331,388
    
    
    
    
    
    
    
    503,555
    
    
    
    
    
    
    
    (3,861
    )
    
    
    
    
    
    
    (1,387
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,928
    
    
    
    
    
    
    
    75,867
    
    
    
    
    
    
    
    206,132
    
    
    
    
    
    
    
    (679,909
    )250,338
    
    
    
    
    
    
    
    (4,186
    )
    
    
    
    
    
    
    (85,229
    )
    
    
    
    
    
    
    1,590,626500,564
    
    
    
    
    
    
    
    971,874
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117,373
    )
    
    
    
    
    
    
    (301,151
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    961,126
    
    
    
    
    
    
    
    1,055,206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (746,680
    )
    
    
    
    
    
    
    (1,722,150
    )35,401
    
    
    
    
    
    
    
    18,061
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (266,008
    )
    
    
    
    
    
    
    (120,295
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,549
    )
    
    
    
    
    
    
    (10,271
    )
    
    
    
    
    
    
    (595,780
    )
    
    
    
    
    
    
    (25,000
    )393,373
    
    
    
    
    
    
    
    554,032
    
    
    
    
    
    
    
    (466,563
    )
    
    
    
    
    
    
    898,682
    
    
    
    
    
    
    
    (1,479
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,971
    
    
    
    
    
    
    
    (248,863
    )
    
    
    
    
    
    
    (5,061
    )
    
    
    
    
    
    
    27736,711
    
    
    
    
    
    
    
    490,308
    
    
    
    
    
    
    
    11,244
    
    
    
    
    
    
    
    12,278$
    42,682
    
    
    
    
    
    
    $
    241,445
    
    
    
    
    
    
    $
    6,183
    
    
    
    
    
    
    $
    12,555
 *
    
    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
consolidated cash flows.
 7




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##### Table of Contents



Centex Corporation and Subsidiaries
 
 Notes to Consolidated Financial Statements
 September 30, 2006
 (A) BASIS OF PRESENTATION
    (B) STATEMENTS OF CONSOLIDATED CASH FLOWS  SUPPLEMENTAL DISCLOSURES
   For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Cash Paid for Interest
    
    $
    119,705
    
    
    $
    158,949
    
    
    $
    288,488
    
    
    $
    300,429Net Cash Paid for Taxes
    
    $
    128,895
    
    
    $
    254,474
    
    
    $
    270,867
    
    
    $
    426,030
 8




---



##### Table of Contents



For the Three Months
    
    
    For the Six MonthsEnded September 30,
    
    
    Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Total Interest Incurred
    
    $
    110,321
    
    
    $
    167,843
    
    
    $
    295,801
    
    
    $
    315,504Less  Interest Capitalized
    
    
    (72,715
    )
    
    
    (56,360
    )
    
    
    (145,309
    )
    
    
    (106,210
    )Financial Services
Interest Expense
    
    
    (21,763
    )
    
    
    (17,834
    )
    
    
    (42,600
    )
    
    
    (30,613
    )Discontinued Operations
    
    
    (15,843
    )
    
    
    (90,577
    )
    
    
    (107,892
    )
    
    
    (172,985
    )Interest Expense, net
    
    $
    
    
    
    $
    3,072
    
    
    $
    
    
    
    $
    5,696Capitalized Interest Relieved to Home
Buildings Costs and Expenses
    
    $
    46,803
    
    
    $
    40,533
    
    
    $
    83,853
    
    
    $
    75,093
  (C) STOCK-BASED COMPENSATION ARRANGEMENTS
   9




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##### Table of Contents



Number ofShares
    
    Fair ValuePeriod of Grant
    
    Grant Type
    
    Granted
    
    of GrantFY2006
    
    Stock Options
    
    
    1,716.2
    
    
    $
    39,301.2Stock Units
    
    
    556.6
    
    
    $
    31,926.9Restricted Stock
    
    
    249.4
    
    
    $
    14,551.1FY2007
    
    Stock Options
    
    
    1,203.2
    
    
    $
    24,031.6Stock Units
    
    
    334.0
    
    
    $
    18,194.9Restricted Stock
    
    
    96.5
    
    
    $
    5,079.9
  (D) STOCKHOLDERS EQUITY
  AccumulatedCapital in
    
    
    
    
    
    
    Treasury
    
    
    OtherCommon Stock
    
    
    Excess of
    
    
    Retained
    
    
    Stock,
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Par Value
    
    
    Earnings
    
    
    at Cost
    
    
    Income
    
    
    TotalBalance, March 31, 2006
    
    
    122,104
    
    
    $
    34,132
    
    
    $
    580,010
    
    
    $
    5,251,325
    
    
    $
    (862,439
    )
    
    $
    8,630
    
    
    $
    5,011,658Issuance of Restricted Stock
    
    
    97
    
    
    
    24
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock Compensation
    
    
    
    
    
    
    
    
    
    
    36,921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,921Exercise of Stock Options
Including Tax Benefits
    
    
    1,293
    
    
    
    324
    
    
    
    43,686
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,010Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,549
    )
    
    
    
    
    
    
    
    
    
    
    (9,549
    )Purchase of Common
Stock for Treasury
    
    
    (5,097
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (267,747
    )
    
    
    
    
    
    
    (267,747
    )Retirement of Treasury Stock
    
    
    
    
    
    
    (3,750
    )
    
    
    (653,910
    )
    
    
    (238,946
    )
    
    
    896,606
    
    
    
    
    
    
    
    Other Stock Transactions
    
    
    82
    
    
    
    
    
    
    
    (6,683
    )
    
    
    (1,926
    )
    
    
    1,739
    
    
    
    
    
    
    
    (6,870
    )Net Earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    297,657
    
    
    
    
    
    
    
    
    
    
    
    297,657Unrealized Gain on
Hedging Instruments(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,702
    )
    
    
    (8,702
    )Foreign Currency
Translation Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    72Balance, September 30, 2006
    
    
    118,479
    
    
    $
    30,730
    
    
    $
    
    
    
    $
    5,298,561
    
    
    $
    (231,841
    )
    
    $
    
    
    
    $
    5,097,450
 (1)
    
    Amount includes a reclassification adjustment of $15,738 for hedging gain
included in net earnings.
  10




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##### Table of Contents



(E) INVENTORIES
 Housing Projects and Land Held for Development and Sale
  As ofSeptember
30, 2006
    
    

March
31, 2006Direct Construction
    
    $
    3,907,083
    
    
    $
    3,218,138Land Under Development
    
    
    5,719,143
    
    
    
    5,215,856Housing Projects
    
    $
    9,626,226
    
    
    $
    8,433,994
  Land Held Under Option Agreements Not Owned and Other Land Deposits
     As ofSeptember
30, 2006
    
    

March
31, 2006Cash Deposits included in:Land Held for Development and Sale
    
    $
    207.5
    
    
    $
    232.6Land Held Under Option Agreements Not Owned
    
    
    58.3
    
    
    
    102.7Total Cash Deposits in Inventory
    
    
    265.8
    
    
    
    335.3Letters of Credit
    
    
    23.4
    
    
    
    29.0Total Invested through Deposits or Secured
with Letters of Credit
    
    $
    289.2
    
    
    $
    364.3Total Purchase Price of Land Option Agreements
    
    $
    7,025.9
    
    
    $
    9,930.2
 11




---



##### Table of Contents



As ofSeptember 30, 2006
    
    

March 31, 2006Pre-acquisition Development Costs included in:Land Held for Development and Sale
    
    $
    91.0
    
    
    $
    158.3Land Under Development
    
    
    8.4
    
    
    
    21.9Total Pre-acquisition Development Costs in Inventory
    
    $
    99.4
    
    
    $
    180.2
  (F) GOODWILL
  ConstructionHome Building
    
    
    Financial Services
    
    
    Services
    
    
    Other
    
    
    TotalBalance as of March 31, 2006
    
    $
    121,501
    
    
    $
    11,737
    
    
    $
    1,007
    
    
    $
    84,490
    
    
    $
    218,735Goodwill Acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,790
    
    
    
    2,790Goodwill Disposed
    
    
    
    
    
    
    (2,785
    )
    
    
    
    
    
    
    
    
    
    
    (2,785
    )Balance as of September 30,
2006
    
    $
    121,501
    
    
    $
    8,952
    
    
    $
    1,007
    
    
    $
    87,280
    
    
    $
    218,740
  12




---



##### Table of Contents



(G) INDEBTEDNESS
  As ofSeptember 30, 2006
    
    
    March 31, 2006Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageInterest
    
    
    
    
    
    
    InterestRate
    
    
    
    
    
    
    RateShort-term Debt:Centex
    
    $
    377,504
    
    
    
    5.45
    %
    
    $
    127,166
    
    
    
    5.09
    %Financial ServicesFinancial Institutions
    
    
    381,419
    
    
    
    5.39
    %
    
    
    324,986
    
    
    
    5.00
    %Harwood Street Funding I, LLC Secured
Liquidity Notes
    
    
    1,357,936
    
    
    
    5.41
    %
    
    
    1,692,229
    
    
    
    4.84
    %Consolidated Short-term Debt
    
    
    2,116,859
    
    
    
    
    
    
    
    2,144,381Long-term Debt:CentexMedium-term Note Programs, due through 2008
    
    
    245,000
    
    
    
    6.28
    %
    
    
    358,000
    
    
    
    6.01
    %Senior Notes, due through 2017
    
    
    3,708,868
    
    
    
    5.89
    %
    
    
    3,208,762
    
    
    
    5.79
    %Other Indebtedness, due through 2018
    
    
    23,815
    
    
    
    6.55
    %
    
    
    188,346
    
    
    
    9.17
    %Subordinated Debentures, due in 2007
    
    
    99,962
    
    
    
    8.75
    %
    
    
    99,919
    
    
    
    8.75
    %4,077,645
    
    
    
    
    
    
    
    3,855,027Financial ServicesHarwood Street Funding I, LLC Variable-Rate
Subordinated Extendable Certificates,
due through 2010
    
    
    60,000
    
    
    
    7.33
    %
    
    
    60,000
    
    
    
    6.83
    %Consolidated Long-term Debt
    
    
    4,137,645
    
    
    
    
    
    
    
    3,915,027Total Debt
    
    $
    6,254,504
    
    
    
    
    
    
    $
    6,059,408
  13




---



##### Table of Contents



For the Six Months Ended September 30,2006
    
    
    2005Short-term Debt:Centex
    
    
    5.29
    %
    
    
    3.43
    %Financial Services
    
    
    5.47
    %
    
    
    3.90
    %Long-term Debt:CentexMedium-term Note Programs
    
    
    6.07
    %
    
    
    5.28
    % (1)Senior Notes
    
    
    5.86
    %
    
    
    6.00
    %Other Indebtedness
    
    
    6.04
    %
    
    
    5.31
    %Subordinated Debentures
    
    
    8.75
    %
    
    
    8.39
    %Financial ServicesHarwood Street Funding I, LLC Variable-Rate
Subordinated Extendable Certificates
    
    
    7.25
    %
    
    
    5.33
    %
 (1)
    
    Interest rate includes the effect of an interest rate swap
agreement.
  Centex
    
    
    Financial Services
    
    
    Total2007
    
    $
    175,724
    
    
    $
    
    
    
    $
    175,7242008
    
    
    526,855
    
    
    
    
    
    
    
    526,8552009
    
    
    150,372
    
    
    
    
    
    
    
    150,3722010
    
    
    225,101
    
    
    
    60,000
    
    
    
    285,1012011
    
    
    700,099
    
    
    
    
    
    
    
    700,099Thereafter
    
    
    2,299,494
    
    
    
    
    
    
    
    2,299,494$
    4,077,645
    
    
    $
    60,000
    
    
    $
    4,137,645
  14




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##### Table of Contents



Credit Facilities
  Existing Credit
    
    
    AvailableFacilities
    
    
    CapacityCentexMulti-Bank Revolving Credit FacilityRevolving Credit
    
    $
    1,250,000
    
    
    $
    875,000Letters of Credit
    
    
    835,000
    
    
    
    447,5362,085,000
    
    
    
    1,322,536
    (1) (2)Unsecured Credit Facility
    
    
    150,000
    
    
    
    150,000
    (3)2,235,000
    
    
    
    1,472,536Financial ServicesSecured Credit Facilities
    
    
    1,040,000
    
    
    
    658,581
    (4)Harwood Street Funding I, LLC Facility
    
    
    3,000,000
    
    
    
    1,581,0004,040,000
    
    
    
    2,239,581$
    6,275,000
    
    
    $
    3,712,117
    (5)
 (1)
    
    This is an unsecured, committed, multi-bank revolving credit facility, maturing in July
2010, which serves as backup for Centex Corporations $1.25 billion commercial paper program
and provides $835 million of letter of credit capacity. As of September 30, 2006, the $1.25
billion commercial paper program had $375 million outstanding, which has been deducted from
the available capacity under the back-up facility. There have been no direct borrowings under
this revolving credit facility since its inception.(2)
    
    In conjunction with the issuance of surety bonds in support of our Construction Services
activity, Centex Corporation has agreed to provide letters of credit of up to $100 million if
Centex Corporations public debt ratings fall below investment grade. In support of this
ratings trigger, we maintain a minimum of $100 million in unused committed credit at all
times.(3)
    
    Centex Corporation maintains a $150 million unsecured, uncommitted credit facility.(4)
    
    CTX Mortgage Company, LLC maintains $1,040 million of secured, committed mortgage warehouse
facilities to finance mortgages.(5)
    
    The amount of available capacity consists of $3,562.1 million of committed capacity and
$150.0 million of uncommitted capacity as of September 30, 2006. Although we believe that the
uncommitted capacity is currently available, there can be no assurance that the lender under
this facility would elect to make advances if and when requested to do so.
 CTX Mortgage Company, LLC and Harwood Street Funding I, LLC
  15




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16




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##### Table of Contents



(H) COMMITMENTS AND CONTINGENCIES
 Joint Ventures
   As ofSeptember 30, 2006
    
    
    March 31, 2006Number of Active Joint Ventures (1)
    
    
    48
    
    
    
    44Investment in Joint Ventures
    
    $
    313,120
    
    
    $
    307,779Total Joint Venture Debt
    
    $
    1,200,382
    
    
    $
    1,053,201Centexs Share of Joint Venture Debt:Based on Centexs Ownership Percentage
    
    $
    461,726
    
    
    $
    388,428Based on Limited Recourse Provisions:Limited Maintenance Guarantee (2) (4)
    
    $
    234,712
    
    
    $
    228,603Repayment Guarantee (3) (4)
    
    
    14,579
    
    
    
    8,136Total Limited Recourse Debt
    
    $
    249,291
    
    
    $
    236,739
 (1)
    
    The number of active joint ventures includes Home Building joint ventures for which
the Company has an investment balance as of the end of the period and/or current fiscal
year activity. The Company is the managing member of 28 and 24 of the active joint
ventures as of September 30, 2006 and March 31, 2006,
respectively. As of September 30, 2006 and March 31, 2006, 24 and 23,
respectively, of the active joint ventures have outstanding debt.(2)
    
    The Company has guaranteed that certain of the joint ventures will maintain a
specified loan to value ratio. The Company could be required to contribute additional
capital to these joint ventures to the extent the loan to value ratio falls below the
specified ratio. To date, the Company has not been requested to perform under any of
its limited maintenance guarantees.(3)
    
    The Company has guaranteed repayment of a portion of certain joint venture debt
limited to its ownership percentage of the joint venture or a percentage thereof.(4)
    
    These amounts represent the Companys maximum exposure based on the joint ventures
debt at each respective date.
   Letters of Credit and Surety Bonds
  17




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##### Table of Contents



As of September 30, 2006
    
    
    As of March 31, 2006Letters of Credit
    
    
    Surety Bonds
    
    
    Letters of Credit
    
    
    Surety BondsHome Building
    
    $
    255.1
    
    
    $
    1,921.2
    (1)
    
    $
    258.5
    
    
    $
    1,342.0Financial Services
    
    
    0.7
    
    
    
    10.7
    
    
    
    0.7
    
    
    
    9.9Construction Services
    
    
    38.1
    
    
    
    4,291.8
    (2)
    
    
    37.3
    
    
    
    4,391.2Other
    
    
    94.0
    
    
    
    1.6
    
    
    
    92.2
    
    
    
    0.1Discontinued Operations
    
    
    
    
    
    
    7.8
    (3)
    
    
    
    
    
    
    7.5$
    387.9
    
    
    $
    6,233.1
    
    
    $
    388.7
    
    
    $
    5,750.7
 (1)
    
    The Company estimates that $940.0 million of work remains to be performed on these
projects.(2)
    
    The Company estimates that $1,954.5 million of work remains to be performed on these
projects.(3)
    
    These surety bonds will continue to be outstanding for up to one year in accordance with the
Companys transition services agreement with Home Equity.
 Warranties and Guarantees
    September 30, 2006
    
    
    March 31, 2006Balance at Beginning of Period
    
    $
    47,199
    
    
    $
    34,961Warranties Issued
    
    
    25,501
    
    
    
    53,036Settlements Made
    
    
    (24,715
    )
    
    
    (40,173
    )Changes in Liability of Pre-Existing
Warranties, Including Expirations
    
    
    (100
    )
    
    
    (625
    )Balance at End of Period
    
    $
    47,885
    
    
    $
    47,199
 18




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##### Table of Contents



Loan Loss Reserves
  September 30, 2006
    
    
    March 31, 2006Balance at Beginning of Period
    
    $
    18,500
    
    
    $
    18,803Provision for Losses
    
    
    2,117
    
    
    
    2,618Settlements
    
    
    (559
    )
    
    
    (2,921
    )Balance at End of Period
    
    $
    20,058
    
    
    $
    18,500
 Litigation and Related Matters
      19




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##### Table of Contents



(I) COMPREHENSIVE INCOME
  For the Three Months Ended September 30,
    
    

For the Six Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net Earnings
    
    $
    137,400
    
    
    $
    334,530
    
    
    $
    297,657
    
    
    $
    568,200Other Comprehensive Income (Loss), net of Tax:Unrealized Gain (Loss) on Hedging Instruments
    
    
    (1,211
    )
    
    
    5,330
    
    
    
    7,036
    
    
    
    (377
    )Foreign Currency Translation Adjustments
    
    
    47
    
    
    
    (710
    )
    
    
    72
    
    
    
    (14,393
    )Hedging Gain Reclassified to Net Earnings
    
    
    (15,738
    )
    
    
    
    
    
    
    (15,738
    )
    
    
    Foreign Currency Gain Reclassified to Net
Earnings
    
    
    
    
    
    
    (48,354
    )
    
    
    
    
    
    
    (48,354
    )Comprehensive Income
    
    $
    120,498
    
    
    $
    290,796
    
    
    $
    289,027
    
    
    $
    505,076
  (J) BUSINESS SEGMENTS
   Home Building
   Financial Services
   20




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##### Table of Contents



Construction Services
  Other
  For the Three Months Ended September 30, 2006(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    
    
    
    
    IntersegmentBuilding
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Eliminations
    
    
    TotalRevenues
    
    $
    2,658.1
    
    
    $
    120.6
    
    
    $
    546.2
    
    
    $
    36.9
    
    
    $
    (39.0
    )
    
    $
    3,322.8Cost of Sales
    
    
    (2,132.7
    )
    
    
    (21.8
    )
    
    
    (517.8
    )
    
    
    (16.1
    )
    
    
    38.9
    
    
    
    (2,649.5
    )Selling, General and
Administrative Expenses
    
    
    (399.9
    )
    
    
    (72.6
    )
    
    
    (18.7
    )
    
    
    (40.3
    )
    
    
    
    
    
    
    (531.5
    )Earnings (Loss) from
Unconsolidated Entities
    
    
    (1.0
    )
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )Earnings (Loss)
Before Income Tax
    
    $
    124.5
    
    
    $
    26.2
    
    
    $
    10.0
    
    
    $
    (19.5
    )
    
    $
    (0.1
    )
    
    $
    141.1
 For the Three Months Ended September 30, 2005(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    
    
    
    
    IntersegmentBuilding
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Eliminations
    
    
    TotalRevenues
    
    $
    2,888.5
    
    
    $
    120.9
    
    
    $
    391.9
    
    
    $
    30.0
    
    
    $
    (6.9
    )
    
    $
    3,424.4Cost of Sales
    
    
    (2,036.1
    )
    
    
    (17.8
    )
    
    
    (368.7
    )
    
    
    (15.0
    )
    
    
    6.6
    
    
    
    (2,431.0
    )Selling, General and
Administrative Expenses
    
    
    (399.8
    )
    
    
    (81.8
    )
    
    
    (19.3
    )
    
    
    (44.2
    )
    
    
    
    
    
    
    (545.1
    )Earnings from
Unconsolidated Entities
    
    
    6.0
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    6.1Earnings (Loss)
Before Income Tax
    
    $
    458.6
    
    
    $
    21.3
    
    
    $
    4.0
    
    
    $
    (29.2
    )
    
    $
    (0.3
    )
    
    $
    454.4
 21




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##### Table of Contents



For the Six Months Ended September 30, 2006(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    
    
    
    
    IntersegmentBuilding
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Eliminations
    
    
    TotalRevenues
    
    $
    5,307.9
    
    
    $
    243.3
    
    
    $
    1,047.6
    
    
    $
    68.3
    
    
    $
    (70.9
    )
    
    $
    6,596.2Cost of Sales
    
    
    (4,104.0
    )
    
    
    (42.6
    )
    
    
    (990.1
    )
    
    
    (31.5
    )
    
    
    69.1
    
    
    
    (5,099.1
    )Selling, General and
Administrative Expenses
    
    
    (807.7
    )
    
    
    (151.4
    )
    
    
    (41.1
    )
    
    
    (82.3
    )
    
    
    
    
    
    
    (1,082.5
    )Earnings from
Unconsolidated Entities
    
    
    9.7
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    10.1Earnings (Loss)
Before Income Tax
    
    $
    405.9
    
    
    $
    49.3
    
    
    $
    16.8
    
    
    $
    (45.5
    )
    
    $
    (1.8
    )
    
    $
    424.7
 For the Six Months Ended September 30, 2005(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    
    
    
    
    IntersegmentBuilding
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Eliminations
    
    
    TotalRevenues
    
    $
    5,287.6
    
    
    $
    230.9
    
    
    $
    758.0
    
    
    $
    57.7
    
    
    $
    (9.9
    )
    
    $
    6,324.3Cost of Sales
    
    
    (3,746.8
    )
    
    
    (30.6
    )
    
    
    (713.0
    )
    
    
    (28.8
    )
    
    
    9.5
    
    
    
    (4,509.7
    )Selling, General and
Administrative Expenses
    
    
    (759.7
    )
    
    
    (157.7
    )
    
    
    (38.5
    )
    
    
    (84.0
    )
    
    
    
    
    
    
    (1,039.9
    )Earnings from
Unconsolidated Entities
    
    
    18.4
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    18.6Earnings (Loss)
Before Income Tax
    
    $
    799.5
    
    
    $
    42.6
    
    
    $
    6.7
    
    
    $
    (55.1
    )
    
    $
    (0.4
    )
    
    $
    793.3
 (K) INCOME TAXES
     22




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(L) DERIVATIVES AND HEDGING
  Fair Value Hedges
  Other Derivatives
    (M) RECENT ACCOUNTING PRONOUNCEMENTS
   23




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##### Table of Contents



(N) OFF-BALANCE SHEET OBLIGATIONS
  (O) DISCONTINUED OPERATIONS
 Condensed Financial Information
     24




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##### Table of Contents



Sales and Related Proceeds
    
    $
    554,214Assets Sold
    
    
    (399,706
    )Accrued Liabilities
    
    
    (47,801
    )Intercompany Liability Paid by Buyer
    
    
    (10,021
    )Deferred Income
    
    
    (10,000
    )Hedging Gain
    
    
    15,738Pre-tax Gain on Sale
    
    
    102,424Income Tax Expense
    
    
    (39,126
    )Net Gain on Sale
    
    $
    63,298
   As ofMarch 31, 2006(1)AssetsCash and Cash Equivalents
    
    $
    787Restricted Cash
    
    
    277,114Loans Held for Investment
    
    
    6,867,658Receivables
    
    
    153,517Property and Equipment, net
    
    
    17,740Deferred Income Taxes
    
    
    74,156Mortgage Securitization Residual Interest
    
    
    56,831Deferred Charges and Other, net
    
    
    62,359$
    7,510,162LiabilitiesAccounts Payable and Accrued Liabilities
    
    $
    70,434Notes Payable
    
    
    1,095,905Long-term Debt
    
    
    5,835,454$
    7,001,793
 For the Three Months Ended September 30,
    
    
    For the Six Months Ended September 30,2006(1)
    
    
    2005 (2)
    
    
    2006(1)
    
    
    2005 (2)Revenues
    
    $
    17,181
    
    
    $
    302,899
    
    
    $
    170,124
    
    
    $
    623,613Cost and Expenses
    
    
    (36,479
    )
    
    
    (264,738
    )
    
    
    (214,164
    )
    
    
    (550,159
    )Earnings from Unconsolidated Entities
    
    
    
    
    
    
    409
    
    
    
    
    
    
    
    675Earnings (Loss) Before Income Taxes
    
    
    (19,298
    )
    
    
    38,570
    
    
    
    (44,040
    )
    
    
    74,129Provision for Income Taxes
    
    
    6,922
    
    
    
    (19,484
    )
    
    
    16,354
    
    
    
    (32,212
    )Gain (Loss) on Sale, net of Tax
    
    
    63,298
    
    
    
    (5,755
    )
    
    
    63,298
    
    
    
    (5,755
    )$
    50,922
    
    
    $
    13,331
    
    
    $
    35,612
    
    
    $
    36,162
 (1)
    
    Includes Home Equity only.(2)
    
    Includes Home Equity and International Home Building.
 25




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##### Table of Contents



(P) SUBSEQUENT EVENTS
  (Q) RECLASSIFICATIONS
  26




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Executive Summary
  
 *
    
    Other consists of the financial results of our investment real estate and
home services operations, as well as corporate general and administrative
expense, interest expense and intersegment eliminations.
     27




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##### Table of Contents



*
    
    Other consists of the financial results of our investment real estate and
home services operations, as well as corporate general and administrative
expense, interest expense and intersegment eliminations.
   28




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##### Table of Contents




    
    increased inventory of new and used homes for sale,
    
    a decline in homebuyer demand due to lower consumer confidence in the
consumer real estate market, and
    
    a decrease in the affordability of housing in selected markets.
      29




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HOME BUILDING
  For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeRevenues  Housing
    
    $
    2,601.9
    
    
    
    (4.2
    %)
    
    $
    2,716.0
    
    
    
    32.3
    %Revenues  Land Sales and Other
    
    
    56.2
    
    
    
    (67.4
    %)
    
    
    172.5
    
    
    
    119.7
    %Cost of Sales  Housing
    
    
    (1,967.6
    )
    
    
    2.3
    %
    
    
    (1,922.7
    )
    
    
    28.9
    %Cost of Sales  Land Sales and Other
    
    
    (165.1
    )
    
    
    45.6
    %
    
    
    (113.4
    )
    
    
    75.5
    %Selling, General and Administrative Expenses
    
    
    (399.9
    )
    
    
    
    
    
    
    (399.8
    )
    
    
    35.2
    %Earnings (Loss) from Unconsolidated Entities (1)
    
    
    (1.0
    )
    
    
    (116.7
    %)
    
    
    6.0
    
    
    
    81.8
    %Operating Earnings
    
    $
    124.5
    
    
    
    (72.9
    %)
    
    $
    458.6
    
    
    
    61.9
    %Operating Earnings as a Percentage of Revenues:Housing Operations (2)
    
    
    9.0
    %
    
    
    (5.5
    )
    
    
    14.5
    %
    
    
    1.5Total Homebuilding Operations
    
    
    4.7
    %
    
    
    (11.2
    )
    
    
    15.9
    %
    
    
    2.6
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeRevenues  Housing
    
    $
    5,163.9
    
    
    
    1.8
    %
    
    $
    5,074.0
    
    
    
    29.3
    %Revenues  Land Sales and Other
    
    
    144.0
    
    
    
    (32.6
    %)
    
    
    213.6
    
    
    
    102.8
    %Cost of Sales  Housing
    
    
    (3,834.1
    )
    
    
    6.6
    %
    
    
    (3,596.2
    )
    
    
    26.0
    %Cost of Sales  Land Sales and Other
    
    
    (269.9
    )
    
    
    79.2
    %
    
    
    (150.6
    )
    
    
    51.1
    %Selling, General and Administrative Expenses
    
    
    (807.7
    )
    
    
    6.3
    %
    
    
    (759.7
    )
    
    
    30.5
    %Earnings from Unconsolidated Entities (1)
    
    
    9.7
    
    
    
    (47.3
    %)
    
    
    18.4
    
    
    
    65.8
    %Operating Earnings
    
    $
    405.9
    
    
    
    (49.2
    %)
    
    $
    799.5
    
    
    
    57.8
    %Operating Earnings as a Percentage of Revenues:Housing Operations (2)
    
    
    10.1
    %
    
    
    (4.1
    )
    
    
    14.2
    %
    
    
    1.7Total Homebuilding Operations
    
    
    7.6
    %
    
    
    (7.5
    )
    
    
    15.1
    %
    
    
    2.5
 (1)
    
    Earnings from Unconsolidated Entities include a $10.5 million loss, which represents
our share of a joint ventures land-related impairment.(2)
    
    Calculates as: (Housing Revenues less Housing Cost of Sales and Selling,
General and Administrative Expenses) divided by Housing Revenues.
 30




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For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeUnits ClosedMid-Atlantic
    
    
    1,725
    
    
    
    (1.4
    %)
    
    
    1,749
    
    
    
    32.8
    %Southeast
    
    
    1,445
    
    
    
    (11.5
    %)
    
    
    1,633
    
    
    
    26.0
    %Midwest
    
    
    1,405
    
    
    
    (20.3
    %)
    
    
    1,762
    
    
    
    4.6
    %Southwest
    
    
    2,353
    
    
    
    (2.7
    %)
    
    
    2,418
    
    
    
    14.1
    %West Coast
    
    
    1,597
    
    
    
    0.1
    %
    
    
    1,595
    
    
    
    12.8
    %8,525
    
    
    
    (6.9
    %)
    
    
    9,157
    
    
    
    16.9
    %Average
Revenue Per UnitMid-Atlantic
    
    $
    331,027
    
    
    
    (0.5
    %)
    
    $
    332,814
    
    
    
    18.1
    %Southeast
    
    $
    283,379
    
    
    
    (0.3
    %)
    
    $
    284,266
    
    
    
    15.0
    %Midwest
    
    $
    225,458
    
    
    
    3.0
    %
    
    $
    218,932
    
    
    
    3.4
    %Southwest
    
    $
    206,403
    
    
    
    11.5
    %
    
    $
    185,101
    
    
    
    11.8
    %West Coast
    
    $
    512,775
    
    
    
    (2.2
    %)
    
    $
    524,307
    
    
    
    13.3
    %Total Home Building
    
    $
    305,201
    
    
    
    2.9
    %
    
    $
    296,593
    
    
    
    13.1
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeUnits ClosedMid-Atlantic
    
    
    3,378
    
    
    
    2.6
    %
    
    
    3,294
    
    
    
    25.7
    %Southeast
    
    
    2,743
    
    
    
    (11.1
    %)
    
    
    3,086
    
    
    
    18.5
    %Midwest
    
    
    2,956
    
    
    
    (11.2
    %)
    
    
    3,327
    
    
    
    3.7
    %Southwest
    
    
    4,667
    
    
    
    1.3
    %
    
    
    4,606
    
    
    
    12.1
    %West Coast
    
    
    3,099
    
    
    
    0.6
    %
    
    
    3,079
    
    
    
    15.2
    %16,843
    
    
    
    (3.2
    %)
    
    
    17,392
    
    
    
    14.3
    %Average
Revenue Per UnitMid-Atlantic
    
    $
    330,075
    
    
    
    0.7
    %
    
    $
    327,677
    
    
    
    15.4
    %Southeast
    
    $
    294,357
    
    
    
    5.7
    %
    
    $
    278,484
    
    
    
    13.8
    %Midwest
    
    $
    227,174
    
    
    
    4.9
    %
    
    $
    216,521
    
    
    
    2.5
    %Southwest
    
    $
    208,497
    
    
    
    16.1
    %
    
    $
    179,507
    
    
    
    10.9
    %West Coast
    
    $
    515,295
    
    
    
    (0.1
    %)
    
    $
    515,778
    
    
    
    14.8
    %Total Home Building
    
    $
    306,590
    
    
    
    5.1
    %
    
    $
    291,745
    
    
    
    13.1
    %
   31




---



##### Table of Contents



For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeAverage Operating Neighborhoods (1)
    
    
    692
    
    
    
    12.5
    %
    
    
    615
    
    
    
    6.8
    %Closings Per Average Neighborhood
    
    
    12.3
    
    
    
    (17.4
    %)
    
    
    14.9
    
    
    
    9.6
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeAverage Operating Neighborhoods (1)
    
    
    680
    
    
    
    11.3
    %
    
    
    611
    
    
    
    6.6
    %Closings Per Average Neighborhood
    
    
    24.8
    
    
    
    (13.0
    %)
    
    
    28.5
    
    
    
    7.1
    %
 (1)
    
    We define a neighborhood as an individual active selling location targeted to a
specific buyer segment with greater than ten homes remaining to be sold.
     32




---



##### Table of Contents



For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeCompensation
    
    $
    189.2
    
    
    
    (10.0
    %)
    
    $
    210.3
    
    
    
    30.2
    %Sales Commissions
    
    
    106.5
    
    
    
    8.2
    %
    
    
    98.4
    
    
    
    35.9
    %Advertising and Marketing
    
    
    48.8
    
    
    
    24.2
    %
    
    
    39.3
    
    
    
    39.4
    %Other
    
    
    55.4
    
    
    
    6.9
    %
    
    
    51.8
    
    
    
    53.7
    %Selling, General and Administrative Expenses
    
    $
    399.9
    
    
    
    
    
    
    $
    399.8
    
    
    
    35.2
    %SG&A as a Percentage of Revenues
    
    
    15.0
    %
    
    
    1.2
    
    
    
    13.8
    %
    
    
    0.1
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeCompensation
    
    $
    401.2
    
    
    
    (0.6
    %)
    
    $
    403.7
    
    
    
    27.6
    %Sales Commissions
    
    
    207.7
    
    
    
    11.4
    %
    
    
    186.4
    
    
    
    31.1
    %Advertising and Marketing
    
    
    96.4
    
    
    
    29.4
    %
    
    
    74.5
    
    
    
    26.7
    %Other
    
    
    102.4
    
    
    
    7.7
    %
    
    
    95.1
    
    
    
    47.0
    %Selling, General and Administrative Expenses
    
    $
    807.7
    
    
    
    6.3
    %
    
    $
    759.7
    
    
    
    30.5
    %SG&A as a Percentage of Revenues
    
    
    15.2
    %
    
    
    0.8
    
    
    
    14.4
    %
    
    
    
  For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeSales Orders (in Units)Mid-Atlantic
    
    
    1,217
    
    
    
    (28.3
    %)
    
    
    1,697
    
    
    
    2.3
    %Southeast
    
    
    787
    
    
    
    (53.4
    %)
    
    
    1,690
    
    
    
    1.6
    %Midwest
    
    
    1,125
    
    
    
    (35.8
    %)
    
    
    1,752
    
    
    
    18.4
    %Southwest
    
    
    2,385
    
    
    
    (13.8
    %)
    
    
    2,767
    
    
    
    22.3
    %West Coast
    
    
    1,314
    
    
    
    (20.3
    %)
    
    
    1,649
    
    
    
    15.3
    %6,828
    
    
    
    (28.5
    %)
    
    
    9,555
    
    
    
    12.5
    %Sales Per Average Neighborhood
    
    
    9.9
    
    
    
    (36.1
    %)
    
    
    15.5
    
    
    
    4.7
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeSales Orders (in Units)Mid-Atlantic
    
    
    2,766
    
    
    
    (25.4
    %)
    
    
    3,707
    
    
    
    18.2
    %Southeast
    
    
    1,826
    
    
    
    (48.2
    %)
    
    
    3,525
    
    
    
    (1.8
    %)Midwest
    
    
    2,605
    
    
    
    (23.1
    %)
    
    
    3,387
    
    
    
    10.9
    %Southwest
    
    
    4,948
    
    
    
    (14.4
    %)
    
    
    5,780
    
    
    
    25.7
    %West Coast
    
    
    2,933
    
    
    
    (18.0
    %)
    
    
    3,575
    
    
    
    13.5
    %15,078
    
    
    
    (24.5
    %)
    
    
    19,974
    
    
    
    14.0
    %Sales Per Average Neighborhood
    
    
    22.2
    
    
    
    (32.1
    %)
    
    
    32.7
    
    
    
    6.9
    %
 33




---



##### Table of Contents



As ofSeptember 30, 2006
    
    March 31, 2006Change
    
    
    
    
    
    
    ChangeBacklog UnitsMid-Atlantic
    
    
    2,461
    
    
    
    (19.9
    %)
    
    
    3,073
    
    
    
    (11.2
    %)Southeast
    
    
    3,199
    
    
    
    (22.3
    %)
    
    
    4,116
    
    
    
    (17.8
    %)Midwest
    
    
    2,404
    
    
    
    (12.7
    %)
    
    
    2,755
    
    
    
    (15.8
    %)Southwest
    
    
    4,375
    
    
    
    6.9
    %
    
    
    4,094
    
    
    
    11.0
    %West Coast
    
    
    3,183
    
    
    
    (5.0
    %)
    
    
    3,349
    
    
    
    5.9
    %15,622
    
    
    
    (10.2
    %)
    
    
    17,387
    
    
    
    (6.5
    %)
    As of September 30,
    
    As of June 30,2006
    
    2006Lots Owned
    
    Lots Controlled
    
    Total Lots
    
    Lots Owned
    
    Lots Controlled
    
    Total LotsMid-Atlantic
    
    
    21,282
    
    
    
    39,965
    
    
    
    61,247
    
    
    
    20,596
    
    
    
    45,706
    
    
    
    66,302Southeast
    
    
    28,187
    
    
    
    26,047
    
    
    
    54,234
    
    
    
    28,475
    
    
    
    43,243
    
    
    
    71,718Midwest
    
    
    13,612
    
    
    
    12,345
    
    
    
    25,957
    
    
    
    13,955
    
    
    
    16,564
    
    
    
    30,519Southwest
    
    
    28,419
    
    
    
    34,151
    
    
    
    62,570
    
    
    
    29,953
    
    
    
    36,147
    
    
    
    66,100West Coast
    
    
    18,354
    
    
    
    23,241
    
    
    
    41,595
    
    
    
    19,997
    
    
    
    27,954
    
    
    
    47,951109,854
    
    
    
    135,749
    
    
    
    245,603
    
    
    
    112,976
    
    
    
    169,614
    
    
    
    282,590Change(1)
    
    
    (2.8
    %)
    
    
    (20.0
    %)
    
    
    (13.1
    %)
    
    
    3.8
    %
    
    
    (9.2
    %)
    
    
    (4.4
    %)
 (1)
    
    From previous quarter.
  FINANCIAL SERVICES
  34




---



##### Table of Contents



For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeRevenues
    
    $
    120.6
    
    
    
    (0.2
    %)
    
    $
    120.9
    
    
    
    15.0
    %Cost of Sales
    
    
    (21.8
    )
    
    
    22.5
    %
    
    
    (17.8
    )
    
    
    125.3
    %Selling, General and Administrative Expenses
    
    
    (72.6
    )
    
    
    (11.2
    %)
    
    
    (81.8
    )
    
    
    8.3
    %Operating Earnings
    
    $
    26.2
    
    
    
    23.0
    %
    
    $
    21.3
    
    
    
    (1.8
    %)Operating Margin
    
    
    21.7
    %
    
    
    4.1
    
    
    
    17.6
    %
    
    
    (3.0
    )Interest Margin
    
    $
    8.0
    
    
    
    (17.5
    %)
    
    $
    9.7
    
    
    
    (28.7
    %)Average Interest Earning Assets
    
    $
    1,520.7
    
    
    
    (14.4
    %)
    
    $
    1,775.6
    
    
    
    30.6
    %Average Yield
    
    
    7.84
    %
    
    
    1.64
    
    
    
    6.20
    %
    
    
    (0.11
    )Average Interest Bearing Liabilities
    
    $
    1,476.7
    
    
    
    (18.8
    %)
    
    $
    1,819.7
    
    
    
    37.0
    %Average Rate Paid
    
    
    5.88
    %
    
    
    1.95
    
    
    
    3.93
    %
    
    
    1.58
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeRevenues
    
    $
    243.3
    
    
    
    5.4
    %
    
    $
    230.9
    
    
    
    7.8
    %Cost of Sales
    
    
    (42.6
    )
    
    
    39.2
    %
    
    
    (30.6
    )
    
    
    105.4
    %Selling, General and Administrative Expenses
    
    
    (151.4
    )
    
    
    (4.0
    %)
    
    
    (157.7
    )
    
    
    8.4
    %Operating Earnings
    
    $
    49.3
    
    
    
    15.7
    %
    
    $
    42.6
    
    
    
    (20.7
    %)Operating Margin
    
    
    20.3
    %
    
    
    1.9
    
    
    
    18.4
    %
    
    
    (6.7
    )Interest Margin
    
    $
    16.6
    
    
    
    (18.2
    %)
    
    $
    20.3
    
    
    
    (30.5
    %)Average Interest Earning Assets
    
    $
    1,547.5
    
    
    
    (5.2
    %)
    
    $
    1,632.5
    
    
    
    5.9
    %Average Yield
    
    
    7.65
    %
    
    
    1.41
    
    
    
    6.24
    %
    
    
    0.51Average Interest Bearing Liabilities
    
    $
    1,509.0
    
    
    
    (8.8
    %)
    
    $
    1,653.9
    
    
    
    11.2
    %Average Rate Paid
    
    
    5.65
    %
    
    
    1.93
    
    
    
    3.72
    %
    
    
    1.75
    35




---



##### Table of Contents



For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeLoan Sales to InvestorsVolume
    
    $
    2,394.9
    
    
    
    (32.6
    %)
    
    $
    3,551.2
    
    
    
    42.5
    %Number of Loans Sold
    
    
    11,960
    
    
    
    (38.4
    %)
    
    
    19,401
    
    
    
    32.1
    %Gain on Sale of Mortgage Loans
    
    $
    39.9
    
    
    
    (13.1
    %)
    
    $
    45.9
    
    
    
    22.4
    %Loans Brokered to Third Party LendersVolume
    
    $
    866.5
    
    
    
    (2.5
    %)
    
    $
    888.9
    
    
    
    9.4
    %Number of Brokered Loans
    
    
    2,898
    
    
    
    (12.5
    %)
    
    
    3,311
    
    
    
    (8.2
    %)Broker Fees
    
    $
    17.3
    
    
    
    (2.3
    %)
    
    $
    17.7
    
    
    
    1.1
    %Average Loan SizeLoans Sold to Investors
    
    $
    200,245
    
    
    
    9.4
    %
    
    $
    183,042
    
    
    
    7.9
    %Loans Brokered to Third Party Lenders
    
    $
    299,037
    
    
    
    11.4
    %
    
    $
    268,499
    
    
    
    19.2
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeLoan Sales to InvestorsVolume
    
    $
    5,252.1
    
    
    
    (14.0
    %)
    
    $
    6,104.4
    
    
    
    20.6
    %Number of Loans Sold
    
    
    26,272
    
    
    
    (19.4
    %)
    
    
    32,598
    
    
    
    9.0
    %Gain on Sale of Mortgage Loans
    
    $
    86.5
    
    
    
    1.4
    %
    
    $
    85.3
    
    
    
    19.6
    %Loans Brokered to Third Party LendersVolume
    
    $
    1,823.5
    
    
    
    3.4
    %
    
    $
    1,763.8
    
    
    
    6.3
    %Number of Brokered Loans
    
    
    6,135
    
    
    
    (8.7
    %)
    
    
    6,723
    
    
    
    (7.5
    %)Broker Fees
    
    $
    35.9
    
    
    
    0.6
    %
    
    $
    35.7
    
    
    
    6.3
    %Average Loan SizeLoans Sold to Investors
    
    $
    199,912
    
    
    
    6.8
    %
    
    $
    187,264
    
    
    
    10.6
    %Loans Brokered to Third Party Lenders
    
    $
    297,260
    
    
    
    13.3
    %
    
    $
    262,369
    
    
    
    15.0
    %
  36




---



##### Table of Contents



For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeOpen Applications  Beginning
    
    
    23,417
    
    
    
    (16.5
    %)
    
    
    28,047
    
    
    
    6.4
    %New Applications
    
    
    22,709
    
    
    
    (21.0
    %)
    
    
    28,736
    
    
    
    10.1
    %Cancelled Applications
    
    
    (10,522
    )
    
    
    
    
    
    
    (10,520
    )
    
    
    (5.3
    %)Net Applications
    
    
    12,187
    
    
    
    (33.1
    %)
    
    
    18,216
    
    
    
    21.5
    %Originated Loans
    
    
    (14,168
    )
    
    
    (26.0
    %)
    
    
    (19,149
    )
    
    
    15.7
    %Open Applications  Ending
    
    
    21,436
    
    
    
    (20.9
    %)
    
    
    27,114
    
    
    
    9.4
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeOpen Applications  Beginning
    
    
    23,219
    
    
    
    (6.8
    %)
    
    
    24,912
    
    
    
    (7.1
    %)New Applications
    
    
    48,118
    
    
    
    (19.3
    %)
    
    
    59,655
    
    
    
    5.3
    %Cancelled Applications
    
    
    (20,751
    )
    
    
    1.9
    %
    
    
    (20,374
    )
    
    
    (11.1
    %)Net Applications
    
    
    27,367
    
    
    
    (30.3
    %)
    
    
    39,281
    
    
    
    16.5
    %Originated Loans
    
    
    (29,150
    )
    
    
    (21.4
    %)
    
    
    (37,079
    )
    
    
    3.8
    %Open Applications  Ending
    
    
    21,436
    
    
    
    (20.9
    %)
    
    
    27,114
    
    
    
    9.4
    %
  For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeOrigination Volume (in millions)
    
    $
    3,357.9
    
    
    
    (21.5
    %)
    
    $
    4,278.7
    
    
    
    38.4
    %Number of Originated LoansBuilder
    
    
    6,429
    
    
    
    2.9
    %
    
    
    6,245
    
    
    
    20.0
    %Retail
    
    
    7,739
    
    
    
    (40.0
    %)
    
    
    12,904
    
    
    
    13.7
    %14,168
    
    
    
    (26.0
    %)
    
    
    19,149
    
    
    
    15.7
    %Average Loan Size  Originated Loans
    
    $
    237,000
    
    
    
    6.1
    %
    
    $
    223,400
    
    
    
    19.7
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeOrigination Volume (in millions)
    
    $
    6,845.9
    
    
    
    (15.5
    %)
    
    $
    8,099.5
    
    
    
    22.9
    %Number of Originated LoansBuilder
    
    
    12,494
    
    
    
    5.3
    %
    
    
    11,864
    
    
    
    16.0
    %Retail
    
    
    16,656
    
    
    
    (33.9
    %)
    
    
    25,215
    
    
    
    (1.1
    %)29,150
    
    
    
    (21.4
    %)
    
    
    37,079
    
    
    
    3.8
    %Average Loan Size  Originated Loans
    
    $
    234,900
    
    
    
    7.6
    %
    
    $
    218,400
    
    
    
    18.4
    %
 37




---



##### Table of Contents



CONSTRUCTION SERVICES
  For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeRevenues
    
    $
    546.2
    
    
    
    39.4
    %
    
    $
    391.9
    
    
    
    (13.3
    %)Operating Earnings
    
    $
    10.0
    
    
    
    150.0
    %
    
    $
    4.0
    
    
    
    (27.3
    %)New Contracts Executed
    
    $
    605.7
    
    
    
    (27.6
    %)
    
    $
    837.0
    
    
    
    129.5
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeRevenues
    
    $
    1,047.6
    
    
    
    38.2
    %
    
    $
    758.0
    
    
    
    (14.5
    %)Operating Earnings
    
    $
    16.8
    
    
    
    150.7
    %
    
    $
    6.7
    
    
    
    (33.0
    %)New Contracts Executed
    
    $
    1,047.8
    
    
    
    (32.6
    %)
    
    $
    1,555.2
    
    
    
    121.3
    %
 As of September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeBacklog of
Uncompleted
Contracts
    
    $
    2,957.5
    
    
    
    5.7
    %
    
    $
    2,798.4
    
    
    
    79.1
    %
    38




---



##### Table of Contents



OTHER
   For the Three Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeOperating Loss from Home Services Operations
    
    $
    (1.4
    )
    
    
    (36.4
    %)
    
    $
    (2.2
    )
    
    
    4.8
    %Operating Earnings (Loss) from Investment
Real Estate Operations
    
    
    2.6
    
    
    
    (966.7
    %)
    
    
    (0.3
    )
    
    
    50.0
    %Corporate General and Administrative Expense
    
    
    (20.7
    )
    
    
    (12.3
    %)
    
    
    (23.6
    )
    
    
    24.2
    %Interest Expense
    
    
    
    
    
    
    (100.0
    %)
    
    
    (3.1
    )
    
    
    (34.0
    %)Operating Loss
    
    $
    (19.5
    )
    
    
    (33.2
    %)
    
    $
    (29.2
    )
    
    
    12.3
    %
 For the Six Months Ended September 30,2006
    
    2005Change
    
    
    
    
    
    
    ChangeOperating Loss from Home Services Operations
    
    $
    (3.1
    )
    
    
    (35.4
    %)
    
    $
    (4.8
    )
    
    
    2.1
    %Operating Earnings (Loss) from Investment
Real Estate Operations
    
    
    2.6
    
    
    
    (750.0
    %)
    
    
    (0.4
    )
    
    
    (104.1
    %)Corporate General and Administrative Expense
    
    
    (45.0
    )
    
    
    1.8
    %
    
    
    (44.2
    )
    
    
    14.5
    %Interest Expense
    
    
    
    
    
    
    (100.0
    %)
    
    
    (5.7
    )
    
    
    (37.4
    %)Operating Loss
    
    $
    (45.5
    )
    
    
    (17.4
    %)
    
    $
    (55.1
    )
    
    
    29.0
    %
    DISCONTINUED OPERATIONS
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For the Three Months Ended September 30,
    
    
    For the Six Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005RevenuesInternational homebuilding
    
    $
    
    
    
    $
    97.5
    
    
    $
    
    
    
    $
    224.4Sub-prime home equity lending
    
    
    17.2
    
    
    
    205.4
    
    
    
    170.1
    
    
    
    399.2$
    17.2
    
    
    $
    302.9
    
    
    $
    170.1
    
    
    $
    623.6Operating Earnings (Loss)International homebuilding
    
    $
    
    
    
    $
    6.1
    
    
    $
    
    
    
    $
    15.2Sub-prime home equity lending
    
    
    (19.3
    )
    
    
    32.5
    
    
    
    (44.0
    )
    
    
    58.9$
    (19.3
    )
    
    $
    38.6
    
    
    $
    (44.0
    )
    
    $
    74.1Pre-tax Gain on SaleInternational homebuilding
    
    $
    
    
    
    $
    10.7
    
    
    $
    
    
    
    $
    10.7Sub-prime home equity lending
    
    
    102.4
    
    
    
    
    
    
    
    102.4
    
    
    
    $
    102.4
    
    
    $
    10.7
    
    
    $
    102.4
    
    
    $
    10.7
 FINANCIAL CONDITION AND LIQUIDITY
  For the Six Months Ended September 30,2006
    
    
    2005Net Cash Provided by (Used in)Centex*Operating Activities
    
    $
    (391,330
    )
    
    $
    (877,283
    )Investing Activities
    
    
    3,928
    
    
    
    75,867Financing Activities
    
    
    393,373
    
    
    
    554,032Effect of Exchange Rate on Cash
    
    
    
    
    
    
    (1,479
    )5,971
    
    
    
    (248,863
    )Financial ServicesOperating Activities
    
    
    255,370
    
    
    
    (218,496
    )Investing Activities
    
    
    206,132
    
    
    
    (679,909
    )Financing Activities
    
    
    (466,563
    )
    
    
    898,682(5,061
    )
    
    
    277Centex Corporation and SubsidiariesOperating Activities
    
    
    (695,871
    )
    
    
    (1,262,173
    )Investing Activities
    
    
    174,191
    
    
    
    (462,648
    )Financing Activities
    
    
    522,590
    
    
    
    1,477,714Effect of Exchange Rate on Cash
    
    
    
    
    
    
    (1,479
    )Net Increase (Decrease) in Cash
    
    $
    910
    
    
    $
    (248,586
    )
 *
    
    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
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subsidiaries and related companies 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 and related companies
have structured their financing programs substantially on a stand-alone basis; and Centex has
limited obligations with respect to the indebtedness of our Financial Services subsidiaries and
related companies. 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.
     Existing Credit
    
    AvailableFacilities
    
    CapacityCentexMulti-Bank Revolving Credit FacilityRevolving Credit
    
    $
    1,250,000
    
    
    $
    875,000Letters of Credit
    
    
    835,000
    
    
    
    447,5362,085,000
    
    
    
    1,322,536
    (1) (2)Unsecured Credit Facility
    
    
    150,000
    
    
    
    150,000
    (3)2,235,000
    
    
    
    1,472,536Financial ServicesSecured Credit Facilities
    
    
    1,040,000
    
    
    
    658,581
    (4)Harwood Street Funding I, LLC Facility
    
    
    3,000,000
    
    
    
    1,581,0004,040,000
    
    
    
    2,239,581$
    6,275,000
    
    
    $
    3,712,117
    (5)
 (1)
    
    This is an unsecured, committed, multi-bank revolving credit facility, maturing in July
2010, which serves as backup for Centex Corporations $1.25 billion commercial paper program
and provides $835 million of letter of credit capacity. As of September 30, 2006, the $1.25
billion commercial paper program had $375 million outstanding which has been deducted from the
available capacity under the back-up facility. There have been no direct borrowings under this
revolving credit facility since its inception.(2)
    
    In conjunction with the issuance of surety bonds in support of our Construction Services
activity, Centex Corporation has agreed to provide letters of credit of up to $100 million if
Centex Corporations public debt ratings fall below investment grade. In support of this
ratings trigger, we maintain a minimum of $100 million in unused committed credit at all
times.
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##### Table of Contents



(3)
    
    Centex Corporation maintains a $150 million unsecured, uncommitted credit facility.(4)
    
    CTX Mortgage Company, LLC maintains $1,040 million of secured, committed mortgage warehouse
facilities to finance mortgages.(5)
    
    The amount of available capacity consists of $3,562.1 million of committed capacity and
$150.0 million of uncommitted capacity as of September 30, 2006. Although we believe that the
uncommitted capacity is currently available, there can be no assurance that the lender under
this facility would elect to make advances if and when requested to do so.
     CentexShort-term Debt:Short-term Notes Payable
    
    $
    377,504Senior Debt:Medium-term Note Programs, weighted-average 6.28%, due
through 2008
    
    
    245,000Senior Notes, weighted-average 5.89%, due through 2017
    
    
    3,708,868Other Indebtedness, weighted-average 6.55%, due through 2018
    
    
    23,815Subordinated Debt:Subordinated Debentures, 8.75%, due in 2007
    
    
    99,9624,455,149Financial ServicesShort-term Debt:Short-term Notes Payable
    
    
    381,419Harwood Street Funding I, LLC Secured Liquidity Notes
    
    
    1,357,936Harwood Street Funding I, LLC Variable Rate Subordinated Extendable
Certificates, weighted-average 7.33%, due through 2010
    
    
    60,0001,799,355$
    6,254,504
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##### Table of Contents



Debt Type
    
    
    
    AmountCentexIssuances
    
    Senior Note
    
    
    
    $
    500.0Retirements
    
    Medium-term Note
    
    
    
    
    (100.0
    )Senior Note
    
    
    
    
    (13.0
    )Other Indebtedness
    
    Various
    
    
    
    
    (164.4
    )Total
    
    
    
    
    
    $
    222.6
 CERTAIN OFF-BALANCE SHEET OBLIGATIONS
  Joint Ventures
   As ofSeptember 30, 2006
    
    
    March 31, 2006Number of Active Joint Ventures (1)
    
    
    48
    
    
    
    44Investment in Joint Ventures
    
    $
    313,120
    
    
    $
    307,779Total Joint Venture Debt
    
    $
    1,200,382
    
    
    $
    1,053,201Centexs Share of Joint Venture Debt:Based on Centexs Ownership Percentage
    
    $
    461,726
    
    
    $
    388,428Based on Limited Recourse Provisions:Limited Maintenance Guarantee (2) (4)
    
    $
    234,712
    
    
    $
    228,603Repayment Guarantee (3) (4)
    
    
    14,579
    
    
    
    8,136Total Limited Recourse Debt
    
    $
    249,291
    
    
    $
    236,739
 (1)
    
    The number of active joint ventures includes Home Building joint ventures for which
we have an investment balance as of the end of the period and/or current fiscal year
activity. We are the managing member of 28 and 24 of the active joint ventures as of
September 30, 2006 and March 31, 2006, respectively. As of
September 30, 2006 and March 31, 2006, 24 and 23, respectively, of
the active joint ventures have outstanding debt.(2)
    
    We have guaranteed that certain of the joint ventures will maintain a specified
loan to value ratio. We could be required to contribute additional capital to these
joint ventures to the extent the loan to value ratio falls below the specified ratio.
To date, we have not been requested to perform under any of our limited maintenance
guarantees.(3)
    
    We have guaranteed repayment of a portion of certain joint venture debt limited
to our ownership percentage of the joint venture or a percentage thereof.(4)
    
    These amounts represent our maximum exposure based on the joint ventures debt
at each respective date.
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CRITICAL ACCOUNTING ESTIMATES
  Impairment of Long-Lived Assets
  Goodwill
  Inventory Valuation
   44




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Land Held Under Option Agreements Not Owned
     Warranty Accruals
  45




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Loan Origination Reserve
   Insurance Accruals
  Income Taxes
    RECENT ACCOUNTING PRONOUNCEMENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 This report includes various forward-looking statements, which are not facts or guarantees of
future performance and which are subject to significant risks and uncertainties.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
   Deterioration
in economic conditions generally or in the market regions where we operate could decrease demand
and pricing for new homes and adversely affect our results of
operations
 There are uncertainties associated with our planned
disposition of Home Equity
  Our income tax provision and other tax reserves may be insufficient if any taxing authorities
are successful in asserting tax positions that are contrary to our positions.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Share Repurchases
  Issuer Purchases of Equity SecuritiesTotal Number of
    
    
    Maximum Number ofTotal Number
    
    
    
    
    
    
    Shares Purchased
    
    
    Shares that May Yet Beof Shares
    
    
    Average Price
    
    
    as Part of Publicly
    
    
    Purchased Under thePurchased
    
    
    Paid Per Share
    
    
    Announced Plans
    
    
    PlansPeriodJuly 1-31
    
    
    1,000,000
    
    
    $
    50.80
    
    
    
    1,000,000
    
    
    
    10,000,000August 1-31
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    10,000,000September 1-30
    
    
    608,699
    
    
    $
    49.64
    
    
    
    600,000
    
    
    
    9,400,000Total (1) (2)
    
    
    1,608,699
    
    
    $
    50.36
    
    
    
    1,600,000
 (1)
    
    Of the 1,608,699 shares repurchased for the quarter ended September 30, 2006, 8,699 shares
represent the delivery to the Company by employees or directors of previously issued shares to
satisfy the exercise price of options and/or withholding taxes that arise on the exercise of
options or the vesting of restricted stock. These transactions are authorized under the terms
of the equity plans under which the options or other equity were awarded; however, these
transactions are not considered repurchases pursuant to the Companys share repurchase
program.(2)
    
    Except as provided in Note (1), all share repurchases were effected in accordance with the
safe harbor provisions of Rule 10b-18 of the Securities Exchange Act of 1934.
  
 Item 4. Submission of Matters to a Vote of Security Holders
   Number of SharesFor
    
    Withheld
    
    Broker Non-VotesUrsula O. Fairbairn
    
    
    97,564,845
    
    
    
    9,679,981
    
    
    
    Thomas J. Falk
    
    
    98,199,874
    
    
    
    9,044,952
    
    
    
    Matthew K. Rose
    
    
    97,845,919
    
    
    
    9,398,907
    
    
    
    Thomas M. Schoewe
    
    
    98,182,486
    
    
    
    9,062,340
    
    
    
    
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Number of SharesFor
    
    Against
    
    Abstained
    
    Broker Non-Votes106,523,424
    
    
    
    84,667
    
    
    
    636,734
    
    
    
    
  Number of SharesFor
    
    Against
    
    Abstained
    
    Broker Non-Votes7,418,850
    
    
    
    74,805,065
    
    
    
    10,354,554
    
    
    
    14,666,357
  Number of SharesFor
    
    Against
    
    Abstained
    
    Broker Non-Votes43,518,228
    
    
    
    48,050,712
    
    
    
    1,009,529
    
    
    
    14,666,357
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Item 6. Exhibits
  3.1
    
    Restated Articles of Incorporation of Centex Corporation
(Centex), as amended (incorporated by reference from Exhibit 3.1 to Centexs
Annual Report on Form 10-K for the fiscal year ended March 31, 2004).3.2
    
    Amended and Restated By-Laws of Centex dated October 11, 2005
(incorporated by reference from Exhibit 3.1 to Centexs Current Report on Form
8-K filed on October 12, 2005).4.1
    
    Specimen Centex common stock certificate.4.2
    
    Any instrument with respect to long-term debt, where the
securities authorized thereunder do not exceed 10% of the total assets of Centex
and its subsidiaries, has not been filed; these instruments relate to (a)
long-term senior and subordinated debt of Centex issued pursuant to supplements
to the indentures filed as Exhibits 4.5 and 4.6 to Centexs Annual Report on
Form 10-K for the fiscal year ended March 31, 2005, which supplements have also
been filed with the SEC as exhibits to various Centex registration statements or
to reports incorporated by reference in such registration statements, (b)
long-term debt issued pursuant to indentures or other agreements in connection
with certain asset securitizations involving certain subsidiaries of Centex in
private transactions and (c) other long-term debt of Centex; Centex agrees to
furnish a copy of such instruments to the SEC upon request.10.1
    
    Amended and Restated 1997 Stock Option Plan.*10.2
    
    Amended and Restated 1998 Centex Corporation Employee
Non-qualified Stock Option Plan.*10.3
    
    Amended and Restated Centex Corporation 2001 Stock Plan.*10.4
    
    Amended and Restated Centex Corporation 2003 Equity Incentive
Plan.*10.5
    
    Amended and Restated Centex Corporation 2001 Long Term Incentive
Plan.*10.6
    
    Amendment No. 1 to Securities Purchase Agreement dated as of July
11, 2006, among Centex Financial Services, LLC, Centex Home Equity Company, LLC
and FIF HE Holdings LLC (incorporated by reference from Exhibit 2.2 to Centexs
Current Report on Form 8-K dated July 14, 2006).12.1
    
    Computation of Ratio of Earnings to Fixed Charges.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.*
    
    Management contract or
compensatory plan or arrangement.
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Signatures
  CENTEX CORPORATIONRegistrantNovember 1, 2006
    
    /s/ Catherine R. SmithCatherine R. SmithExecutive Vice President and Chief Financial Officer(principal financial officer)November 1, 2006
    
    /s/ Mark D. KempMark D. KempSenior Vice President-Controller(principal accounting officer)
 53