##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

JOINT QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended

December 31, 2003

Commission File No. 1-6776

Centex Corporation

A Nevada Corporation

IRS Employer Identification No. 75-0778259
2728 N. Harwood
Dallas, Texas 75201
(214) 981-5000

Commission File Nos. 1-9624 and 1-9625, respectively

3333 Holding Corporation
A Nevada CorporationCentex Development Company, L.P.
A Delaware Limited Partnership

IRS Employer Identification Nos. 75-2178860 and 75-2168471, respectively
2728 N. Harwood
Dallas, Texas 75201
(214) 981-6770

The registrants have filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
have been subject to such filing requirements for the past 90 days.

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

Indicate the number of shares of each of the registrants classes of common
stock (or other similar equity securities) outstanding as of the close of
business on February 2, 2004:

Centex Corporation
    
    Common Stock
    
    61,871,097
    shares3333 Holding Corporation
    
    Common Stock
    
    1,000
    sharesCentex Development Company, L.P.
    
    Class A Units of Limited Partnership Interest
    
    32,260
    unitsCentex Development Company, L.P.
    
    Class C Units of Limited Partnership Interest
    
    211,142
    units






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TABLE OF CONTENTS



|                                              |                                                                                               |                                                                  |  |  |  |  |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- |  |  |  |  |  | 
|Part I. Financial Information                
|                                              | Item 1. Financial Statements                                                                 
|                                              |                                                                                               | Statements of Consolidated Earnings                             
|                                              |                                                                                               | Consolidated Balance Sheets with Consolidating Details          
|                                              |                                                                                               | Statements of Consolidated Cash Flows with Consolidating Details
|                                              |                                                                                               | Notes to Consolidated Financial Statements                      
|                                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                              | Item 4. Controls and Procedures                                                              
|Part II. Other Information                   
|                                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|Signatures                                   
|Exhibit Index for Centex Corporation         
|Certification of CEO of Centex Corp          
|Certification of CFO of Centex Corp          
|Certification of CEO of 3333 Holding Corp    
|Certification of CFO of 3333 Holding Corp    
|Certification of CEO of 3333 Development Corp
|Certification of CFO of 3333 Development Corp
|Certification of CEO of Centex Corp          
|Certification of CFO of Centex Corp          
|Certification of CEO of 3333 Holding Corp    
|Certification of CFO of 3333 Holding Corp    
|Certification of CEO of 3333 Development Corp
|Certification of CFO of 3333 Development Corp



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##### Table of Contents



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

Form 10-Q Table of
Contents

December 31, 2003

Centex Corporation and Subsidiaries

Part I.
    
    Financial Information
    
    
    
    PageItem 1.
    
    Financial StatementsStatements of Consolidated Earnings
    
    1Consolidated Balance Sheets with Consolidating Details
    
    3Statements of Consolidated Cash Flows with Consolidating Details
    
    5Notes to Consolidated Financial Statements
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Conditionand Results of Operations
    
    32Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    55Item 4.
    
    Controls and Procedures
    
    56Part II.
    
    Other InformationItem 6.
    
    Exhibits and Reports on Form 8-K
    
    57Signatures
    
    
    
    
    
    59


i



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##### Table of Contents



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

Part I.
    
    Financial Information
    
    
    
    PageItem 1.
    
    Financial StatementsCondensed Combining Statements of Operations
    
    60Condensed Combining Balance Sheets
    
    62Condensed Combining Statements of Cash Flows
    
    63Notes to Condensed Combining Financial Statements
    
    64Item 2.
    
    Managements Discussion and Analysis of Financial Conditionand Results of Operations
    
    74Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    83Item 4.
    
    Controls and Procedures
    
    83Part II.
    
    Other InformationItem 6.
    
    Exhibits and Reports on Form 8-K
    
    84Signatures
    
    
    
    
    
    86


ii





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##### Table of Contents









Part I. Financial Information




Item 1. Financial Statements







Centex Corporation and Subsidiaries
Statements of Consolidated Earnings
(Dollars in thousands, except per share data)
(unaudited)

For the Three Months Ended December 31,2003
    
    
    2002RevenuesHome Building
    
    $
    1,906,305
    
    
    $
    1,456,730Financial Services
    
    
    238,231
    
    
    
    223,078Construction Products
    
    
    81,471
    
    
    
    119,089Construction Services
    
    
    404,227
    
    
    
    411,132Investment Real Estate
    
    
    2,171
    
    
    
    11,482Other
    
    
    18,923
    
    
    
    22,3632,651,328
    
    
    
    2,243,874Costs and ExpensesHome Building
    
    
    1,676,941
    
    
    
    1,309,368Financial Services
    
    
    194,580
    
    
    
    172,893Construction Products
    
    
    72,206
    
    
    
    93,316Construction Services
    
    
    400,634
    
    
    
    401,782Investment Real Estate
    
    
    (1,627
    )
    
    
    5,705Other
    
    
    18,904
    
    
    
    22,402Corporate General and Administrative
    
    
    30,297
    
    
    
    13,755Interest Expense
    
    
    4,149
    
    
    
    20,976Minority Interest
    
    
    9,866
    
    
    
    8,0652,405,950
    
    
    
    2,048,262Earnings from Unconsolidated Entities
    
    
    50,740
    
    
    
    26,032Earnings from Continuing Operations Before Income Taxes
    
    
    296,118
    
    
    
    221,644Income Taxes
    
    
    97,115
    
    
    
    66,565Earnings from Continuing Operations
    
    
    199,003
    
    
    
    155,079(Loss) Earnings from Discontinued Operations, net of Taxes of $(180) and $434
    
    
    (333
    )
    
    
    805Net Earnings
    
    $
    198,670
    
    
    $
    155,884Basic Earnings Per ShareContinuing Operations
    
    $
    3.21
    
    
    $
    2.57Discontinued Operations
    
    
    (0.01
    )
    
    
    0.01$
    3.20
    
    
    $
    2.58Diluted Earnings Per ShareContinuing Operations
    
    $
    3.05
    
    
    $
    2.49Discontinued Operations
    
    
    (0.01
    )
    
    
    0.01$
    3.04
    
    
    $
    2.50Average Shares OutstandingBasic
    
    
    62,038,146
    
    
    
    60,447,468Dilutive Securities:Options
    
    
    3,056,813
    
    
    
    1,475,421Other
    
    
    235,020
    
    
    
    544,776Diluted
    
    
    65,329,979
    
    
    
    62,467,665Cash Dividends Per Share
    
    $
    0.04
    
    
    $
    0.04


See Notes to Consolidated Financial Statements.

1



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##### Table of Contents



Centex Corporation and Subsidiaries
Statements of Consolidated Earnings
(Dollars in thousands, except per share data)
(unaudited)

For the Nine Months Ended December 31,2003
    
    
    2002RevenuesHome Building
    
    $
    5,119,937
    
    
    $
    3,844,561Financial Services
    
    
    795,642
    
    
    
    608,437Construction Products
    
    
    380,358
    
    
    
    383,857Construction Services
    
    
    1,166,611
    
    
    
    1,163,593Investment Real Estate
    
    
    27,589
    
    
    
    21,117Other
    
    
    61,033
    
    
    
    77,8367,551,170
    
    
    
    6,099,401Costs and ExpensesHome Building
    
    
    4,530,723
    
    
    
    3,469,736Financial Services
    
    
    609,890
    
    
    
    497,371Construction Products
    
    
    318,591
    
    
    
    303,609Construction Services
    
    
    1,153,899
    
    
    
    1,136,962Investment Real Estate
    
    
    4,255
    
    
    
    9,673Other
    
    
    63,463
    
    
    
    81,303Corporate General and Administrative
    
    
    72,002
    
    
    
    40,836Interest Expense
    
    
    38,516
    
    
    
    52,839Minority Interest
    
    
    27,441
    
    
    
    25,4486,818,780
    
    
    
    5,617,777Earnings from Unconsolidated Entities
    
    
    70,900
    
    
    
    29,100Earnings from Continuing Operations Before Income Taxes and Cumulative Effect
of a Change in Accounting Principle
    
    
    803,290
    
    
    
    510,724Income Taxes
    
    
    262,355
    
    
    
    153,379Earnings from Continuing Operations Before Cumulative Effect of a Change in
Accounting Principle
    
    
    540,935
    
    
    
    357,345(Loss) Earnings from Discontinued Operations, net of Taxes of $(47) and $1,025
    
    
    (86
    )
    
    
    1,903Earnings Before Cumulative Effect of a Change in Accounting Principle
    
    
    540,849
    
    
    
    359,248Cumulative Effect of a Change in Accounting Principle, net of Taxes of $(8,303)
    
    
    (13,260
    )
    
    
    Net Earnings
    
    $
    527,589
    
    
    $
    359,248Basic Earnings Per ShareContinuing Operations
    
    $
    8.77
    
    
    $
    5.88Discontinued Operations
    
    
    
    
    
    
    0.03Cumulative Effect of a Change in Accounting Principle
    
    
    (0.21
    )
    
    
    $
    8.56
    
    
    $
    5.91Diluted Earnings Per ShareContinuing Operations
    
    $
    8.39
    
    
    $
    5.68Discontinued Operations
    
    
    
    
    
    
    0.03Cumulative Effect of a Change in Accounting Principle
    
    
    (0.21
    )
    
    
    $
    8.18
    
    
    $
    5.71Average Shares OutstandingBasic
    
    
    61,667,274
    
    
    
    60,829,409Dilutive Securities:Options
    
    
    2,729,452
    
    
    
    1,697,600Other
    
    
    113,507
    
    
    
    541,894Diluted
    
    
    64,510,233
    
    
    
    63,068,903Cash Dividends Per Share
    
    $
    0.12
    
    
    $
    0.12


See Notes to Consolidated Financial Statements.

2



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##### Table of Contents









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

Centex Corporation and SubsidiariesDecember 31, 2003
    
    
    March 31, 2003AssetsCash and Cash Equivalents
    
    $
    81,579
    
    
    $
    469,778Restricted Cash
    
    
    288,278
    
    
    
    172,321Receivables -Residential Mortgage Loans Held for Investment, net
    
    
    6,079,966
    
    
    
    4,642,826Residential Mortgage Loans Held for Sale
    
    
    1,633,704
    
    
    
    303,328Construction Contracts
    
    
    290,981
    
    
    
    251,024Trade, including Notes of $53,540 and $31,315
    
    
    379,010
    
    
    
    406,008Inventories -Housing Projects
    
    
    4,550,029
    
    
    
    3,306,655Land Held for Development and Sale
    
    
    97,327
    
    
    
    106,057Land Held Under Option Agreements Not Owned
    
    
    337,827
    
    
    
    Construction Products
    
    
    44,049
    
    
    
    58,254Other
    
    
    14,252
    
    
    
    15,278Investments -Centex Development Company, L.P.
    
    
    309,366
    
    
    
    281,100Joint Ventures and Other
    
    
    166,236
    
    
    
    102,277Unconsolidated Subsidiaries
    
    
    
    
    
    
    Property and Equipment, net
    
    
    636,581
    
    
    
    681,165Other Assets -Deferred Income Taxes
    
    
    76,455
    
    
    
    52,929Goodwill
    
    
    302,780
    
    
    
    304,780Mortgage Securitization Residual Interest
    
    
    96,344
    
    
    
    108,102Deferred Charges and Other, net
    
    
    189,977
    
    
    
    238,290Assets of Discontinued Operations
    
    
    5,172
    
    
    
    110,364$
    15,579,913
    
    
    $
    11,610,536Liabilities and Stockholders EquityAccounts Payable
    
    $
    676,798
    
    
    $
    630,118Accrued Liabilities
    
    
    1,066,298
    
    
    
    1,028,211Debt -Centex
    
    
    2,407,477
    
    
    
    2,105,880Financial Services
    
    
    7,796,175
    
    
    
    4,998,819Payables to Affiliates
    
    
    
    
    
    
    Liabilities of Discontinued Operations
    
    
    
    
    
    
    19,435Minority Interests
    
    
    509,393
    
    
    
    170,227Stockholders
Equity -
Preferred Stock: Authorized 5,000,000 Shares, None Issued
    
    
    
    
    
    
    Common Stock: $.25 Par Value; Authorized 100,000,000
Shares; Outstanding 61,844,682 and 60,836,091 Shares
    
    
    16,003
    
    
    
    15,483Capital in Excess of Par Value
    
    
    222,394
    
    
    
    98,711Unamortized Value of Deferred Compensation
    
    
    (26,219
    )
    
    
    (2,398
    )Retained Earnings
    
    
    3,024,276
    
    
    
    2,597,078Treasury Stock, at Cost; 2,167,478 and 1,096,844 Shares
    
    
    (144,188
    )
    
    
    (45,037
    )Accumulated Other Comprehensive Income (Loss)
    
    
    31,506
    
    
    
    (5,991
    )Total Stockholders Equity
    
    
    3,123,772
    
    
    
    2,657,846$
    15,579,913
    
    
    $
    11,610,536


See Notes to Consolidated Financial Statements.

3



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##### Table of Contents



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

Centex*
    
    
    Financial ServicesDecember 31, 2003
    
    
    March 31, 2003
    
    
    December 31, 2003
    
    
    March 31, 2003$
    69,299
    
    
    $
    454,696
    
    
    $
    12,280
    
    
    $
    15,08233,252
    
    
    
    8,349
    
    
    
    255,026
    
    
    
    163,972
    
    
    
    
    
    
    
    6,079,966
    
    
    
    4,642,826
    
    
    
    
    
    
    
    1,633,704
    
    
    
    303,328290,981
    
    
    
    251,024
    
    
    
    
    
    
    
    200,920
    
    
    
    207,704
    
    
    
    178,090
    
    
    
    198,3044,550,029
    
    
    
    3,306,655
    
    
    
    
    
    
    
    97,327
    
    
    
    106,057
    
    
    
    
    
    
    
    337,827
    
    
    
    
    
    
    
    
    
    
    
    44,049
    
    
    
    58,254
    
    
    
    
    
    
    
    4,855
    
    
    
    6,832
    
    
    
    9,397
    
    
    
    8,446309,366
    
    
    
    281,100
    
    
    
    
    
    
    
    166,236
    
    
    
    102,277
    
    
    
    
    
    
    
    446,704
    
    
    
    405,407
    
    
    
    
    
    
    
    594,466
    
    
    
    639,069
    
    
    
    42,115
    
    
    
    42,096(28,437
    )
    
    
    (36,534
    )
    
    
    104,892
    
    
    
    89,463286,178
    
    
    
    287,725
    
    
    
    16,602
    
    
    
    17,055
    
    
    
    
    
    
    
    96,344
    
    
    
    108,102141,690
    
    
    
    156,650
    
    
    
    48,287
    
    
    
    81,6405,172
    
    
    
    110,364
    
    
    
    
    
    
    
    $
    7,549,914
    
    
    $
    6,345,629
    
    
    $
    8,476,703
    
    
    $
    5,670,314$
    664,320
    
    
    $
    589,530
    
    
    $
    12,478
    
    
    $
    40,588846,755
    
    
    
    804,447
    
    
    
    219,543
    
    
    
    223,7642,407,477
    
    
    
    2,105,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,796,175
    
    
    
    4,998,819
    
    
    
    
    
    
    
    23,295
    
    
    
    25,736
    
    
    
    19,435
    
    
    
    
    
    
    
    507,590
    
    
    
    168,491
    
    
    
    1,803
    
    
    
    1,736
    
    
    
    
    
    
    
    
    16,003
    
    
    
    15,483
    
    
    
    1
    
    
    
    1222,394
    
    
    
    98,711
    
    
    
    200,467
    
    
    
    200,467(26,219
    )
    
    
    (2,398
    )
    
    
    
    
    
    
    3,024,276
    
    
    
    2,597,078
    
    
    
    236,218
    
    
    
    198,145(144,188
    )
    
    
    (45,037
    )
    
    
    
    
    
    
    31,506
    
    
    
    (5,991
    )
    
    
    (13,277
    )
    
    
    (18,942
    )3,123,772
    
    
    
    2,657,846
    
    
    
    423,409
    
    
    
    379,671$
    7,549,914
    
    
    $
    6,345,629
    
    
    $
    8,476,703
    
    
    $
    5,670,314




| | * |  | In the supplemental data presented above, Centex represents the
consolidation of all subsidiaries other than those included in Financial
Services. Transactions between Centex and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries balance sheets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4



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##### Table of Contents









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

Centex Corporation and SubsidiariesFor the Nine Months Ended December 31,2003
    
    
    2002Cash Flows  Operating ActivitiesNet Earnings
    
    $
    527,589
    
    
    $
    359,248Adjustments-Cumulative Effect of a Change in Accounting Principle
    
    
    13,260
    
    
    
    Depreciation, Depletion and Amortization
    
    
    78,105
    
    
    
    70,305Provision for Losses on Residential Mortgage Loans Held for Investment
    
    
    56,643
    
    
    
    25,466Deferred Income Tax (Benefit) Provision
    
    
    (23,371
    )
    
    
    35,388Equity in Earnings of Centex Development Company, L.P.
and Joint Ventures
    
    
    (64,650
    )
    
    
    (28,319
    )Undistributed Earnings of Unconsolidated Subsidiaries
    
    
    
    
    
    
    Minority Interest, net of Taxes
    
    
    31,128
    
    
    
    16,925Changes in Assets and Liabilities, Excluding Effect of AcquisitionsIncrease in Restricted Cash
    
    
    (108,660
    )
    
    
    (24,395
    )Increase in Receivables
    
    
    (33,635
    )
    
    
    (73,670
    )Decrease in Residential Mortgage Loans Held for Sale
    
    
    1,113,052
    
    
    
    30,064Increase in Housing Projects and Land Held for Development
and Sale Inventories
    
    
    (1,277,001
    )
    
    
    (860,897
    )Decrease (Increase) in Construction Products and Other Inventories
    
    
    5,013
    
    
    
    (7,112
    )Increase (Decrease) in Accounts Payable and Accrued Liabilities
    
    
    144,518
    
    
    
    63,718Decrease in Other Assets, net
    
    
    44,830
    
    
    
    37,343Increase (Decrease) in Payables to Affiliates
    
    
    
    
    
    
    Other
    
    
    (4,878
    )
    
    
    (1,185
    )501,943
    
    
    
    (357,121
    )Cash Flows  Investing Activities(Issuance) Payment on Notes Receivable, net
    
    
    (24,291
    )
    
    
    1,866Increase in Residential Mortgage Loans Held for Investment
    
    
    (1,493,783
    )
    
    
    (966,828
    )Decrease in Investment and Advances to Centex Development Company, L.P.
and Joint Ventures
    
    
    71,307
    
    
    
    27,805Decrease in Investment and Advances to Unconsolidated Subsidiaries
    
    
    
    
    
    
    Purchases of Property and Equipment, net
    
    
    (41,133
    )
    
    
    (44,950
    )Discontinued Operations
    
    
    (7,852
    )
    
    
    1,349Harwood Street Funding I, LLC Cash Consolidated
    
    
    18,000
    
    
    
    (1,477,752
    )
    
    
    (980,758
    )Cash Flows  Financing ActivitiesIncrease (Decrease) in Short-Term Debt, net
    
    
    13,983
    
    
    
    623,855CentexIssuance of Long-Term Debt
    
    
    307,277
    
    
    
    305,721Repayment of Long-Term Debt
    
    
    (90,429
    )
    
    
    (261,686
    )Financial ServicesIssuance of Long-Term Debt
    
    
    3,405,616
    
    
    
    1,262,654Repayment of Long-Term Debt
    
    
    (2,996,992
    )
    
    
    (723,502
    )Proceeds from Stock Option Exercises
    
    
    54,737
    
    
    
    13,281Treasury Stock Purchases, net
    
    
    (99,151
    )
    
    
    (38,481
    )Dividends Paid
    
    
    (7,431
    )
    
    
    (7,309
    )587,610
    
    
    
    1,174,533Net Decrease in Cash and Cash Equivalents
    
    
    (388,199
    )
    
    
    (163,346
    )Cash and Cash Equivalents at Beginning of Period
    
    
    469,778
    
    
    
    218,869Cash and Cash Equivalents at End of Period
    
    $
    81,579
    
    
    $
    55,523


See Notes to Consolidated Financial Statements.

5



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##### Table of Contents



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

Centex *
    
    
    Financial ServicesFor the Nine Months Ended December 31,
    
    
    For the Nine Months Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002$
    527,589
    
    
    $
    359,248
    
    
    $
    103,073
    
    
    $
    100,632
    
    
    
    
    
    
    
    13,260
    
    
    
    65,400
    
    
    
    58,050
    
    
    
    12,705
    
    
    
    12,255
    
    
    
    
    
    
    
    56,643
    
    
    
    25,466(13,109
    )
    
    
    32,707
    
    
    
    (10,262
    )
    
    
    2,681(64,650
    )
    
    
    (28,319
    )
    
    
    
    
    
    
    (38,073
    )
    
    
    (65,632
    )
    
    
    
    
    
    
    31,061
    
    
    
    16,925
    
    
    
    67
    
    
    
    (24,903
    )
    
    
    (4,426
    )
    
    
    (83,757
    )
    
    
    (19,969
    )(19,910
    )
    
    
    (20,985
    )
    
    
    (13,725
    )
    
    
    (52,685
    )
    
    
    
    
    
    
    
    1,113,052
    
    
    
    30,064(1,277,001
    )
    
    
    (860,897
    )
    
    
    
    
    
    
    5,964
    
    
    
    (5,183
    )
    
    
    (951
    )
    
    
    (1,929
    )150,274
    
    
    
    7,216
    
    
    
    (24,409
    )
    
    
    56,50215,179
    
    
    
    22,576
    
    
    
    29,651
    
    
    
    14,767
    
    
    
    
    
    
    
    16,212
    
    
    
    (178,884
    )(4,878
    )
    
    
    (1,203
    )
    
    
    
    
    
    
    18(647,057
    )
    
    
    (489,923
    )
    
    
    1,211,559
    
    
    
    (11,082
    )(24,559
    )
    
    
    769
    
    
    
    268
    
    
    
    1,097
    
    
    
    
    
    
    
    (1,493,783
    )
    
    
    (966,828
    )71,307
    
    
    
    27,805
    
    
    
    
    
    
    
    2,441
    
    
    
    181,088
    
    
    
    
    
    
    
    (29,429
    )
    
    
    (34,079
    )
    
    
    (11,704
    )
    
    
    (10,871
    )(7,852
    )
    
    
    1,349
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    11,908
    
    
    
    176,932
    
    
    
    (1,487,219
    )
    
    
    (976,602
    )84,749
    
    
    
    148,731
    
    
    
    (70,766
    )
    
    
    475,124307,277
    
    
    
    305,721
    
    
    
    
    
    
    
    (90,429
    )
    
    
    (261,686
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,405,616
    
    
    
    1,262,654
    
    
    
    
    
    
    
    (2,996,992
    )
    
    
    (723,502
    )54,737
    
    
    
    13,281
    
    
    
    
    
    
    
    (99,151
    )
    
    
    (38,481
    )
    
    
    
    
    
    
    (7,431
    )
    
    
    (7,309
    )
    
    
    (65,000
    )
    
    
    (37,204
    )249,752
    
    
    
    160,257
    
    
    
    272,858
    
    
    
    977,072(385,397
    )
    
    
    (152,734
    )
    
    
    (2,802
    )
    
    
    (10,612
    )454,696
    
    
    
    191,744
    
    
    
    15,082
    
    
    
    27,125$
    69,299
    
    
    $
    39,010
    
    
    $
    12,280
    
    
    $
    16,513




| | * |  | In the supplemental data presented above, Centex represents the
consolidation of all subsidiaries other than those included in Financial
Services. Transactions between Centex and Financial Services have been
eliminated from the Centex Corporation and Subsidiaries statements of cash
flows.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



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##### Table of Contents









Centex Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2003
(Dollars and shares in thousands, except per share data)
(unaudited)

(A) BASIS OF PRESENTATION

The consolidated interim financial statements include the accounts of
Centex Corporation and subsidiaries (the Company) after elimination of all
significant intercompany balances and transactions. The statements have been
prepared, without audit, in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted.

In the opinion of the Company, all adjustments (consisting of normal,
recurring adjustments) necessary to present fairly the information in the
consolidated financial statements of the Company have been included. The
results of operations for such interim periods are not necessarily indicative
of results for the full year. The Company suggests that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes to consolidated financial statements included in the
Companys latest Annual Report on Form 10-K.

(B) STATEMENTS OF CONSOLIDATED CASH FLOWS  SUPPLEMENTAL DISCLOSURES

The following table provides supplemental disclosures related to the
Statements of Consolidated Cash Flows:

For the Three Months
    
    
    For the Nine MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Cash Paid for Interest
    
    $
    78,737
    
    
    $
    72,115
    
    
    $
    249,900
    
    
    $
    227,696Net Cash Paid for Taxes
    
    $
    84,863
    
    
    $
    61,314
    
    
    $
    256,731
    
    
    $
    143,596


Interest expense relating to the Financial Services segment is included in
Financial Services costs and expenses. The Company capitalizes a portion of
interest incurred as a component of housing projects inventory cost. The
relief of capitalized interest is included in Home Buildings costs and
expenses as housing inventories are sold. Interest expense related to
segments other than Financial Services and Home Building is included as a
separate line item in the Statements of Consolidated Earnings.

7



---



##### Table of Contents



For the Three Months
    
    
    For the Nine MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Total Interest Incurred
    
    $
    99,206
    
    
    $
    82,149
    
    
    $
    283,064
    
    
    $
    241,343Less  Interest Capitalized
    
    
    (37,337
    )
    
    
    (15,160
    )
    
    
    (77,856
    )
    
    
    (52,157
    )Financial Services Interest Expense
    
    
    (57,720
    )
    
    
    (46,013
    )
    
    
    (166,692
    )
    
    
    (136,347
    )Interest Expense, net
    
    $
    4,149
    
    
    $
    20,976
    
    
    $
    38,516
    
    
    $
    52,839Capitalized Interest Relieved to Home Building's Costs
   and Expenses
    
    $
    28,453
    
    
    $
    12,537
    
    
    $
    56,397
    
    
    $
    31,342


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

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


As explained in Note (J), Land Held Under Option Agreements not Owned and
Other Land Deposits pursuant to the provisions of FIN 46, the
Company consolidated $308.0 million of lot option agreements and reclassified
$29.8 million of deposits related to these options, previously included in Land
Held for Development and Sale.

(C) STOCK-BASED EMPLOYEE COMPENSATION ARRANGEMENTS

On April 1, 2003, the Company adopted the fair value measurement
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS No. 123), under which the Company
recognizes compensation expense of a stock option award to an employee over the
vesting period based on the fair value of the award on the grant date. The
fair value method has been applied to awards granted or modified on or after
April 1, 2003 (the prospective method), whereas awards granted prior to such
date continue to be accounted for in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No.
25), and related interpretations.

In May 2003, the Company granted approximately 1.4 million options to
employees. The fair value of these options is $35.1 million, as calculated
under the Black-Scholes option-pricing model, which will be recognized as
compensation expense over the vesting period. Compensation expense of $2.9
million and $8.7 million, respectively, related to these stock options was
recognized during the three and nine month periods ended December 31, 2003.

8



---



##### Table of Contents



The following pro forma information reflects the Companys net earnings
and earnings per share as if compensation cost for all stock option plans and
other equity-based compensation programs had been determined based upon the
fair value at the date of grant for awards outstanding during the three and
nine month periods ended December 31, 2003 and 2002, consistent with the
provisions of SFAS No. 123.

For the Three Months
    
    
    For the Nine MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Net Earnings  as Reported
    
    $
    198,670
    
    
    $
    155,884
    
    
    $
    527,589
    
    
    $
    359,248Stock-Based Employee CompensationIncluded in Reported Net Income,
net of Related Tax Effects
    
    
    3,590
    
    
    
    1,074
    
    
    
    10,747
    
    
    
    3,189Total Stock-Based Employee CompensationExpense Determined Under Fair Value
Based Method, net of Related Tax Effects
    
    
    (8,035
    )
    
    
    (6,507
    )
    
    
    (24,335
    )
    
    
    (19,862
    )Pro Forma Net Earnings
    
    $
    194,225
    
    
    $
    150,451
    
    
    $
    514,001
    
    
    $
    342,575Earnings Per Share:Basic  as Reported
    
    $
    3.20
    
    
    $
    2.58
    
    
    $
    8.56
    
    
    $
    5.91Basic  Pro Forma
    
    $
    3.13
    
    
    $
    2.49
    
    
    $
    8.34
    
    
    $
    5.63Diluted  as Reported
    
    $
    3.04
    
    
    $
    2.50
    
    
    $
    8.18
    
    
    $
    5.71Diluted  Pro Forma
    
    $
    2.97
    
    
    $
    2.42
    
    
    $
    7.96
    
    
    $
    5.45


(D) STOCKHOLDERS EQUITY

A summary of changes in stockholders equity is presented below:

Unamortized
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon Stock
    
    
    Capital in
    
    
    Value of
    
    
    
    
    
    
    Treasury
    
    
    OtherExcess of
    
    
    Deferred
    
    
    Retained
    
    
    Stock
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Par Value
    
    
    Compensation
    
    
    Earnings
    
    
    at Cost
    
    
    (Loss) Income
    
    
    TotalBalance, March 31, 2003
    
    
    60,836
    
    
    $
    15,483
    
    
    $
    98,711
    
    
    $
    (2,398
    )
    
    $
    2,597,078
    
    
    $
    (45,037
    )
    
    $
    (5,991
    )
    
    $
    2,657,846Issuance of Stock
Compensation
    
    
    64
    
    
    
    16
    
    
    
    31,672
    
    
    
    (31,688
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock Compensation
Expense
    
    
    
    
    
    
    
    
    
    
    8,699
    
    
    
    7,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,566Exercise of Stock,
Options, Including
Tax Benefits
    
    
    1,616
    
    
    
    404
    
    
    
    81,312
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,716Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,431
    )
    
    
    
    
    
    
    
    
    
    
    (7,431
    )Purchases of Common
Stock for Treasury
    
    
    (1,071
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,151
    )
    
    
    
    
    
    
    (99,151
    )Exercise of Convertible
Debenture
    
    
    400
    
    
    
    100
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,100Cavco Spin-off
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92,960
    )
    
    
    
    
    
    
    
    
    
    
    (92,960
    )Net Earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    527,589
    
    
    
    
    
    
    
    
    
    
    
    527,589Unrealized Gain
on Hedging
Instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,913
    
    
    
    7,913Foreign Currency
Translation
Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,705
    
    
    
    29,705Other Comprehensive
Income Items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121
    )
    
    
    (121
    )Balance, December 31, 2003
    
    
    61,845
    
    
    $
    16,003
    
    
    $
    222,394
    
    
    $
    (26,219
    )
    
    $
    3,024,276
    
    
    $
    (144,188
    )
    
    $
    31,506
    
    
    $
    3,123,772


9



---



##### Table of Contents



(E) RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT

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

December 31, 2003
    
    
    March 31, 2003Residential Mortgage Loans Held for Investment
    $
    6,128,423
    
    
    $
    4,671,210Allowance for Losses on Residential Mortgage Loans
Held for Investment
    
    (48,457
    )
    
    
    (28,384
    )Residential Mortgage Loans Held for Investment,
net of Allowance for Losses
    $
    6,079,966
    
    
    $
    4,642,826


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

December 31, 2003
    
    
    March 31, 2003Balance at Beginning of Period
    
    $
    28,384
    
    
    $
    14,106Provision for Losses
    
    
    56,643
    
    
    
    34,859Recoveries on Loans Charged Off
    
    
    131
    
    
    
    160Losses Sustained
    
    
    (36,701
    )
    
    
    (20,741
    )Balance at End of Period
    
    $
    48,457
    
    
    $
    28,384


December 31, 2003
    
    
    March 31, 2003Allowance as a Percentage of Gross Loans Held for Investment
    
    
    0.79
    %
    
    
    0.61
    %Allowance as a Percentage of 90+ Days Contractual Delinquency
    
    
    29.41
    %
    
    
    23.17
    %90+ Days Contractual DelinquencyTotal Dollars Delinquent
    
    $
    164,761
    
    
    $
    122,479% Delinquent
    
    
    2.69
    %
    
    
    2.62
    %


10



---



##### Table of Contents



(F) GOODWILL

A summary of changes in goodwill by segment for the nine months ended
December 31, 2003 is presented below:

Home
    
    
    Financial
    
    
    Construction
    
    
    ConstructionBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Other
    
    
    TotalBalance as of March 31, 2003
    
    $
    123,011
    
    
    $
    17,055
    
    
    $
    40,290
    
    
    $
    1,007
    
    
    $
    123,417
    
    
    $
    304,780Other, net
    
    
    
    
    
    
    (453
    )
    
    
    
    
    
    
    
    
    
    
    (1,547
    )
    
    
    (2,000
    )Balance as of December 31, 2003
    
    $
    123,011
    
    
    $
    16,602
    
    
    $
    40,290
    
    
    $
    1,007
    
    
    $
    121,870
    
    
    $
    302,780


Goodwill for the Other segment at December 31, 2003 includes $73.2 million
related to the Companys home services operations and $48.7 million related to
the Companys investment in Construction Products. Included in Assets of
Discontinued Operations at March 31, 2003 is $67.3 million of goodwill related
to manufactured housing.

(G) INDEBTEDNESS

Short-term Debt

Balances of short-term debt were:

December 31, 2003
    
    
    March 31, 2003Financial
    
    
    
    
    
    
    
    
    
    
    FinancialCentex
    
    
    
    
    
    
    Services
    
    
    Centex
    
    
    
    
    
    
    ServicesFinancial Institutions
    
    $
    
    
    
    
    
    
    
    $
    577,654
    (1)
    
    $
    25,257
    (2)
    
    
    
    
    
    $
    283,146Commercial Paper
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secured Liquidity Notes:Harwood Street Funding I, LLC
    
    
    
    
    
    
    
    
    
    
    869,068
    
    
    
    
    
    
    
    
    
    
    
    Harwood Street Funding II, LLC
    
    
    
    
    
    
    
    
    
    
    1,645,239
    
    
    
    
    
    
    
    
    
    
    
    559,083Other
    
    
    10,006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    110,006
    
    
    
    
    
    
    $
    3,091,961
    
    
    $
    25,257
    
    
    
    
    
    
    $
    842,229Consolidated Short-term Debt
    
    
    
    
    
    $
    3,201,967
    
    
    
    
    
    
    
    
    
    
    $
    867,486




|(1) |  | Approximately $250 million relates to Harwood Street Funding I, LLC.
|--- |  | --------------------------------------------------------------------



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

The weighted-average interest rates of all short-term debt balances
outstanding at December 31, 2003 and March 31, 2003 were 1.3% and 1.6%,
respectively.

11



---



##### Table of Contents



Long-term Debt

Balances of long-term debt (debt instruments with original maturities
greater than one year) and weighted-average interest rates at December 31, 2003
and March 31, 2003 were (due dates are presented in fiscal years):

December 31, 2003
    
    March 31, 2003CentexMedium-term Note Programs, due through 2007
    
    $
    258,000
    
    
    
    4.69
    %
    
    $
    281,000
    
    
    
    4.79
    %Long-term Notes, due through 2014
    
    
    1,808,278
    
    
    
    6.73
    %
    
    
    1,508,116
    
    
    
    7.05
    %Other Indebtedness, due through 2009
    
    
    31,517
    
    
    
    3.38
    %
    
    
    91,919
    
    
    
    2.81
    %Subordinated Debt:Subordinated Debentures, due in 2006
    
    
    99,931
    
    
    
    7.38
    %
    
    
    99,894
    
    
    
    7.38
    %Subordinated Debentures, due in 2007
    
    
    99,745
    
    
    
    8.75
    %
    
    
    99,694
    
    
    
    8.75
    %2,297,471
    
    
    
    
    
    
    
    2,080,623Financial ServicesCentex Home Equity Company, LLCAsset-Backed Certificates, due through 2034
    
    
    4,471,464
    
    
    
    3.68
    %
    
    
    4,081,590
    
    
    
    3.67
    %Harwood Street Funding I, LLC Variable RateSubordinated Extendable Certificates,
due through 2007
    
    
    139,000
    
    
    
    3.08
    %
    
    
    
    
    
    
    Harwood Street Funding II, LLC VariableRate Subordinated Notes, due through 2009
    
    
    93,750
    
    
    
    3.27
    %
    
    
    75,000
    
    
    
    3.38
    %4,704,214
    
    
    
    
    
    
    
    4,156,590Total
    
    $
    7,001,685
    
    
    
    
    
    
    $
    6,237,213


The weighted-average interest rates for long-term debt during the nine
months ended December 31, 2003 and 2002 were:

For the Nine MonthsEnded December 31,2003
    
    
    2002CentexMedium-term Note Programs (1)
    
    
    5.31
    %
    
    
    5.30
    %Long-term Notes
    
    
    6.91
    %
    
    
    7.90
    %Other Indebtedness
    
    
    2.52
    %
    
    
    3.27
    %Subordinated Debentures
    
    
    8.04
    %
    
    
    8.04
    %Financial ServicesCentex Home Equity Company, LLC Long-Term Debt (2)
    
    
    3.66
    %
    
    
    4.67
    %CTX
Mortgage Company, LLC Long-Term Debt (3)
    
    
    2.69
    %
    
    
    




|(1) |  | Interest rates include the effects of an interest rate swap agreement.
|--- |  | ----------------------------------------------------------------------



|(2) |  | Consists of Centex Home Equity Company, LLC Asset-Backed Certificates and
Harwood Street Funding II, LLC Variable Rate Subordinated Notes.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Consists of Harwood Street Funding I, LLC Variable Rate Subordinated
Extendable Certificates.
|--- |  | ---------------------------------------------------------------------------------------------

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

FinancialCentex
    
    
    Services
    
    
    Total2004
    
    $
    1,085
    
    
    $
    370,073
    
    
    $
    371,1582005
    
    
    32,743
    
    
    
    1,300,898
    
    
    
    1,333,6412006
    
    
    341,308
    
    
    
    1,016,735
    
    
    
    1,358,0432007
    
    
    290,465
    
    
    
    1,026,413
    
    
    
    1,316,8782008
    
    
    358,591
    
    
    
    571,525
    
    
    
    930,116Thereafter
    
    
    1,273,279
    
    
    
    418,570
    
    
    
    1,691,849$
    2,297,471
    
    
    $
    4,704,214
    
    
    $
    7,001,685


Financial Services long-term debt associated with Centex Home Equity
Company, LLC and its related companies (Home Equity) includes Asset-Backed
Certificates of $4.5 billion at December 31, 2003. These Asset-Backed
Certificates relate to securitized residential mortgage loans structured as
collateralized borrowings. The holders of such debt have no recourse for
non-payment to Centex Home Equity Company, LLC or Centex Corporation; however,
Centex Home Equity Company, LLC remains liable for customary loan
representations. The principal and interest on these certificates are paid from the
liquidation of the underlying residential mortgage loans, which serve as
collateral for the debt. Accordingly, the timing of the principal payments on
these certificates is dependent upon the payments received on the underlying
residential mortgage loans. The expected maturities of this component of
long-term debt are based on contractual maturities adjusted for projected
prepayments.

Under the Companys debt covenants, Centex is required to maintain certain
leverage and interest coverage ratios and a minimum tangible net worth. At
December 31, 2003, the Company was in compliance with all of these covenants.

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Credit Facilities

The Companys existing credit facilities and available borrowing capacity
as of December 31, 2003 are summarized below:

Existing Credit
    
    
    AvailableFacilities
    
    
    CapacityCentexCentex CorporationMulti-Bank Revolving Credit Facility
    
    $
    800,000
    
    
    $
    800,000
    (1)Multi-Bank Revolving Letter of Credit Facility
    
    
    250,000
    
    
    
    92,050
    (2)Construction ProductsSenior Revolving Credit Facility
    
    
    250,000
    
    
    
    244,317
    (3)1,300,000
    
    
    
    1,136,367Financial ServicesUnsecured Credit Facility
    
    
    125,000
    
    
    
    63,000
    (4)Secured Credit Facilities
    
    
    415,000
    
    
    
    149,051
    (5)Harwood Street Funding I, LLC Facility
    
    
    3,000,000
    
    
    
    1,742,524Harwood Street Funding II, LLC Facility
    
    
    2,500,000
    
    
    
    761,0116,040,000
    
    
    
    2,715,586$
    7,340,000
    
    
    $
    3,851,953
    (6)




|(1) |  | This is a committed, multi-bank revolving credit facility, maturing in
August 2006, which serves as backup for commercial paper borrowings. As
of December 31, 2003, there were no borrowings under this backup facility,
and the Companys $700 million commercial paper program had $100 million
outstanding. There have been no borrowings under this facility since
inception.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(3) |  | This is a committed, senior revolving credit facility, entered into by
Construction Products in December 2003 and maturing in December 2006.
This facility has no recourse to Centex Corporation.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(5) |  | CTX Mortgage Company, LLC and its related companies and Home Equity share
in a $250 million committed secured credit facility to finance mortgage
inventory. CTX Mortgage Company, LLC and its related companies also
maintain $155 million of committed secured mortgage warehouse facilities
to finance mortgages. Home Equity also maintains a $10 million committed
secured mortgage warehouse facility to finance mortgages.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) |  | The amount of available borrowing capacity
includes $3.789 billion of
committed borrowings and $63.0 million of uncommitted borrowings as of
December 31, 2003. Although the Company believes that the uncommitted
capacity is currently available, there can be no assurance that the lender
under this facility would elect to make advances to the Company or its
subsidiaries if and when requested to do so.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

CTX Mortgage Company, LLC finances its inventory of mortgage loans held
for sale principally through sales of conforming and Jumbo A loans to HSF-I,
pursuant to a mortgage loan purchase agreement (the HSF-I Purchase
Agreement). Since 1999, CTX Mortgage Company, LLC has sold substantially all
of the conforming and Jumbo A mortgage loans that it originates to HSF-I in
accordance with the HSF-I Purchase Agreement. HSF-Is commitment to purchase
eligible mortgage loans continues in effect until the occurrence of certain
termination events described in the HSF-I Purchase Agreement. When HSF-I
acquires

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these loans, it typically holds them for a period averaging between 45 and 60
days and then resells them into the secondary market. In accordance with the
HSF-I Purchase Agreement, CTX Mortgage Company, LLC acts as servicer of the
loans owned by HSF-I and arranges for the sale of the eligible mortgage loans
into the secondary market. HSF-I obtains the funds needed to purchase eligible
mortgage loans from CTX Mortgage Company, LLC by issuing (1) short-term secured
liquidity notes that are currently rated A1+ by Standard & Poors (S&P) and
P-1 by Moodys Investors Service (Moodys), (2) medium-term debt that is
currently rated A1+ by S&P and P-1 by Moodys and (3) subordinated certificates
maturing in September 2004, November 2005 and June 2006, extendable for up to
five years, that are currently rated BBB by S&P and Baa2 by Moodys. Under the
terms of the HSF-I Purchase Agreement, CTX Mortgage Company, LLC may elect to
sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage Company,
LLC, mortgage loans that satisfy certain eligibility criteria and portfolio
requirements. At December 31, 2003, the maximum amount of mortgage loans that
HSF-I is allowed to carry in its inventory under the HSF-I Purchase Agreement
is $3.0 billion. This arrangement provides CTX Mortgage Company,
LLC with reduced financing cost for eligible mortgage loans it originates and
improves its liquidity.

In January 2003, the FASB issued FIN 46, which modified the
accounting for certain entities in which (1) equity investors do not have a
controlling financial interest and/or (2) the entity is unable to finance its
activities without additional subordinated financial support from other
parties. Pursuant to FIN 46, HSF-I is a variable interest entity
for which the Company is the primary beneficiary. Accordingly, HSF-I was
consolidated in the Companys financial statements beginning July 1, 2003.
Prior to the implementation of FIN 46, HSF-I was not consolidated
in the Companys financial statements. As a result of the consolidation of
HSF-I, the Company recorded a cumulative effect of a change in accounting
principle of $13.3 million, net of tax, in the quarter ended September 30,
2003. This cumulative effect of a change in accounting principle primarily
represents the deferral of servicing release premium income offset to a lesser
extent by the deferral of certain loan origination costs, which will be
recognized as loans are sold into the secondary market. The consolidation of
HSF-I resulted in an increase in the Companys residential mortgage loans held
for sale with a corresponding increase in the Companys debt of approximately
$1.3 billion at December 31, 2003. In addition, interest income and interest
expense of HSF-I subsequent to June 30, 2003, are reflected in the Companys
financial statements. Because HSF-I is a consolidated entity as of July 1,
2003, all transactions between the Company and HSF-I subsequent to June 30,
2003 are eliminated in consolidation.

HSF-I has entered into a swap arrangement with a bank (the Harwood Swap)
under which the bank has agreed to make certain payments to HSF-I, and HSF-I
has agreed to make certain payments to the bank, the net effect of which is
that the bank has agreed to bear certain interest rate risks, non-credit
related market risks and prepayment risks related to the mortgage loans held by
HSF-I. The purpose of this arrangement is to provide credit enhancement to
HSF-I by permitting it to hedge these risks with a counterparty having a
short-term credit rating of A1+ from S&P and P1 from Moodys. Additionally,
the Company has entered into a separate swap arrangement with the bank pursuant
to which the Company has agreed to pay to the bank all amounts that the bank is
required to pay to HSF-I pursuant to the Harwood Swap plus a monthly fee equal
to a percentage of the notional amount of the Harwood Swap, and the bank is
required to pay to the Company all amounts that the bank receives from HSF-I
pursuant to the Harwood Swap. Accordingly, the Company effectively bears all
interest rate risks, non-credit related market risks and prepayment risks that
are the subject of the Harwood Swap. Financial Services executes the forward
sales of CTX Mortgage Company, LLCs loans to hedge the risk of reductions in
value of mortgages sold to HSF-I or maintained under secured financing
agreements. This offsets the majority of the Companys risk as the
counterparty to the swap supporting the payment requirements of HSF-I. See
additional discussion of interest rate risks in Note (N), Derivatives and
Hedging. The Company is also required to reimburse the bank for certain
expenses, costs and damages that it may incur. As noted above, because HSF-I is a consolidated
entity as of July 1, 2003, all

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##### Table of Contents



transactions between the Company and HSF-I
subsequent to June 30, 2003, including those related to the Harwood Swap, are
eliminated in consolidation.

HSF-Is debt does not have recourse to the Company, and the consolidation
of this debt does not change the Companys credit profile or debt ratings. The
Company does not guarantee the payment of any debt or subordinated extendable
certificates of HSF-I and is not liable for credit losses relating to
securitized residential mortgage loans sold to HSF-I. However, the Company
retains certain risks related to the portfolio of mortgage loans held by HSF-I.
In particular, CTX Mortgage Company, LLC makes representations and warranties
to HSF-I to the effect that each mortgage loan sold to HSF-I satisfies the
eligibility criteria and portfolio requirements discussed above. CTX Mortgage
Company, LLC may be required to repurchase mortgage loans sold to HSF-I if such
mortgage loans are determined to be ineligible loans or there occur certain
other breaches of representations and warranties of CTX Mortgage Company, LLC,
as seller or servicer. CTX Mortgage Company, LLCs obligation as servicer to
repurchase such loans is guaranteed by Centex Corporation. CTX Mortgage
Company, LLC records a liability for its estimated losses for these obligations
and such amount is included in its loan origination reserve. CTX Mortgage
Company, LLC and its related companies sold $3.55 billion and $13.13 billion of
mortgage loans to investors during the three and nine months ended December 31,
2003, respectively. CTX Mortgage Company, LLC sold $4.24 billion and $10.15
billion of mortgage loans to HSF-I and other investors during the three and
nine months ended December 31, 2002, respectively. CTX Mortgage Company, LLC
and its related companies recognized gains on the sale of mortgage loans of
$29.2 million and $60.7 million for the three months ended December 31, 2003
and 2002, respectively. For the nine months ended December 31, 2003 and 2002,
gains on the sale of mortgage loans were $186.6 million and $182.2 million,
respectively.

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

Home Equity finances its inventory of mortgage loans held for investment
through Harwood Street Funding II, LLC (HSF-II), a wholly-owned, consolidated
entity, under a revolving sales agreement that expires upon final payment of
the senior and subordinated debt issued by HSF-II. This arrangement, where
HSF-II has committed to finance all eligible loans, gives Home Equity daily
access to HSF-IIs borrowing capacity of $2.5 billion. HSF-II obtains funds
through the sale of subordinated notes that are currently rated BBB by S&P,
Baa2 by Moodys and BBB by Fitch Ratings (Fitch) and short-term secured
liquidity notes that are currently rated A1+ by S&P, P1 by Moodys and F1+ by
Fitch. Because HSF-II is a consolidated entity, the debt, interest income and
interest expense of HSF-II are reflected in the financial statements of
Financial Services. HSF-IIs debt does not have recourse to the Company and
the consolidation of this debt does not change the Companys credit profile or
debt ratings.

(H) CENTEX DEVELOPMENT COMPANY, L.P.

Centex Development Company, L.P. (the Partnership) is a master limited
partnership formed by the Company in March 1987 to broaden the range of
business activities that may be conducted for the benefit of the Companys
stockholders to include general real estate development. The Company believed
that this expansion would improve stockholder value through longer-term real
estate investments, real estate developments and the benefits of the
partnership form of business.

The Partnership is authorized to issue three classes of limited
partnership interest. The Company indirectly holds 100% of the Partnerships
Class A and Class C limited partnership units (Class A Units and Class C
Units, respectively), which are collectively convertible into 20% of the
Partnerships Class B limited partnership units (Class B Units). The
Partnership may issue additional Class C Units in connection
with the acquisition of real property and other assets. No Class B Units have been
issued. However, the stockholders

16



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##### Table of Contents



of Centex Corporation hold warrants to
purchase approximately 80% of the Class B Units. The warrants are held through
a nominee arrangement and trade in tandem with the common stock of Centex
Corporation.

As holder of the Class A and Class C Units, the Company is entitled to a
cumulative preferred return of 9% per annum on the average outstanding balance
of its capital contributions to the Partnership, adjusted for cash and other
distributions representing return of capital. As of December 31, 2003, these
adjusted capital contributions, or Unrecovered Capital, were $243.9 million and
preference payments in arrears totaled $58.4 million.

The Partnership is managed by its general partner, 3333 Development
Corporation, a wholly-owned subsidiary of 3333 Holding Corporation (Holding).
The common stock of Holding is held by the stockholders of Centex Corporation
through a nominee arrangement and trades in tandem with the common stock of
Centex Corporation. The stockholders of Centex Corporation elect the
four-person board of directors of Holding, three of whom are independent
outside directors who are not directors, affiliates or employees of the
Company. Thus, through Holding, the stockholders of Centex Corporation control
the general partner of the Partnership. The general partner, through its
independent board and the independent board of Holding, including its
non-executive Chairman, oversees the Partnerships activities, including the
acquisition, development, maintenance, operation and sale of properties.
Consent of the limited partners for the activities of the Partnership is not
required, and the limited partners cannot remove the general partner. As a
result, at December 31, 2003, the Company accounts for its limited partnership
interest in the Partnership using the equity method of accounting for
investments.

On
November 18, 2003, Centex announced that merger agreements were
entered into by and among the Partnership, Holding and Centex, which
will end the tandem trading relationship between Centex common stock
and the common stock of Holding, as well as the stockholder warrants
of the Partnership. The mergers will result in the consolidation of
Holding and the Partnership as indirect, wholly-owned subsidiaries of
Centex. The transaction is
subject to the approval by Centex stockholders of the termination of the
nominee agreement, and subject to the approval of the stockholders of
Holding. Pursuant to the transaction, the Holding
common stock and the stockholder warrants would be converted into
cash. A joint special meeting of the stockholders of Centex and
Holding is scheduled for February 25, 2004 to vote on these matters. The Company anticipates this
transaction will be completed prior to March 31, 2004. If such transaction is
not completed prior to March 31, 2004, the Company will consolidate the
Partnership and Holding as of March 31, 2004, pursuant to the
provisions of FIN 46.

Supplementary condensed combined financial statements for Centex
Corporation and subsidiaries, Holding and subsidiary and the Partnership and
subsidiaries are set forth below. For additional information on Holding and
subsidiary and the Partnership and subsidiaries, see their separate financial
statements and related footnotes included elsewhere in this Report.

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##### Table of Contents



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

December 31,
    
    
    March 31,2003
    
    
    2003AssetsCash and Cash Equivalents
    
    $
    86,696
    
    
    $
    474,891Restricted Cash
    
    
    288,278
    
    
    
    172,321Receivables
    
    
    8,438,656
    
    
    
    5,633,816Inventories
    
    
    5,605,059
    
    
    
    3,920,679Investments in Joint Ventures and Other
    
    
    170,607
    
    
    
    106,250Assets Held for Sale and Discontinued Operations
    
    
    40,755
    
    
    
    228,663Property and Equipment, net
    
    
    638,862
    
    
    
    683,473Other Assets
    
    
    726,454
    
    
    
    750,072$
    15,995,367
    
    
    $
    11,970,165Liabilities and Stockholders EquityAccounts Payable and Accrued Liabilities
    
    $
    1,992,249
    
    
    $
    1,793,143Liabilities Related to Assets Held for Sale and
Discontinued Operations
    
    
    33,522
    
    
    
    119,506Short-term Debt
    
    
    3,317,409
    
    
    
    974,427Long-term Debt
    
    
    7,018,922
    
    
    
    6,255,016Minority Stockholders Interest
    
    
    509,493
    
    
    
    170,227Stockholders Equity
    
    
    3,123,772
    
    
    
    2,657,846$
    15,995,367
    
    
    $
    11,970,165


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

For the Nine MonthsEnded December 31,2003
    
    
    2002Revenues
    
    $
    7,870,222
    
    
    $
    6,359,520Costs and Expenses
    
    
    7,119,077
    
    
    
    5,870,699Earnings from Unconsolidated Entities
    
    
    41,120
    
    
    
    11,784Earnings Before Income Taxes
    
    
    792,265
    
    
    
    500,605Income Taxes
    
    
    262,355
    
    
    
    153,379Earnings from Continuing Operations
    
    
    529,910
    
    
    
    347,226Earnings from Discontinued Operations
    
    
    10,939
    
    
    
    12,022Earnings Before Cumulative Effect of a Change in AccountingPrinciple
    
    
    540,849
    
    
    
    359,248Cumulative Effect of a Change in Accounting Principle
    
    
    (13,260
    )
    
    
    Net Earnings
    
    
    527,589
    
    
    
    359,248Other Comprehensive Income
    
    
    37,497
    
    
    
    8,847Comprehensive Income
    
    $
    565,086
    
    
    $
    368,095


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(I) COMMITMENTS AND CONTINGENCIES

The Company conducts a portion of its land acquisition, development and
other activities through its participation in joint ventures in which the
Company holds less than a majority interest. These joint ventures are
typically large in nature, and partnering with other developers allows Centex
Homes to share the risks and rewards of ownership while providing for efficient
asset utilization. The Companys investment in these non-consolidated joint
ventures was $166.2 million and $102.3 million at December 31, 2003 and March
31, 2003, respectively. These joint ventures had total outstanding secured
construction debt of approximately $246.2 million and $232.5 million at
December 31, 2003 and March 31, 2003, respectively. The Companys maximum
potential liability with respect to this debt, based on its ownership
percentage of the related joint ventures, is approximately $62.2 million and
$56.4 million at December 31, 2003 and March 31, 2003, respectively. Under the
structure of this debt, the Company becomes liable up to these amounts only to
the extent that the construction debt exceeds a certain percentage of the value
of the project. At December 31, 2003 and March 31, 2003, the Company was not
liable for any of this debt. The Company believes that these joint ventures
are not variable interest entities for purposes of FIN 46;
therefore, management does not believe that FIN 46 will have a
material impact on the Companys accounting for these investments.

In the normal course of its business, the Company issues certain
representations, warranties and guarantees related to its home sales, land
sales, building sales, commercial construction and mortgage loan originations.
The Company believes that it has established the necessary accruals for these
representations, warranties and guarantees. See further discussion of our
warranty liability below.

Centex Homes offers a ten-year limited warranty for most homes constructed
and sold in the United States. The warranty covers defects in materials or
workmanship in the first year of the home and certain designated components or
structural elements of the home in the second through tenth years. In
California, effective January 1, 2003, Centex Homes began following the
statutory provisions of Senate Bill 800, which, in part, provide a statutory
warranty to customers and a statutory dispute resolution process. Centex Homes
estimates the costs that may be incurred under its warranty program for which
it will be responsible and records a liability at the time each home is closed.
Factors that affect Centex Homes warranty liability include the number of
homes closed, historical and anticipated rates of warranty claims and cost per
claim. Centex Homes periodically assesses the adequacy of its recorded
warranty liability and adjusts the amounts as necessary.

Changes in Centex Homes contractual warranty liability during the three
and nine months ended December 31, 2003 are as follows:

For the Three Months
    
    
    For the Nine MonthsEnded December 31, 2003
    
    
    Ended December 31, 2003Balance at Beginning of Period
    
    $
    15,542
    
    
    $
    16,125Warranties Issued
    
    
    8,625
    
    
    
    16,629Settlements Made
    
    
    (7,572
    )
    
    
    (16,775
    )Changes in Liability of Pre-Existing
Warranties, Including Expirations
    
    
    (692
    )
    
    
    (76
    )Balance at End of Period
    
    $
    15,903
    
    
    $
    15,903


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CTX Mortgage Company, LLC has established a liability for anticipated
losses associated with loans originated. Changes in CTX Mortgage Company,
LLCs mortgage loan origination reserve for the three and nine months ended
December 31, 2003 are as follows:

For the Three Months
    
    
    For the Nine MonthsEnded December 31, 2003
    
    
    Ended December 31, 2003Balance at Beginning of Period
    
    $
    29,083
    
    
    $
    28,594Provision for Losses
    
    
    
    
    
    
    1,837Settlements
    
    
    (1,411
    )
    
    
    (2,759
    )Balance at End of Period
    
    $
    27,672
    
    
    $
    27,672


(J) LAND HELD UNDER OPTION AGREEMENTS NOT OWNED AND OTHER LAND DEPOSITS

In order to ensure the future availability of land for homebuilding, the
Company enters into lot option purchase agreements with unaffiliated third
parties and with the Partnership, as discussed in Note (O), Related Party
Transactions, below. Under the option agreements, the Company pays a stated
deposit in consideration for the right to purchase land at a future time,
usually at predetermined prices. These options do not contain performance
requirements from the Company nor obligate the Company to purchase the land,
and expire at various dates through the year 2010.

The Company has evaluated lot option agreements entered into after January
31, 2003 under the provisions of FIN 46. The Company does not have
legal title to the optioned land; however, under FIN 46, if the
option agreements are entered into with entities that qualify as variable
interest entities and if the Company qualifies as the primary beneficiary of
those entities, the Company must consolidate such entities. The Company has
determined that it is the primary beneficiary of several such agreements at
December 31, 2003. As a result, the Company recorded $308.0 million of land as
inventory under the caption Land Held Under Option Agreements Not Owned, with a
corresponding increase to Minority Interests. In addition, at December 31,
2003, the Company reclassified $29.8 million of deposits related to these
options, previously included in Land Held for Development and Sale, to Land
Held Under Option Agreements Not Owned.

The Company also has option agreements entered into before February 1,
2003. These agreements must be evaluated for consolidation under FIN 46 as of March 31, 2004. Management is in the process of determining the
impact of FIN 46 on these lot option agreements on the Companys
results of operations and financial position.

At December 31, 2003, the Company had deposited or invested with third
parties $75.2 million (excluding the $29.8 million of deposits discussed above)
related to lot option agreements. The lot option agreements related to these
deposits had a total remaining purchase price of approximately $2.7 billion.

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##### Table of Contents



(K) COMPREHENSIVE INCOME

A summary of comprehensive income for the three and nine months ended
December 31, 2003 and 2002 is presented below:

For the Three Months
    
    
    For the Nine MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Net Earnings
    
    $
    198,670
    
    
    $
    155,884
    
    
    $
    527,589
    
    
    $
    359,248Other Comprehensive Income (Loss),
net of Tax:Unrealized Gain (Loss) on Hedging
Instruments
    
    
    4,742
    
    
    
    (1,567
    )
    
    
    7,913
    
    
    
    (13,509
    )Foreign Currency Translation Adjustments
    
    
    16,426
    
    
    
    5,909
    
    
    
    29,705
    
    
    
    23,517Other
    
    
    (127
    )
    
    
    277
    
    
    
    (121
    )
    
    
    (1,161
    )Comprehensive Income
    
    $
    219,711
    
    
    $
    160,503
    
    
    $
    565,086
    
    
    $
    368,095


The foreign currency translation adjustments are primarily the result of
Centexs investment in the Partnership. For additional information on the
Partnership and subsidiaries, see their separate financial statements included
elsewhere in the Report. The unrealized gain or loss on hedging instruments
represents the deferral in other comprehensive income of the unrealized gain or
loss on swap agreements designated as cash flow hedges. The accounting for
interest rate swaps and other derivative financial instruments is discussed in
detail in Note (N), Derivatives and Hedging.

(L) BUSINESS SEGMENTS

The Company operates in five principal business segments: Home Building,
Financial Services, Construction Products, Construction Services and Investment
Real Estate. These segments operate primarily in the United States, and their
markets are nationwide. Revenues from any one customer are not significant to
the Company.

Intersegment revenues and investments in joint ventures are not material
and are not shown in the following tables. The investment in the Partnership
(approximately $309.4 million as of December 31, 2003) is included in the
Investment Real Estate segment.

Home Building

Home Buildings operations involve the purchase and development of land or
lots and the construction and sale of detached and attached single-family
homes.

Financial Services

Financial Services mortgage operations consist primarily of home
financing, sub-prime home equity lending and the sale of title insurance and
other various insurance coverages. These activities include mortgage
origination, servicing and other related services for homes sold by the
Companys subsidiaries and others. Financial Services revenues include
interest income of $135.8 million and $90.7 million for the three months and
$382.3 million and $257.1 million for the nine months ended December 31, 2003
and 2002,

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##### Table of Contents



respectively. Substantially all of the Companys interest income in each year
is earned by the Financial Services segment. Financial Services cost of sales
is comprised of interest expense related to debt issued to fund its home
financing and sub-prime home equity lending activities.

Construction Products

Construction Products operations involve the manufacture, production,
distribution and sale of cement, gypsum wallboard, recycled paperboard,
aggregates and readymix concrete. The Company owned 63.7% of Centex
Construction Products, Inc. at December 31, 2003 and 65.1% at December 31,
2002. Construction Products results are shown before minority interest in the
tables presented below.

Construction
Products has amended its annual report on Form 10-K for the fiscal
year ended March 31, 2003 and
subsequent Form 10-Q filings to reflect a change in the method of accounting for its
interest in two cement joint ventures from the proportionate consolidation
method to the equity method of accounting. This change in accounting was
immaterial to the Companys financial statements taken as a whole; therefore,
the Companys financial results for the quarter ended December 31,
2003 include the necessary reclassifications for the
nine month period ended December 31, 2003 to reflect Construction Products
interest in these joint ventures on the equity method of accounting. Prior
period balances have not been restated.

On January 30, 2004, the Company completed the tax-free spin-off of its
entire equity interest in Centex Construction Products, Inc. Subsequent to the
spin-off, Construction Products will be reported as discontinued operations.
The pro forma effects of the spin-off are discussed in detail in Note
(S), Subsequent Events.

Construction Services

Construction Services operations involve the construction of buildings
for both private and government interests including office, commercial and
industrial buildings, hospitals, hotels, correctional facilities, educational
institutions, museums, libraries, multi-unit residential buildings, airport facilities
and sports facilities. As this segment generates positive cash flow,
intercompany interest income (credited at the prime rate in effect) of $1.1
million and $1.4 million for the three months and $3.5 million and $4.2 million
for the nine months ended December 31, 2003 and 2002, respectively, is included
in managements evaluation of this segment. However, the intercompany interest
income is eliminated in consolidation and excluded from the tables presented
below.

Investment Real Estate

Investment Real Estates operations involve the acquisition, development
and sale of land, primarily for industrial, office, multi-family, retail,
residential and mixed-use projects. Under the equity method of accounting for
investments, Investment Real Estate also records as earnings from
unconsolidated entities any income or loss from its investment in the
Partnership, including the International Home Building business located in the
United Kingdom. It is not currently anticipated that any significant capital
will be allocated to Investment Real Estate for new business development.
Through its investment in the Partnership, Investment Real Estate will focus on
the International Home Building operations and evaluate opportunistic real
estate transactions. Further discussion regarding Investment Real Estates
investment in the Partnership can be found under Note (H), Centex Development
Company, L.P.

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##### Table of Contents



Other

The Companys Other segment includes Corporate general and administrative
expenses, interest expense and minority interest. Also included in the Other
segment are the Companys home services operations, which are not material for
purposes of segment reporting. In June 2003, the Company spun off
substantially all of its manufactured housing operations, which had previously
been included in the Other segment. All remaining manufactured housing
operations and related assets are reflected as a discontinued operation and not
included in the segment information below. Earnings (loss) related to the
operations that were spun off have been reclassified to discontinued
operations.

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

For the Three Months
    
    
    For the Nine MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Operating Loss from Home Services
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    (2.4
    )
    
    $
    (2.5
    )Corporate General and Administrative Expenses
    
    
    (30.3
    )
    
    
    (13.8
    )
    
    
    (72.0
    )
    
    
    (40.8
    )Interest Expense
    
    
    (4.1
    )
    
    
    (21.0
    )
    
    
    (38.5
    )
    
    
    (52.8
    )Minority Interest
    
    
    (9.9
    )
    
    
    (8.1
    )
    
    
    (27.4
    )
    
    
    (25.4
    )Other
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (1.1
    )$
    (44.4
    )
    
    $
    (43.0
    )
    
    $
    (140.5
    )
    
    $
    (122.6
    )


For the Three Months Ended December 31, 2003(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products **
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    1,906.3
    
    
    $
    238.2
    
    
    $
    81.5
    
    
    $
    404.2
    
    
    $
    2.2
    
    
    $
    18.9
    
    
    $
    2,651.3Cost of Sales
    
    
    (1,410.9
    )
    
    
    (57.7
    )
    
    
    (70.1
    )
    
    
    (385.9
    )
    
    
    2.7
    
    
    
    (9.4
    )
    
    
    (1,931.3
    )Selling, General and
Administrative
Expenses
    
    
    (266.1
    )
    
    
    (136.8
    )
    
    
    (2.1)+
    
    
    
    (14.7
    )
    
    
    (1.0
    )
    
    
    (53.9
    )
    
    
    (474.6
    )Earnings from Unconsolidated Entities
    
    
    20.9
    
    
    
    
    
    
    
    18.9
    
    
    
    
    
    
    
    10.9
    
    
    
    
    
    
    
    50.7Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    250.2
    
    
    $
    43.7
    
    
    $
    28.2
    *
    
    $
    3.6
    
    
    $
    14.8
    
    
    $
    (44.4
    )
    
    $
    296.1




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



|** |  | Construction Products, for management reporting purposes, proportionately
consolidates its share of its cement joint ventures. On a proportionately
consolidated basis, revenues were $141.1 million and cost of sales were $110.8
million.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|+ |  | Includes corporate general and administrative expenses only.
|- |  | ------------------------------------------------------------

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##### Table of Contents



For the Three Months Ended December 31, 2002(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    1,456.8
    
    
    $
    223.1
    
    
    $
    119.1
    
    
    $
    411.1
    
    
    $
    11.5
    
    
    $
    22.3
    
    
    $
    2,243.9Cost of Sales
    
    
    (1,099.7
    )
    
    
    (46.0
    )
    
    
    (91.9
    )
    
    
    (385.0
    )
    
    
    (3.8
    )
    
    
    (8.5
    )
    
    
    (1,634.9
    )Selling, General &
Administrative Expenses
    
    
    (209.7
    )
    
    
    (126.9
    )
    
    
    (1.4) +
    
    
    
    (16.7
    )
    
    
    (1.9
    )
    
    
    (56.8
    )
    
    
    (413.4
    )Earnings from Unconsolidated Entities
    
    
    11.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.3
    
    
    
    
    
    
    
    26.0Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    159.1
    
    
    $
    50.2
    
    
    $
    25.8
    *
    
    $
    9.4
    
    
    $
    20.1
    
    
    $
    (43.0
    )
    
    $
    221.6




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



|+ |  | Includes corporate general and administrative expenses only.
|- |  | ------------------------------------------------------------

For the Nine Months Ended December 31, 2003(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products**
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    5,119.9
    
    
    $
    795.6
    
    
    $
    380.4
    
    
    $
    1,166.6
    
    
    $
    27.6
    
    
    $
    61.1
    
    
    $
    7,551.2Cost of Sales
    
    
    (3,798.0
    )
    
    
    (166.7
    )
    
    
    (312.6
    )
    
    
    (1,109.4
    )
    
    
    1.7
    
    
    
    (28.3
    )
    
    
    (5,413.3
    )Selling, General and
Administrative
Expenses
    
    
    (732.6
    )
    
    
    (443.1
    )
    
    
    (6.0)+
    
    
    
    (44.5
    )
    
    
    (6.0
    )
    
    
    (173.3
    )
    
    
    (1,405.5
    )Earnings from Unconsolidated Entities
    
    
    23.4
    
    
    
    
    
    
    
    18.9
    
    
    
    
    
    
    
    28.6
    
    
    
    
    
    
    
    70.9Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    612.7
    
    
    $
    185.8
    
    
    $
    80.7
    *
    
    $
    12.7
    
    
    $
    51.9
    
    
    $
    (140.5
    )
    
    $
    803.3




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



|** |  | Construction Products, for management reporting purposes, proportionately
consolidates its share of its cement joint ventures. On a proportionately
consolidated basis, revenues were $440.0 million and cost of sales were $353.3
million.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|+ |  | Includes corporate general and administrative expenses only.
|- |  | ------------------------------------------------------------

For the Nine Months Ended December 31, 2002(Dollars in millions)Home
    
    
    Financial
    
    
    Construction
    
    
    Construction
    
    
    InvestmentBuilding
    
    
    Services
    
    
    Products
    
    
    Services
    
    
    Real Estate
    
    
    Other
    
    
    TotalRevenues
    
    $
    3,844.6
    
    
    $
    608.4
    
    
    $
    383.9
    
    
    $
    1,163.6
    
    
    $
    21.1
    
    
    $
    77.8
    
    
    $
    6,099.4Cost of Sales
    
    
    (2,884.1
    )
    
    
    (136.3
    )
    
    
    (299.5
    )
    
    
    (1,086.7
    )
    
    
    (3.8
    )
    
    
    (30.3
    )
    
    
    (4,440.7
    )Selling, General &
Administrative Expenses
    
    
    (585.6
    )
    
    
    (361.0
    )
    
    
    (4.2)+
    
    
    
    (50.3
    )
    
    
    (5.9
    )
    
    
    (170.1
    )
    
    
    (1,177.1
    )Earnings from Unconsolidated Entities
    
    
    11.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18.0
    
    
    
    
    
    
    
    29.1Earnings (Loss) from
Continuing Operations
Before Income Tax
    
    $
    386.0
    
    
    $
    111.1
    
    
    $
    80.2
    *
    
    $
    26.6
    
    
    $
    29.4
    
    
    $
    (122.6
    )
    
    $
    510.7




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



|+ |  | Includes corporate general and administrative expenses only.
|- |  | ------------------------------------------------------------

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##### Table of Contents



(M) INCOME TAXES

Income tax expense, excluding taxes related to cumulative effect of a
change in accounting principle, for the Company increased from $66.6 million to
$97.1 million and the effective tax rate increased from approximately 30.0% to
32.8% for the three months ended December 31, 2002 and 2003, respectively.
Income tax expense, excluding taxes related to cumulative effect of a change in
accounting principle, also increased from $153.4 million to $262.4 million and
the effective tax rate increased from approximately 30.0% to 32.7% for the nine
months ended December 31, 2002 and 2003, respectively. The increase in the
effective tax rate is primarily the result of the expected decrease in the
availability of net operating loss carryforwards during fiscal 2004 compared to
fiscal 2003.

(N) DERIVATIVES AND HEDGING

The Company is exposed to the risk of interest rate fluctuations on its
debt and other obligations. As part of its strategy to manage the obligations
that are subject to changes in interest rates, the Company has entered into
various interest rate swap agreements, designated as cash flow hedges. The
swap agreements are recorded at their fair value in Other Assets or Accrued
Liabilities in the consolidated balance sheets. To the extent the hedging
relationship is effective, gains or losses in the fair value of the derivative
are deferred as a component of Stockholders Equity through Other Comprehensive
(Loss) Income. Fluctuations in the fair value of the ineffective portion of
the derivative are reflected in the current period earnings, although such
amounts are insignificant.

At December 31, 2003, Centex Corporation has an interest rate swap
agreement that, in effect, fixes the variable interest rate on $25 million of
its outstanding debt at 6.7% and expires in October 2005. During the three and
nine months ended December 31, 2003, the hedge related to this derivative was
effective. Amounts to be received or paid under the swap agreement are
recognized as a change in interest incurred on the related debt instrument.
Based on the balance in Accumulated Other Comprehensive Income at December 31,
2003 related to this derivative, the Company estimates increases in interest
incurred over the next 12 months to be approximately $1.4 million. As of
December 31, 2003, the balance in Accumulated Other Comprehensive Income
related to this derivative was $2.4 million ($1.6 million net of tax).

Financial Services, through Home Equity, uses interest rate swaps to hedge
the market risk associated with the anticipated issuance of fixed rate
securitization debt used to finance sub-prime mortgages. At December 31, 2003,
Home Equity had $200 million of these interest rate swap hedging instruments in
place at a weighted-average interest rate of 3.4%. Changes in fair value of
these derivatives are deferred in Accumulated Other Comprehensive (Loss) Income
and recorded through current earnings as an adjustment of the interest incurred
over the life of the securitization debt. Home Equity also uses interest rate
swaps that, in effect, fix the interest rate on its variable interest rate
debt. Amounts to be received or paid as a result of these interest rate swap
agreements are recognized as adjustments to interest incurred on the related
debt instrument. At December 31, 2003, Home Equity was hedging $1.7 billion of
its outstanding debt with these interest rate swaps at a weighted-average
interest rate of 2.1%. These swaps expire at varying times through December
2006. Based on the balance in Accumulated Other Comprehensive Income at
December 31, 2003 related to interest rate hedging activities, the Company
estimates increases in interest incurred over the next 12 months to be
approximately $5.7 million. During the three and nine months ended December
31, 2003, the hedges related to substantially all of Home Equitys interest
rate swaps were effective and the ineffective portion was insignificant. As of
December 31, 2003, the balance in Accumulated Other Comprehensive Income
related to Home Equitys derivatives was $5.9 million ($3.9 million net of
tax).

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##### Table of Contents



Financial Services, through CTX Mortgage Company, LLC and its related
companies, enters into interest rate lock commitments (IRLCs) with its
customers under which CTX Mortgage Company, LLC and its related companies agree
to make mortgage loans at agreed upon rates within a period of time, generally
from 1 to 30 days, if certain conditions are met. Initially, the fair value of
the IRLCs is recorded on the balance sheet in Other Assets or Accrued
Liabilities. Subsequent changes in the fair value of the IRLCs are recorded as
an adjustment to earnings. To hedge the interest rate risk related to its
IRLCs, CTX Mortgage Company, LLC and its related companies executes mandatory
forward trade commitments (i.e., forward trade commitments). CTX Mortgage
Company, LLC and its related companies also executes forward trade commitments
to hedge the interest rate risk related to its portfolio of mortgage loans held
for sale, including mortgage loans held by HSF-I. As discussed in
Note (G), Indebtedness, HSF-I is a variable interest entity that has been consolidated with Financial
Services and the Company effective July 1, 2003, pursuant to FIN 46. In connection with the consolidation of HSF-I, CTX Mortgage Company,
LLC and its related companies elected as of July 1, 2003 to utilize hedge
accounting treatment under Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities, (SFAS No.
133) for these forward trade commitments. These forward trade commitments
have been designated as fair value hedges. Accordingly, changes in the fair
value of the forward trade commitments and the mortgage loans hedged by these
commitments are recorded as an adjustment to earnings. To the extent the hedge
is effective, gains or losses in the value of the hedged loans due to interest
rate movement will be offset by an equal and opposite gain or loss in the value
of the forward trade commitment. This will result in net zero impact to
earnings. To the extent the hedge contains some ineffectiveness, the
ineffectiveness is recognized immediately in earnings. The amount of hedge
ineffectiveness included in earnings were gains of approximately $500 thousand
and $8 million for the three and nine months ended December 31, 2003,
respectively. The net change in the estimated fair value of derivative
positions not designated as hedges resulted in a loss of approximately $600
thousand and $13 million for the three and nine months ended December 31, 2003.

(O) RELATED PARTY TRANSACTIONS

At December 31, 2003 and March 31, 2003, Centex Homes had $4.9 million and
$7.2 million, respectively, deposited with the Partnership as option deposits
for the purchase of land. Centex Homes also entered into agreements to
reimburse the Partnership for certain costs and fees incurred by the
Partnership in the purchase and ownership of these tracts of land. During the
three months ended December 31, 2003 and 2002, Centex Homes paid $0.5 million
and $1.0 million, respectively, to the Partnership in fees and reimbursements
pursuant to these agreements and $5.4 million and $3.3 million, respectively,
for the purchase of residential lots. During the nine months ended December
31, 2003 and 2002, Centex Homes paid $1.6 million and $2.6 million,
respectively, to the Partnership in fees and reimbursements pursuant to these
agreements and $19.0 million and $27.4 million, respectively, for the purchase
of residential lots. Centex Homes expects to pay an additional $14.9 million
to the Partnership to complete the purchase of these tracts of land.

Construction Services has historically executed construction contracts
with the Partnership. At March 31, 2003, contracts for the construction of two
industrial facilities were completed and no additional contracts were
outstanding. At December 31, 2003, a $9.7 million contract for the
construction of an office building had been executed with the Partnership and
was outstanding. During the three months ended December 31, 2003 and 2002, the
Partnership paid $3.1 million and $0.6 million, respectively, to Construction
Services pursuant to these contracts. During the nine months ended December
31, 2003 and 2002, the Partnership paid $3.6 million and $5.3 million,
respectively, to Construction Services pursuant to these contracts.

26



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##### Table of Contents



During the nine months ended December 31, 2003, the Partnership issued
2,812 Class C Units to Centex Homes in exchange for land with a fair market
value of $2.8 million.

During the nine months ended December 31, 2003, a subsidiary of the
Partnership entered into a lease agreement (the Lease) with a Company
subsidiary for 160,000 square feet of office space currently under construction
in Lewisville, Texas. The Lease is for a ten-year primary term commencing upon
the date that the premises is ready for occupancy.

(P) RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FIN 46, which modified the
accounting for certain entities in which (1) equity investors do not have a
controlling financial interest and/or (2) the entity is unable to finance its
activities without additional subordinated financial support from other
parties. FIN 46 applied immediately for certain disclosure
requirements and to variable interest entities created, or in which an
enterprise obtains an interest, after January 31, 2003. For certain variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003, FIN 46 applies to interim or
annual periods ending after March 15, 2004. At December 31, 2003, the Company
has interests in the Partnership, HSF-I, land option agreements and certain
joint ventures that are or may be affected by this interpretation. Variable
interest entities owned or acquired before February 1, 2003 are: the
Partnership, HSF-I, certain land option agreements and joint ventures. The
Company has completed its analysis of the effects of FIN 46 on
HSF-I, as explained in Note (G), Indebtedness. The Company continues to
evaluate the impacts of FIN 46 on land option agreements and joint
ventures entered into prior to February 1, 2003. In accordance with FIN 46, the nature of these entities operations, the Companys potential
maximum exposure related to these entities and the applicability of
FIN 46 to these entities are discussed as follows:

The Partnership
    
    Financial statements filed with this ReportNote (H), Centex Development Company, L.P.HSF-I
    
    Note (G), IndebtednessLand Option Agreements
    
    Note (J), Land Held Under Option Agreements notOwned and Other Land DepositsJoint Ventures
    
    Note (I), Commitments and Contingencies


In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, (SFAS No. 149). The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under SFAS No. 133 by requiring that contracts with comparable characteristics
be accounted for similarly, resulting in more consistent reporting of contracts
as either derivatives or hybrid instruments. A portion of this statement is
effective for contracts entered into or modified and for hedging relationships
designated after June 30, 2003. The remainder of this statement codifies
previously issued SFAS No. 133 implementation guidance, which retains its
original effective dates. The implementation of SFAS No. 149 did not have a
material impact on the Companys results of operations or financial position.

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

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##### Table of Contents



2003, FASB deferred indefinitely certain provisions of this
Statement pertaining to non-controlling interests in limited life entities.
The implementation of the provisions of SFAS No. 150 which are effective did
not have an impact on the Companys results of operations or financial
position.

The SEC is currently considering issuance of a Staff Accounting Bulletin
(SAB) that would modify the Companys accounting for interest rate lock
commitments (IRLCs). In accordance with Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, CTX Mortgage Company, LLC currently marks its IRLCs to market with
the resulting gains and losses recognized in income. The proposed SAB may
require that IRLCs be recognized as liabilities, with offsetting entries to
expense accounts, through loan settlement. It is anticipated the SAB will
apply to all IRLCs originated in the first reporting period beginning after
March 15, 2004. This proposed SAB would not have a material effect on the
Companys financial position or results of operations. The proposed SAB would
not have any impact on the Companys cash flow, but it could impact the timing
of revenue recognition for the Financial Services segment. The Company will
continue to monitor this issue for additional developments and potential impact
on the Companys financial statements.

(Q) OFF-BALANCE SHEET OBLIGATIONS

The Company enters into various off-balance sheet transactions in the
normal course of business in order to reduce financing costs and improve access
to liquidity, facilitate homebuilding activities and manage exposure to
changing interest rates. Further discussion regarding these transactions can
be found above in Note (H), Centex Development Company, L.P., Note (I),
Commitments and Contingencies, and Note (J), Land Held Under Option
Agreements Not Owned and Other Land Deposits.

(R) SPIN-OFF OF MANUFACTURED HOUSING

In June 2003, the Company spun off substantially all of its manufactured
housing operations, which had previously been included in the Other segment.
As a result of the spin-off, the manufactured housing operations earnings have
been reclassified to discontinued operations in the statements of consolidated
earnings, and any assets or liabilities related to these discontinued
operations have been disclosed separately on the consolidated balance sheets.
All prior period information related to these discontinued operations has been
reclassified to be consistent with the December 31, 2003 presentation. All
assets related to these discontinued operations that remain with the Company at
December 31, 2003 are in the process of being sold and/or disposed.
Discontinued operations had no revenues for the three months ended December 31,
2003 versus $35.0 million for the same period last year. For the three months
ended December 31, 2003 and 2002, discontinued operations had operating
earnings (loss) of $(513) thousand and $1.2 million, respectively. For the nine
months ended December 31, 2003 and 2002, discontinued operations had revenues
of $45.7 million and $104.0 million, respectively, and operating earnings
(loss) of $(133) thousand and $2.9 million, respectively.

(S) SUBSEQUENT EVENTS

Spin-off of Centex Construction Products, Inc.

In 2003, the Company reached an agreement with Centex
Construction Products, Inc. (CXP) to distribute the Companys entire equity
interest in CXP to the Companys stockholders and received a
private letter ruling from the Internal Revenue Service confirming
that this transaction would be tax-free to the Company and its
stockholders. The distribution was
subject to the approval by CXP stockholders of the reclassification of CXPs common stock into two classes. On January 8,
2004, the stockholders of CXP

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approved the reclassification of CXPs common
stock and eight other proposals including a proposal to change CXPs name to
Eagle Materials Inc. CXPs board of
directors also declared a special one-time cash dividend of $6 per share to all of
its stockholders (including the Company) immediately prior to the spin-off.
The record date for the cash dividend was January 13, 2004 and payment was made
on January 29, 2004. The Company received $71.8 million of this dividend.

On January 30, 2004, the Company distributed all of its CXP common stock
to stockholders of record as of January 14, 2004. For each share of Centex
stock owned on the record date, Centex stockholders received approximately .044322 shares of CXP common stock and .149019 shares of CXP Class B common
stock, for a total of approximately .193341 shares of CXP stock. The Company
will record the spin-off of its equity investment in CXP as a dividend based
upon the carrying value of the Companys investment in CXP on January 30, 2004.
As of December 31, 2003, the Companys investment in CXP was $323.1 million.

The pro
forma condensed consolidated statement of earnings presented below assumes that the spin-off of
CXP, and the related cash dividend to its stockholders, occurred on
April 1, 2003, and the pro forma condensed consolidated balance sheet
assumes that the spin-off and related cash dividend occurred on December 31, 2003.

The pro forma condensed consolidated financial statements are presented
for informational purposes only and do not reflect the historical results of
operations or financial position of the Company or CXP. The pro forma data
also does not purport to project the financial position or results of
operations of the Company or CXP as of any future date or for any future
period.

The pro
forma adjustments, which reflect the spin-off and elimination of
CXP from the Companys consolidated financial statements and related cash
dividend, to the historical
condensed consolidated statement of earnings and consolidated balance sheet are
set forth below.

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Supplementary Pro Forma Condensed Consolidated Balance Sheet of Centex
Corporation and Subsidiaries (unaudited)

As Reported
    
    
    
    
    
    
    Pro FormaDecember 31,
    
    
    Pro Forma
    
    
    December 31,2003
    
    
    Adjustments
    
    
    2003AssetsCash and Cash Equivalents
    
    $
    81,579
    
    
    $
    42,398
    *
    
    $
    123,977Restricted Cash
    
    
    288,278
    
    
    
    
    
    
    
    288,278Receivables
    
    
    8,383,661
    
    
    
    (42,578
    )
    
    
    8,341,083Inventories
    
    
    5,043,484
    
    
    
    (44,049
    )
    
    
    4,999,435Investments in Joint Ventures and Other
    
    
    475,602
    
    
    
    (50,150
    )
    
    
    425,452Property and Equipment, net
    
    
    636,581
    
    
    
    (485,664
    )
    
    
    150,917Other Assets
    
    
    665,556
    
    
    
    30,852
    
    
    
    696,408Assets of Discontinued Operations
    
    
    5,172
    
    
    
    
    
    
    
    5,172$
    15,579,913
    
    
    $
    (549,191
    )
    
    $
    15,030,722Liabilities and Stockholders EquityAccounts Payable and Accrued Liabilities
    
    $
    1,743,096
    
    
    $
    (66,051
    )
    
    $
    1,677,045Short-term Debt
    
    
    3,201,967
    
    
    
    
    
    
    
    3,201,967Long-term Debt
    
    
    7,001,685
    
    
    
    (160
    )
    
    
    7,001,525Minority Stockholders Interest
    
    
    509,393
    
    
    
    (197,430
    )
    
    
    311,963Stockholders Equity
    
    
    3,123,772
    
    
    
    (285,550
    )
    
    
    2,838,222$
    15,579,913
    
    
    $
    (549,191
    )
    
    $
    15,030,722




|* |  |  | Reflects the elimination of CXP cash and cash equivalents and the Companys
receipt of a $71.8 million cash dividend from CXP.
|- |  |  | ------------------------------------------------------------------------------------------------------------------------------

Supplementary Pro Forma Condensed Consolidated Statement of Earnings of Centex
Corporation and Subsidiaries (unaudited)



For the
Nine MonthsEnded
December 31,As Reported
    
    
    Pro Forma
    
    
    Pro
Forma2003
    
    
    Adjustments
    
    
    2003Revenues
    
    $
    7,551,170
    
    
    $
    (380,358
    )
    
    $
    7,170,812Cost and Expenses
    
    
    6,818,780
    
    
    
    (349,178
    )
    
    
    6,469,602Earnings from Unconsolidated Entities and
Other
    
    
    70,900
    
    
    
    (18,909
    )
    
    
    51,991Earnings Before Income Taxes
    
    
    803,290
    
    
    
    (50,089
    )
    
    
    753,201Income Taxes
    
    
    262,355
    
    
    
    (29,224
    )
    
    
    233,131Earnings from Continuing Operations
    
    $
    540,935
    
    
    $
    (20,865
    )
    
    $
    520,070


Subsequent to the spin-off, the Company will report CXP as a discontinued
operation in its consolidated financial statements. In connection with the
tax-free distribution, the Company will recognize as a component of
discontinued operations, a tax benefit of $36.5 million. The tax benefit is a
result of the reversal of deferred tax liabilities for the difference between
the financial carrying amount of the Companys investment in CXP and its
respective tax basis which are not required given the tax-free nature of the
distribution. Also, in connection with the spin-off, the Company modified all
of its stock options outstanding on January 30, 2004, in order to keep the
holders in the same economic position as before the spin-off. The

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modification
resulted in a reduction of the exercise price and an increase in the number of
shares. This adjustment will be accounted for in accordance with the Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, and accordingly, compensation expense of $12.1 million will be
expensed over the remaining vesting periods.

Stock Split

On
November 18, 2003, the Board of Directors of Centex approved a
2-for-1 split of its common stock, to be effected in the form of a 100% stock
dividend. The stock split is subject to the stockholders approval of an
increase in Centexs authorized common stock from 100 million to 300
million shares and to final approval of the stock split by the
Executive Committee of the Board of Directors. A special meeting
of stockholders is scheduled for February 25, 2004 to vote on the increase in
authorized shares. Subject to stockholder approval of the increase in
authorized common shares and final approval of the stock split by the Executive
Committee of the Board of Directors, Centex plans to pay the stock
dividend on March 12, 2004 to stockholders of record on February 29, 2004. In
connection with the stock split, Centex has also indicated that the annual
cash dividend will remain at $0.16 per share.

(T) RECLASSIFICATIONS

Certain prior year balances have been reclassified to be consistent with
the December 31, 2003 presentation.

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

For the three months ended December 31, 2003, our consolidated revenues
were $2.65 billion, an 18.2% increase over $2.24 billion for the same period
last year. Earnings from continuing operations before income taxes were $296.1
million, 33.6% higher than $221.6 million for the same period last year. For
the nine months ended December 31, 2003, our consolidated revenues were $7.55
billion, a 23.8% increase over $6.10 billion for the same period last year.
Earnings from continuing operations before income taxes and cumulative effect
of a change in accounting principle were $803.3 million, 57.3% higher than
$510.7 million for the same period last year. The changes in our revenues and
earnings from continuing operations before income taxes and cumulative effect
of a change in accounting principle are explained below by segment. The
principal reasons for the increases in consolidated revenues and earnings from
continuing operations before income taxes and cumulative effect of a change in
accounting principle are the continued growth of our Home Building
operations and
continued growth in Home Equitys servicing portfolio. Additionally, for the
nine months ended December 31, 2003, the increase in revenues and operating
earnings is reflective of a substantial increase in CTX Mortgage Company, LLCs
refinancing activity as compared to the prior year. However, refinance activity
decreased in the three month period ended December 31, 2003, as compared to the
prior year.

Earnings from continuing operations for the three months ended December
31, 2003 were $199.0 million, 28.3% higher than $155.1 million for the same
period last year. Earnings from continuing operations before cumulative effect
of a change in accounting principle for the nine months ended December 31, 2003
were $540.9 million, 51.4% higher than $357.3 million for the same period last
year. The increase in earnings from continuing operations before cumulative
effect of a change in accounting principle is less than the increase in
earnings from continuing operations before income taxes and cumulative effect
of a change in accounting principle due to an increase in our effective tax
rate. Our effective tax rate related to continuing operations increased to
32.8% and 32.7% for the three months and nine months ended December 31, 2003
from 30.0% for the same periods last year. The increase in the effective tax
rate is primarily the result of the expected decrease in the availability of
net operating loss carryforwards during fiscal 2004 compared to fiscal 2003.

Any reference herein to we, us or our includes Centex Corporation and its
subsidiary companies.

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##### Table of Contents



HOME BUILDING

The following summarizes the results of our Home Building operations for
the three and nine months ended December 31, 2003 compared to the same periods
last year (dollars in millions, except per unit data):

For the Three Months Ended December 31,2003
    
    
    2002% of Revenues
    
    
    
    
    
    % of RevenuesRevenues  Housing
    
    $
    1,832.4
    
    
    
    96.1
    %
    
    $
    1,431.4
    
    
    
    98.3
    %Revenues  Land Sales and Other
    
    
    73.9
    
    
    
    3.9
    %
    
    
    25.4
    
    
    
    1.7
    %Cost of Sales  Housing
    
    
    (1,340.9
    )
    
    
    (70.3
    %)
    
    
    (1,075.0
    )
    
    
    (73.8
    %)Cost of Sales  Land Sales and Other
    
    
    (70.0
    )
    
    
    (3.7
    %)
    
    
    (24.7
    )
    
    
    (1.7
    %)Selling, General and Administrative Expenses
    
    
    (266.1
    )
    
    
    (14.0
    %)
    
    
    (209.7
    )
    
    
    (14.4
    %)Earnings from Unconsolidated Entities
    
    
    20.9
    
    
    
    1.1
    %
    
    
    11.7
    
    
    
    0.8
    %Operating Earnings
    
    $
    250.2
    
    
    
    13.1
    %
    
    $
    159.1
    
    
    
    10.9
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    7,468
    
    
    
    14.7
    %
    
    
    6,509
    
    
    
    16.9
    %Average Unit Sales Price
    
    $
    245,370
    
    
    
    11.6
    %
    
    $
    219,909
    
    
    
    3.5
    %Operating Earnings Per Unit
    
    $
    33,505
    
    
    
    37.1
    %
    
    $
    24,442
    
    
    
    9.5
    %Backlog Units
    
    
    14,775
    
    
    
    17.9
    %
    
    
    12,527
    
    
    
    32.2
    %Ending Operating Neighborhoods
    
    
    560
    
    
    
    6.9
    %
    
    
    524
    
    
    
    11.7
    %


For the Nine Months Ended December 31,2003
    
    
    2002% of Revenues
    
    
    
    
    
    % of RevenuesRevenues  Housing
    
    $
    4,997.6
    
    
    
    97.6
    %
    
    $
    3,762.2
    
    
    
    97.9
    %Revenues  Land Sales and Other
    
    
    122.3
    
    
    
    2.4
    %
    
    
    82.4
    
    
    
    2.1
    %Cost of Sales  Housing
    
    
    (3,672.8
    )
    
    
    (71.7
    %)
    
    
    (2,815.2
    )
    
    
    (73.2
    %)Cost of Sales  Land Sales and Other
    
    
    (125.2
    )
    
    
    (2.5
    %)
    
    
    (68.9
    )
    
    
    (1.8
    %)Selling, General and Administrative Expenses
    
    
    (732.6
    )
    
    
    (14.3
    %)
    
    
    (585.6
    )
    
    
    (15.2
    %)Earnings from Unconsolidated Entities
    
    
    23.4
    
    
    
    0.5
    %
    
    
    11.1
    
    
    
    0.2
    %Operating Earnings
    
    $
    612.7
    
    
    
    12.0
    %
    
    $
    386.0
    
    
    
    10.0
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    20,723
    
    
    
    19.8
    %
    
    
    17,292
    
    
    
    9.2
    %Average Unit Sales Price
    
    $
    241,162
    
    
    
    10.8
    %
    
    $
    217,568
    
    
    
    2.4
    %Operating Earnings Per Unit
    
    $
    29,564
    
    
    
    32.5
    %
    
    $
    22,320
    
    
    
    7.9
    %Backlog Units
    
    
    14,775
    
    
    
    17.9
    %
    
    
    12,527
    
    
    
    32.2
    %Ending Operating Neighborhoods
    
    
    560
    
    
    
    6.9
    %
    
    
    524
    
    
    
    11.7
    %


Revenues for the three and nine months ended December 31, 2003 increased
30.9% and 33.2%, respectively, versus the same periods last year primarily due
to an increase in units closed and higher unit sales prices as outlined above.
The increase in units closed of 14.7% and 19.8% for the three and nine months
ended December 31, 2003, was due to a higher number of operating neighborhoods
in the current year coupled with an increase in units closed per neighborhood
versus last year. The increase in the unit sales price was due to general
price increases, a shift at the neighborhood level to a higher priced product,
and the California markets, which generally have higher unit prices, making up
a greater percentage of total closings as compared to last year.

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The relief of capitalized interest is included in Home Buildings cost of
sales. Capitalized interest relieved was $28.5 million and $12.5 million for
the three months ended December 31, 2003 and 2002, respectively, and $56.4
million and $31.3 million for the nine months ended December 31, 2003 and 2002,
respectively.

Housing margin, defined as housing revenues less housing cost of sales,
was 26.8% and 26.5% of housing revenues for the three and nine months ended
December 31, 2003, respectively, compared to 24.9% and 25.2% of housing
revenues for the same periods last year. The increase in housing margin for
the three months ended December 31, 2003 can be attributed to the average unit
sales price increase of 11.6%, as noted above, combined with Home Buildings
continued focus on reducing construction costs and increasing productivity.

Selling, general and administrative expenses for the three months ended
December 31, 2003 were $266.1 million, or 14.0% of revenues, as compared to the
$209.7 million and 14.4% of revenues reported for the same period last year.
Selling, general and administrative expenses for the nine months ended December
31, 2003 were $732.6 million, or 14.3% of revenues, as compared to the $585.6
million and 15.2% of revenues reported for the same period last year. The
dollar increase resulted from incremental expenses associated with closing more
homes; however, compared to the prior year, Home Buildings selling, general and
administrative expenses as a percentage of revenues have decreased
reflective of increased operating leverage.

Operating earnings for the three months ended December 31, 2003 were 13.1%
of revenues and approximately $33,505 on a per-unit basis compared to operating
earnings of 10.9% of revenues and approximately $24,442 on a per-unit basis for
the same period last year. Operating earnings for the nine months ended
December 31, 2003 were 12.0% of revenues and approximately $29,564 on a
per-unit basis compared to operating earnings of 10.0% of revenues and
approximately $22,320 on a per-unit basis for the same period last year. The
increase in operating earnings is a direct result of the increase in housing
margin and Home Buildings leverage of its selling, general and administrative
expenses.

Centex Homes ended its third quarter of fiscal 2004 with a backlog in home
sales of 14,775 units, a 17.9% increase over the 12,527 units at December 31,
2002. The increase in backlog resulted from a 6.9% increase in ending
operating neighborhoods, which helped drive the 14.7% increase in new sales
(orders) versus the prior year for the nine months ended December 31, 2003.
Centex Homes defines backlog units as units that have been sold, as
evidenced by a signed contract, but not closed.

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##### Table of Contents



FINANCIAL SERVICES

The Financial Services segment is primarily engaged in the residential
mortgage banking business, as well as in other financial services that are in
large part related to the residential mortgage market. Its operations include
mortgage origination, servicing and other related services for purchasers of
homes sold by our Home Building operations and other homebuilders, as well as
sub-prime home equity lending and the sale of title insurance and various other
insurance coverages. The following summarizes Financial Services results for
the three and nine months ended December 31, 2003 compared to the same periods
last year (dollars in millions):

For the Three Months Ended December 31,2003
    
    
    2002Revenues
    
    $
    238.2
    
    
    $
    223.1Interest Margin
    
    $
    78.1
    
    
    $
    44.7Operating Earnings
    
    $
    43.7
    
    
    $
    50.2Origination Volume
    
    $
    3,891
    
    
    $
    4,852Number of Loans OriginatedCTX Mortgage Company, LLCCentex-built Homes (Builder)
    
    
    5,138
    
    
    
    4,380Non-Centex-built Homes (Retail)
    
    
    11,657
    
    
    
    20,60716,795
    
    
    
    24,987Centex Home Equity Company, LLC
    
    
    9,185
    
    
    
    8,04925,980
    
    
    
    33,036


CTX Mortgage
    
    
    Centex Home EquityCompany, LLC
    
    
    Company, LLCFor the Three Months
    
    
    For the Three MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Average Interest Earning Assets
    
    $
    1,462.7
    
    
    $
    187.9
    
    
    $
    5,855.8
    
    
    $
    4,040.0Average Yield
    
    
    5.66
    %
    
    
    6.11
    %
    
    
    8.02
    %
    
    
    8.69
    %Average Interest Bearing Liabilities
    
    $
    1,343.9
    
    
    $
    122.8
    
    
    $
    6,109.6
    
    
    $
    4,206.8Average Rate Paid
    
    
    1.67
    %
    
    
    2.72
    %
    
    
    3.37
    %
    
    
    4.23
    %


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##### Table of Contents



For the Nine Months Ended December 31,2003
    
    
    2002Revenues
    
    $
    795.6
    
    
    $
    608.4Interest Margin
    
    $
    215.6
    
    
    $
    120.7Operating Earnings
    
    $
    185.8
    
    
    $
    111.1Origination Volume
    
    $
    14,786
    
    
    $
    11,773Number of Loans OriginatedCTX Mortgage Company, LLCCentex-built Homes (Builder)
    
    
    14,307
    
    
    
    11,717Non-Centex-built Homes (Retail)
    
    
    56,016
    
    
    
    49,08970,323
    
    
    
    60,806Centex Home Equity Company, LLC
    
    
    27,768
    
    
    
    21,78198,091
    
    
    
    82,587


CTX Mortgage
    
    
    Centex Home EquityCompany, LLC
    
    
    Company, LLCFor the Nine Months
    
    
    For the Nine MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Average Interest Earning Assets
    
    $
    1,360.2
    
    
    $
    183.1
    
    
    $
    5,367.4
    
    
    $
    3,712.0Average Yield
    
    
    5.99
    %
    
    
    6.98
    %
    
    
    8.18
    %
    
    
    8.85
    %Average Interest Bearing Liabilities
    
    $
    1,258.9
    
    
    $
    123.2
    
    
    $
    5,596.9
    
    
    $
    3,864.1Average Rate Paid
    
    
    1.57
    %
    
    
    2.84
    %
    
    
    3.56
    %
    
    
    4.52
    %


Financial Services results are primarily derived from conforming mortgage
banking and sub-prime home equity lending operations as described below.

Conforming Mortgage Banking

The revenues and operating earnings of CTX Mortgage Company, LLC and its
related companies are derived primarily from the sale of mortgage loans,
inclusive of all servicing rights and, to a lesser extent, interest income and
other fees. CTX Mortgage Company, LLC and its related companies business
strategy of selling conforming loans reduces our capital investment and related
risks, provides substantial liquidity and is an efficient process given the
size and maturity of the conforming mortgage loan secondary capital markets.
CTX Mortgage Company, LLC originates mortgage loans, holds them for a short
period and sells them to Harwood Street Funding I, LLC, or HSF-I, and
investors. HSF-I is a variable interest entity for which the Company is the
primary beneficiary and as of July 1, 2003, is consolidated with the Companys
financial statements. As a result of the consolidation of HSF-I, the Company
recorded a cumulative effect of a change in accounting principle of $13.3
million, net of tax, in the quarter ended September 30, 2003. This cumulative
effect of a change in accounting principle primarily represents the deferral of
servicing release premium income offset to a lesser extent by the deferral of
certain loan origination costs, which will be recognized as loans are sold into
the secondary market. The consolidation of HSF-I resulted in an increase in the
Companys residential mortgage loans held for sale with a corresponding
increase in the Companys debt of

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##### Table of Contents



approximately $1.3 billion at December 31, 2003. HSF-I purchases mortgage
loans from CTX Mortgage Company, LLC with the proceeds from the issuance of
securitized term debt, secured liquidity notes and subordinated certificates
that are extendable for up to five years. Because HSF-I is a consolidated
entity, the debt, interest income and interest expense of HSF-I are reflected
in the Companys financial statements at December 31, 2003. CTX Mortgage
Company, LLC and its related companies sold $3.55 billion and $13.13 billion of
mortgage loans to investors for the three and nine months ended December 31,
2003, respectively. CTX Mortgage Company, LLC sold $4.24 billion and $10.15
billion of mortgage loans to HSF-I and other investors during the three months
and nine months ended December 31, 2002, respectively. CTX Mortgage Company,
LLC and its related companies recognized gains on the sale of mortgage loans of
$29.2 million and $60.7 million for the three months ended December 31, 2003
and 2002, respectively. For the nine months ended December 31, 2003 and 2002,
gains on the sale of mortgage loans were $186.6 million and $182.2 million,
respectively.

Revenues decreased 13.5% to $104.2 million for the three months ended
December 31, 2003 as compared to the same period last year. This decrease is
primarily related to a decrease in loans originated for refinancing.
Refinanced mortgages accounted for 35% of originations for the three months
ended December 31, 2003, as compared to 54% for the same period last year. The
impact on revenues of this decrease in production was partially offset by an
increase in the recognized servicing fee component of gains on sale of
mortgages. Revenues increased 29.8% to $412.9 million for the nine months
ended December 31, 2003, as compared to the same period last year. The
increase in revenues for the nine month period is primarily related to an
increase in CTX Mortgage Company, LLC originations due to an increase in
mortgage loans originated for refinancing for the nine month period and
mortgage loans originated for Centex Homes buyers, to a lesser extent higher
revenues from Title and Insurance operations and a net increase in the
servicing fee component of gains on sale of mortgages which is deferred until
final mortgage loan settlement. Refinanced mortgages accounted for 46% of
originations for the nine months ended December 31, 2003, as compared to 40%
for the same period last year. CTX Mortgage Company, LLCs capture rate of
Centex Homes buyers was 74% for the three and nine months ended December 31,
2003, and 73% for the three and nine months ended December 31, 2002.

For the three months ended December 31, 2003, originations totaled 16,795
compared to 24,987 originations in the same period last year; loan volume was
$2.89 billion compared to $4.15 billion for the same period last year; the
per-loan profit was $1,597, an increase of 4.4% compared to $1,529 for the same
period last year and total mortgage applications decreased 41.3% to 13,681 from
23,292 applications for the same period last year. The per-loan profit for the
three months ended December 31, 2003 increased slightly due to an increase in
the recognized servicing fee component of gains on sale of mortgages partially
offset by decreased operational leverage as a result of the decrease in the
volume of originations. For the nine months ended December 31, 2003,
originations totaled 70,323 compared to 60,806 originations in the same period
last year; loan volume was $11.88 billion compared to $9.97 billion for the
same period last year; the per-loan profit was $1,927, an increase of 49.7%
compared to $1,287 for the same period last year and total mortgage
applications increased 6.7% to 67,396 from 63,161 applications for the same
period last year. For the nine months ended December 31, 2003, per-loan profit
increased due to increased operational leverage as a result of the increase in
the volume of originations, to a lesser extent an increase in Title and
Insurance earnings, and an increase in the recognized servicing fee component
of gains on sale of mortgages.

CTX Mortgage Company, LLC and its related companies selling, general and
administrative expenses decreased $9.7 million to $71.2 million for the three
months ended December 31, 2003. This decrease was primarily due to decreased
employee related costs and overhead resulting from the decreased volume in loan
originations. Selling, general and administrative expenses increased $21.8
million to $256.7 million for the

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nine months ended December 31, 2003. This increase was primarily due to
increased employee related costs and overhead related to the increased volume
in loan originations as compared to the nine month period in the prior year.

CTX Mortgage Company, LLC and its related companies operating earnings
were $26.9 million for the three months ended December 31, 2003, a 29.6%
decrease as compared to the same period last year. This decrease is primarily
due to the decrease in loan originations discussed above. Operating earnings
were $138.9 million for the nine months ended December 31, 2003, a 77.4%
increase as compared to the same period last year. This increase in operating
earnings is primarily due to the increase in revenues discussed above and a
decrease in the cost per loan originated.

In the normal course of its activities, CTX Mortgage Company, LLC and its
related companies carry inventories of loans pending sale to investors and earn
an interest margin, which we define as the difference between interest revenue
on mortgage loans held for sale or investment and interest expense on debt used
to fund the mortgage loans. CTX Mortgage Company, LLC uses HSF-I and other
short-term mortgage warehouse facilities to finance these inventories of loans.
CTX Mortgage Company, LLC and its related companies interest margin increased
from $1.4 million to $12.1 million and from $5.4 million to $35.7 million for
the three and nine months ended December 31, 2003, respectively, as compared to
the same periods last year. These increases are primarily due to the inclusion
in the Companys results of HSF-I interest income and interest expense,
beginning July 1, 2003, as required under the provisions of FIN 46.
Interest margin contributed by HSF-I during the three months ended December
31, 2003 totaled $10.5 million. Interest margin contributed by HSF-I from July
1, 2003 through December 31, 2003 totaled $29.9 million. Prior to July 1,
2003, HSF-Is interest margin was included as a component of Financial
Services revenue as a result of the interest rate swap with HSF-I.

The results of operations of CTX Mortgage Company, LLC and its related
companies depend to a significant extent on the level of interest rates. Any
significant increases in mortgage rates above currently prevailing levels could
adversely affect the volume of loan originations and may result in a
significant curtailment of refinancing activity. There can be no assurance
that mortgage rates will remain at the current level in the future.

Sub-Prime Home Equity Lending

The revenues of Home Equity, increased 30.6% to $134.0 million and 31.8%
to $382.7 million for the three and nine months ended December 31, 2003,
respectively, as compared to the same periods last year, as a result of
continued growth in Home Equitys portfolio of residential mortgage loans held
for investment. Interest margin increased to $66.0 million and $179.9 million
for the three and nine months ended December 31, 2003, respectively, as
compared to $43.3 million and $115.3 million for the same periods last year.
The increase in interest margin is primarily a result of an increase in the
portfolio of mortgage loans held for investment and a decrease in interest
rates on debt used to fund mortgage loans. Home Equity reported operating
earnings of $16.8 million and $46.9 million for the three and nine months ended
December 31, 2003, respectively, as compared to operating earnings of $12.0
million and $34.4 million for the same periods last year. The increase in Home
Equitys operating earnings is primarily the result of the increase in interest
margin, as noted above. Interest income will be positively affected as the
portfolio of mortgage loans held for investment increases. The increase in
interest margin was partially offset by an increase in servicing and production
costs, mostly attributable to loan volume and loan servicing growth, and an
increase in the provision for losses on residential mortgage loans held for
investment. Home Equitys selling, general and administrative expenses
increased $19.6 million to $65.7 million and $61.5 million to $186.5 million
for the

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three and nine months ended December 31, 2003, respectively, as a result
of Home Equitys growth. Home Equitys increase in loan production volume, the
expansion of its branch offices and the increase in the number of its employees
has resulted in a corresponding increase in salaries and related costs, rent
expense, group insurance costs and advertising expenditures of approximately
$7.9 million and $28.6 million for the three and nine months ended December 31,
2003, respectively. The remainder of the increase was due to higher charges to
the provision for loan losses, as discussed below.

For the three and nine months ended December 31, 2003, respectively,
originations totaled 9,185 and 27,768 compared to 8,049 and 21,781 originations
for the same periods last year; origination volume was $1.0 billion and $2.91
billion compared to $703.9 million and $1.80 billion for the same periods last
year and total applications increased 27.4% and 44.1% to 83,518 and 249,817
from 65,534 and 173,315 applications for the same periods last year. For the
nine months ended December 31, 2003, originations increased
27.5% while origination volume increased 61.7% due to an increase in average
loan size. The smaller increase in the number of originations relative to the
larger increase in total applications is reflective of Home Equitys continued
adherence to its credit underwriting guidelines. Average interest earning
assets increased 44.7%, from $3.71 billion in the nine months ended December
31, 2002 to $5.37 billion in the nine months ended December 31, 2003, and the
corresponding average interest bearing liabilities increased 45.1%, from $3.86
billion in the nine months ended December 31, 2002 to $5.60 billion in the nine
months ended December 31, 2003, primarily due to an increase in the volume of
loan originations and an increase in average loan size. The average yield
earned on these assets decreased from 8.85% in the nine months ended December
31, 2002 to 8.18% in the nine months ended December 31, 2003, and the average
rate paid on these liabilities decreased from 4.52% in the nine months ended
December 31, 2002 to 3.56% in the nine months ended December 31, 2003,
primarily due to lower interest rates in fiscal 2004 compared to fiscal 2003.
The fact that the average rate paid on interest bearing liabilities decreased
significantly more than the yield earned on interest earning assets decreased
and the increase in originations noted above led to a 56.0% increase in net
interest margin from $115.3 million in the nine months ended December 31, 2002
to $179.9 million in the nine months ended December 31, 2003.

At December 31, 2003, Home Equitys total servicing portfolio consisted of
84,608 loans totaling $6.75 billion compared to 70,850 loans totaling $5.07
billion at December 31, 2002. For the three and nine months ended December 31,
2003, service fee income related to this servicing was $17.8 million and $49.6
million compared to $13.2 million and $37.6 million, respectively, for the same
periods last year.

The primary risks in Home Equitys operations are consistent with those of
the financial services industry and include credit risk associated with its
loans, liquidity risk related to funding its loans and interest rate risk prior
to securitization of the loans. In addition, as Home Equity services its
loans, it is also subject to customer prepayment risks.

Allowance for Losses

Home Equity originates and purchases loans in accordance with standard
underwriting criteria. The underwriting standards are primarily intended to
assess the creditworthiness of the borrower and the value of the mortgaged
property and to evaluate the adequacy of the property as collateral for the
home equity loan.

Home Equity establishes an allowance for losses by charging the provision
for losses in the statement of consolidated earnings when it believes a loss
has occurred. When Home Equity determines that a residential mortgage loan
held for investment is partially or fully uncollectible, the estimated loss is
charged

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against the allowance for losses. Recoveries on losses previously charged
to the allowance are credited to the allowance at the time the recovery is
collected.

We believe that the allowance for losses is sufficient to provide for
credit losses in the existing residential mortgage loans held for investment,
which include real estate owned. We evaluate the allowance on an aggregate
basis considering, among other things, the relationship of the allowance to
residential mortgage loans held for investment and historical credit losses.
The allowance reflects our judgment of the present loss exposure at the end of
the reporting period. A range of expected credit losses is estimated using
historical losses, static pool loss curves and delinquency modeling. These
tools take into consideration historical information regarding delinquency and
loss severity experience and apply that information to the portfolio at each
reporting date.

Although we consider the allowance for losses on residential mortgage
loans held for investment reflected in our consolidated balance sheet to be
adequate, there can be no assurance that this allowance will prove to be
sufficient over time to cover ultimate losses. This allowance may prove to be
insufficient due to unanticipated adverse changes in the economy or discrete
events adversely affecting specific customers or industries.

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

December 31, 2003
    
    
    March 31, 2003Balance at Beginning of Period
    
    $
    28,384
    
    
    $
    14,106Provision for Losses
    
    
    56,643
    
    
    
    34,859Recoveries on Loans Charged Off
    
    
    131
    
    
    
    160Losses Sustained
    
    
    (36,701
    )
    
    
    (20,741
    )Balance at End of Period
    
    $
    48,457
    
    
    $
    28,384


December 31, 2003
    
    
    March 31, 2003Allowance as a Percentage of Gross Loans Held for Investment
    
    
    0.79
    %
    
    
    0.61
    %Allowance as a Percentage of 90+ Days Contractual Delinquency
    
    
    29.41
    %
    
    
    23.17
    %90+ Days Contractual DelinquencyTotal Dollars Delinquent
    
    $
    164,761
    
    
    $
    122,479% Delinquent
    
    
    2.69
    %
    
    
    2.62
    %


The increase in the allowance for losses in the current quarter occurred
primarily because the amount of the residential mortgage loans held for
investment increased and the residential mortgage loan portfolio continued to
mature. As the age and size of the residential mortgage loan portfolio
continues to mature and grow, we expect the balance in the allowance for
losses, the loans charged off and the allowance to continue to increase. The
increase in 90+ days contractual delinquency at December 31, 2003 occurred
primarily because the residential mortgage loan portfolio continued to mature.

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CONSTRUCTION PRODUCTS

For
management reporting purposes, Construction Products proportionately
consolidates its 50% share of its cement joint ventures revenues and operating
earnings, which is consistent with the way management receives information from
this segment for making operating decisions and assessing performance. As
explained in Note (S) Subsequent Events on January 30, 2004, the Company
spun-off its equity interest in Construction Products to the Companys
stockholders in a tax-free transaction.

The following summarizes Construction Products results for the three and
nine months ended December 31, 2003 compared to the same periods last year on a
proportional consolidation basis (dollars in millions):

For the Three Months Ended December 31,2003
    
    
    2002Revenues
    
    $
    141.1
    
    
    $
    119.1Cost of Sales and Expenses
    
    
    (110.8
    )
    
    
    (91.9
    )Selling, General and Administrative Expenses
    
    
    (2.1
    )+
    
    
    (1.4
    )Operating Earnings *
    
    $
    28.2
    
    
    $
    25.8




|* |  |  | Before Minority Interest of $9.9 million and $8.1 million for the three
months ended December 31, 2003 and 2002,
respectively.
|- |  |  | ------------------------------------------------------------------------------------------------------------------------------



|+ |  |  | Includes corporate general and administrative expenses only.
|- |  |  | ------------------------------------------------------------

For the Nine Months Ended December 31,2003
    
    
    2002Revenues
    
    $
    440.0
    
    
    $
    383.9Cost of Sales and Expenses
    
    
    (353.3
    )
    
    
    (299.5
    )Selling, General and Administrative Expenses
    
    
    (6.0
    )+
    
    
    (4.2
    )Operating Earnings *
    
    $
    80.7
    
    
    $
    80.2




|* |  |  | Before Minority Interest of $27.4 million and $25.4 million for the three
months ended December 31, 2003 and 2002,
respectively.
|- |  |  | --------------------------------------------------------------------------------------------------------------------------------



|+ |  |  | Includes corporate general and administrative expenses only.
|- |  |  | ------------------------------------------------------------

Construction Products revenues for the three and nine months ended
December 31, 2003 increased 18.5% and 14.6% versus the same periods last year.
These increases were primarily the result of increased sales in all lines of
business for both the three and nine months ended December 31, 2003,
particularly gypsum wallboard.

Construction Products cost of sales for the three and nine months ended
December 31, 2003 increased 20.6% and 18.0%, respectively, over the
same periods last year, primarily due to increased sales volume in all lines of
business, higher maintenance costs for cement manufacturing facilities and
higher energy costs for gypsum wallboard and paperboard. Construction
Products selling, general and administrative expenses as a percentage of
revenues for the three and nine months ended December 31, 2003 remained
relatively consistent with prior year.

For the three months ended December 31, 2003, Construction Products
operating earnings, net of minority interest, increased 9.3% due to increased
paperboard and aggregates operating earnings offset in part by lower operating
earnings of cement and gypsum wallboard.

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##### Table of Contents



CONSTRUCTION SERVICES

The following summarizes Construction Services results for the three and
nine months ended December 31, 2003 compared to the same periods last year
(dollars in millions):

For the Three Months EndedDecember 31,2003
    
    
    2002Revenues
    
    $
    404.2
    
    
    $
    411.1Operating Earnings
    
    $
    3.6
    
    
    $
    9.4New Contracts Executed and Change Orders
    
    $
    561
    
    
    $
    125Backlog of Uncompleted Contracts
    
    $
    1,764
    
    
    $
    1,571


For the Nine Months EndedDecember 31,2003
    
    
    2002Revenues
    
    $
    1,166.6
    
    
    $
    1,163.6Operating Earnings
    
    $
    12.7
    
    
    $
    26.6New Contracts Executed and Change Orders
    
    $
    1,411
    
    
    $
    554Backlog of Uncompleted Contracts
    
    $
    1,764
    
    
    $
    1,571


Construction Services revenues for the three and nine months ended
December 31, 2003 were 1.7% lower and 0.3% higher, respectively, than revenues
for the same periods last year. The variance in revenues was primarily the
result of the stage of execution of construction projects. Operating earnings
for the group decreased 61.7% and 52.3% in the three and nine months ended
December 31, 2003, respectively, compared to the same periods last year
primarily as a result of the prior year including certain high margin
contracts. For the three and nine months ended December 31, 2003, new
contracts executed and change orders increased 348.8% and 154.7% from the same
periods last year, and backlog of uncompleted contracts increased 12.3% from
December 31, 2002. The increase in backlog is primarily due to strategic focus
on core geographical and vertical markets. Construction Services defines
backlog as the uncompleted portion of all signed contracts. In addition to
backlog, Construction Services has been awarded work that is pending execution
of a signed contract. At December 31, 2003 and 2002, such work, which is not
included in backlog, was approximately $1.6 billion and $2.4 billion,
respectively. There is no guarantee that these unsigned contracts will result
in future revenues.

The Construction Services segment provided a positive average net cash
flow in excess of our investment in the segment of $115.8 million and $112.5
million for the three and nine months ended December 31, 2003 compared to
$125.6 million and $119.3 million for the same periods last year.

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INVESTMENT REAL ESTATE

The following summarizes Investment Real Estates results for the three
and nine months ended December 31, 2003 compared to the same periods last year
(dollars in millions):

For the Three Months EndedDecember 31,2003
    
    
    2002Revenues
    
    $
    2.2
    
    
    $
    11.5Earnings from Unconsolidated Entities and Other
    
    $
    10.9
    
    
    $
    14.3Operating Earnings
    
    $
    14.8
    
    
    $
    20.1


For the Nine Months EndedDecember 31,2003
    
    
    2002Revenues
    
    $
    27.6
    
    
    $
    21.1Earnings from Unconsolidated Entities and Other
    
    $
    28.6
    
    
    $
    18.0Operating Earnings
    
    $
    51.9
    
    
    $
    29.4


Investment Real Estates revenues for the three months ended December 31,
2003 were $9.3 million lower than the same period in the prior year. Revenues
for the nine months ended December 31, 2003 were $6.5 million higher than the
same period last year. Operating earnings from Investment Real Estate for the
three and nine months ended December 31, 2003 totaled $14.8 million and $51.9
million, respectively, compared to $20.1 million and $29.4 million in the same
periods last year. The fluctuations in revenues and operating earnings were
primarily related to the timing of property sales and, as discussed below,
fluctuations in results from Investment Real Estates investment in Centex
Development Company, L.P., or the Partnership.

Property sales contributed operating earnings of $2.7 million and $25.3
million for the three and nine months ended December 31, 2003, respectively and
$5.5 million and $7.3 million, respectively for the same periods last year.
The timing of land sales is uncertain and can vary significantly from period to
period.

Included in Investment Real Estates operating earnings for the three and
nine months ended December 31, 2003 were earnings of $11.0 million and $30.6
million, respectively, derived from its investment in the Partnership compared
to earnings of $14.3 million and $18.0 million for the same periods last year.
As noted in Note (H), Centex Development Company, L.P., of the Notes to
Consolidated Financial Statements of Centex, the investment in the Partnership
is not consolidated and is accounted for on the equity method of accounting.

The largest component of the Partnership is its International Home
Building segment, based near London, England. Included in Investment Real
Estates operating earnings were earnings of $10.4 million and $5.6 million for
the three months ended December 31, 2003 and 2002, respectively, and earnings
of $21.6 million and $9.4 million for the nine months ended December 31, 2003
and 2002, respectively, derived from International Home Building. The increase
in earnings from last year was primarily due to an increase in the number of
units closed, an improvement in International Home Buildings operating margins
attributable in large part to an increase in the average sales price per unit.
For the three months ended December 31, 2003 and 2002, this segment closed 422
units at an average sales price per unit of $272,173 and 324 units at an

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##### Table of Contents



average sales price per unit of $239,148, respectively. For the nine
months ended December 31, 2003 and 2002, this segment closed 1,114 units at an
average sales price per unit of $268,039 and 976 units at an average sales
price per unit of $234,673, respectively. Operating earnings per unit were
$25,912 and $19,099 for the three months ended December 31, 2003 and 2002,
respectively. Operating earnings per unit were $20,832 and $11,442 for the
nine months ended December 31, 2003 and 2002, respectively.

It is not currently anticipated that any significant capital will be
allocated to Investment Real Estate for new business development. Through its
investment in the Partnership, Investment Real Estate will focus on the
International Home Building operations and evaluate opportunistic real estate
transactions. Further discussion regarding Investment Real Estates investment
in the Partnership can be found under Note (H), Centex Development Company,
L.P.

On
November 18, 2003, Centex announced that merger agreements were entered into by and among the Partnership, Holding and Centex,
which will end the tandem trading relationship between Centex common
stock and the common stock of Holding, as well as the stockholder
warrants of the Partnership. The mergers will result in the
consolidation of Holding and the Partnership as indirect,
wholly-owned subsidiaries of Centex. The transaction is subject to the approval by Centex stockholders of the termination of the
nominee agreement, and subject to the approval of the stockholders of
Holding. Pursuant to the transaction, the Holding
common stock and the stockholder warrants would be converted into
cash. A joint special meeting of the stockholders of Centex and
Holding is scheduled for February 25, 2004 to vote on these
matters. The Company anticipates this
transaction will be completed prior to March 31, 2004. If such transaction is
not completed prior to March 31, 2004, the Company will consolidate the
Partnership and Holding as of
March 31, 2004, pursuant to the provisions of FIN 46.

OTHER

Our Other segment includes Corporate general and administrative expenses,
interest expense and minority interest. Also included in our Other segment are
the Companys home services operations, which are not material for purposes of
segment reporting. In June 2003, the Company spun off substantially all of its
manufactured housing operations which had previously been included in the Other
segment. As a result of the spin-off, manufactured housing operations are
reflected as a discontinued operation and not included in the segment
information below. Earnings (loss) related to the manufactured housing
operations have been reclassified to discontinued operations.

Other consisted of the following (dollars in millions):

For the Three Months
    
    
    For the Nine MonthsEnded December 31,
    
    
    Ended December 31,2003
    
    
    2002
    
    
    2003
    
    
    2002Operating Loss from Home Services
    
    $
    (0.1
    )
    
    $
    
    
    
    $
    (2.4
    )
    
    $
    (2.5
    )Corporate General and Administrative
Expenses
    
    
    (30.3
    )
    
    
    (13.8
    )
    
    
    (72.0
    )
    
    
    (40.8
    )Interest Expense
    
    
    (4.1
    )
    
    
    (21.0
    )
    
    
    (38.5
    )
    
    
    (52.8
    )Minority Interest
    
    
    (9.9
    )
    
    
    (8.1
    )
    
    
    (27.4
    )
    
    
    (25.4
    )Other
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (1.1
    )$
    (44.4
    )
    
    $
    (43.0
    )
    
    $
    (140.5
    )
    
    $
    (122.6
    )


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Corporate general and administrative
expenses represent corporate employee compensation and other
corporate costs such as investor communications, insurance, rent and
professional services. The increase in corporate general and
administrative expenses is primarily related to compensation
increases reflective of additional personnel to support the growth in
the Company's operations and higher performance-related compensation
levels due to increases in the Company's earnings and returns. In
addition, in the third quarter of fiscal 2004, the Company recorded
an incremental $8.0 million related to the acceleration of certain
executive compensation costs for the March 31, 2004 retirement of an
executive officer.

Total
interest costs, excluding interest to Financial Services, expensed
and relieved to Home Building's costs and expenses for the three and
nine months ended December 31, 2003, were $32.6 million and $94.9
million as compared to $33.5 million and $84.2 million, respectively
for the same periods in the prior year. The change in interest expense is primarily related to an increase in
average debt outstanding for the nine months ended December 31, 2003,
as compared to the same periods last year. This increase is offset by slightly
lower borrowing costs during the nine months ended December 31, 2003,
as compared to the same periods last year.

FINANCIAL CONDITION AND LIQUIDITY

At December 31, 2003, we had cash and cash equivalents of $81.6 million,
including $12.3 million in Financial Services and $29.4 million belonging to
our 63.7%-owned Construction Products subsidiary. The net cash used in or
provided by the operating, investing and financing activities for the three and
nine months ended December 31, 2003 and 2002 is summarized below (dollars in
thousands). See Statements of Consolidated Cash Flows with Consolidating
Details on pages 5-6 of this Report for the detail supporting this summary.
Note that we use the term Centex to represent a supplemental consolidating
presentation that reflects the Financial Services segment as if accounted for
under the equity method.

For the Nine Months EndedDecember 31,2003
    
    
    2002Net Cash (Used in) Provided byCentex*Operating Activities
    
    $
    (647,057
    )
    
    $
    (489,923
    )Investing Activities
    
    
    11,908
    
    
    
    176,932Financing Activities
    
    
    249,752
    
    
    
    160,257(385,397
    )
    
    
    (152,734
    )Financial ServicesOperating Activities
    
    
    1,211,559
    
    
    
    (11,082
    )Investing Activities
    
    
    (1,487,219
    )
    
    
    (976,602
    )Financing Activities
    
    
    272,858
    
    
    
    977,072(2,802
    )
    
    
    (10,612
    )Centex Corporation and SubsidiariesOperating Activities
    
    
    501,943
    
    
    
    (357,121
    )Investing Activities
    
    
    (1,477,752
    )
    
    
    (980,758
    )Financing Activities
    
    
    587,610
    
    
    
    1,174,533Net Decrease in Cash
    
    $
    (388,199
    )
    
    $
    (163,346
    )




|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* |  | Centex represents a supplemental presentation that reflects the
Financial Services segment as if accounted for under the equity method. We
believe that separate disclosure of the consolidating information is
useful because the Financial Services subsidiaries operate in a distinctly
different financial environment that generally requires significantly less
equity to support their higher debt45Table of Contentslevels compared to the operations of
our other subsidiaries; the Financial Services subsidiaries have
structured their financing programs substantially on a stand alone basis;
and we have limited obligations with respect to the indebtedness of our
Financial Services subsidiaries. Management uses this information in its
financial and strategic planning. We also use this presentation to allow
investors to compare us to homebuilders that do not have financial
services operations.

We generally fund our Centex operating and other short-term needs through
cash from operations, borrowings from commercial paper and other short-term
credit arrangements and the issuance of senior notes. During the nine months
ended December 31, 2003, cash was primarily used in Centex Operating Activities
to finance increases in housing inventories relating to the increased level of
sales and resulting units under construction during the year and for the
acquisition of land held for development. The Company expects Centex Operating
Activities will continue to use cash as its Home Building operations continue
to grow. The funds provided by Centex Financing Activities were primarily from
new debt used to fund the increased homebuilding activity.

We generally fund our Financial Services operating and other short-term
needs through credit facilities, securitizations, proceeds from the sale of
mortgage loans to investors and cash flows from operations, as described below.
During the nine months ended December 31, 2003, Financial Services Operating
Activities primarily relate to net cash provided from the sale of mortgage
loans, including mortgage loans sold by HSF-I. During the nine months ended
December 31, 2003, cash was primarily used in Financial Services Investing
Activities to finance increases in residential mortgage loans held for
investment. The funds provided by Financial Services Financing Activities were
primarily from new debt used to fund the increased residential mortgage loan
activity.

Centex Corporation currently has an investment-grade credit rating from
each of the principal credit rating agencies. Our ability to finance our
activities on favorable terms is dependent to a significant extent on whether
we are able to maintain our investment-grade credit ratings. We attempt to
manage our debt levels in order to maintain investment-grade ratings. If,
however, our debt ratings were downgraded, we would not have direct access to
the commercial paper markets and might need to draw on our existing committed
backup facility, which exceeds our commercial paper program size.

Our existing credit facilities and available borrowing capacity as of
December 31, 2003 are summarized below (dollars in thousands):

Existing Credit
    
    
    AvailableFacilities
    
    
    CapacityCentexCentex CorporationMulti-Bank Revolving Credit Facility
    
    $
    800,000
    
    
    $
    800,000
    (1)Multi-Bank Revolving Letter of Credit Facility
    
    
    250,000
    
    
    
    92,050
    (2)Construction ProductsSenior Revolving Credit Facility
    
    
    250,000
    
    
    
    244,317
    (3)1,300,000
    
    
    
    1,136,367Financial ServicesUnsecured Credit Facility
    
    
    125,000
    
    
    
    63,000
    (4)Secured Credit Facilities
    
    
    415,000
    
    
    
    149,051
    (5)Harwood Street Funding I, LLC Facility
    
    
    3,000,000
    
    
    
    1,742,524Harwood Street Funding II, LLC Facility
    
    
    2,500,000
    
    
    
    761,0116,040,000
    
    
    
    2,715,586$
    7,340,000
    
    
    $
    3,851,953
    (6)


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|(1) |  | This is a committed, multi-bank revolving credit facility, maturing in
August 2006, which serves as backup for commercial paper borrowings. As
of December 31, 2003, there were no borrowings under this backup facility,
and our $700 million commercial paper program had $100 million
outstanding. We have not borrowed under this facility since its
inception.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(3) |  | This is a committed, senior revolving credit facility, entered into by
Construction Products in December 2003 and maturing in December 2006.
This facility has no recourse to Centex Corporation.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(5) |  | CTX Mortgage Company, LLC and its related companies and Home Equity share
in a $250 million committed secured credit facility to finance mortgage
inventory. CTX Mortgage Company, LLC and its related companies also
maintain $155 million of committed secured mortgage warehouse facilities
to finance mortgages. Home Equity also maintains a $10 million committed
secured mortgage warehouse facility to finance mortgages.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) |  | The amount of available borrowing capacity
consists of $3.789 billion of
committed borrowings and $63.0 million of uncommitted borrowings as of
December 31, 2003. 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 to Centex Corporation or its
subsidiaries if and when requested to do so.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CTX Mortgage Company, LLC finances its inventory of mortgage loans held
for sale principally through sales of conforming and Jumbo A loans to HSF-I,
pursuant to a mortgage loan purchase agreement (the HSF-I Purchase
Agreement). Since 1999, CTX Mortgage Company, LLC has sold substantially all
of the conforming and Jumbo A mortgage loans that it originates to HSF-I in
accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans,
it typically holds them for a period averaging between 45 and 60 days and then
resells them into the secondary market. HSF-I obtains the funds needed to
purchase eligible mortgage loans from CTX Mortgage Company, LLC by issuing (1)
short-term secured liquidity notes that are currently rated A1+ by S&P and P-1
by Moodys, (2) medium-term debt that is currently rated A1+ by S&P and P-1 by
Moodys and (3) subordinated certificates maturing in September 2004, November
2005 and June 2006, extendable for up to five years, that are currently rated
BBB by S&P and Baa2 by Moodys. Under the terms of the HSF-I Purchase
Agreement, CTX Mortgage Company, LLC may elect to sell to HSF-I, and HSF-I is
obligated to purchase from CTX Mortgage Company, LLC, mortgage loans that
satisfy certain eligibility criteria and portfolio requirements. At December
31, 2003, the maximum amount of mortgage loans that HSF-I is allowed to carry
in its inventory under the HSF-I Purchase Agreement is limited to $3.0 billion.
This arrangement provides CTX Mortgage Company, LLC with reduced financing
cost for eligible mortgage loans it originates and improves its liquidity. The
Company does not guarantee the payment of any debt or subordinated certificates
of HSF-I, we are not liable for credit losses relating to securitized
residential mortgage loans sold to HSF-I, and HSF-I debt does not have recourse
to us. The consolidation of this debt does not change our credit profile or
debt ratings.

Home Equity finances its inventory of mortgage loans through HSF-II, a
wholly-owned, consolidated entity, under a revolving sales agreement that
expires upon final payment of the senior and subordinated debt issued by
HSF-II. This arrangement, where HSF-II has committed to finance all eligible
loans, gives Home Equity daily access to HSF-II borrowing capacity of $2.5
billion. HSF-II obtains funds through the sale of subordinated notes that are
currently rated BBB by S&P, Baa2 by Moodys, and BBB by Fitch, and short-term
secured liquidity notes that are currently rated A1+ by S&P, P1 by Moodys and
F1+ by Fitch. Because HSF-II is a consolidated entity, the debt, interest
income and interest expense of HSF-II are reflected in the financial statements
of Financial Services. HSF-IIs debt does not have recourse to the Company and
the consolidation of this debt does not change the Companys credit profile or
debt ratings.

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In the event Financial Services is unable to finance its inventory of
loans through HSF-I and HSF-II, it would draw on existing credit facilities
currently held in addition to HSF-I and HSF-II. In addition, Financial
Services would need to make other customary financing arrangements to fund its
mortgage loan origination activities. Although we believe that Financial
Services could arrange for alternative financing that is common for
non-investment grade mortgage companies, there can be no assurance that such
financing would be
available on satisfactory terms, and any delay in obtaining such financing
could adversely affect the results of operations of Financial Services.

Under our debt covenants, we are required to maintain certain leverage and
interest coverage ratios and a minimum tangible net worth. At December 31,
2003, Centex Corporation was in compliance with all of these covenants.

As of December 31, 2003, our short-term debt was $3.2 billion, which was
primarily applicable to Financial Services. Excluding Financial Services and
Construction Products, our short-term borrowings are generally financed at
prevailing market interest rates from our commercial paper program and from an
uncommitted bank facility.

Our outstanding debt (in thousands) as of December 31, 2003 was as follows
(due dates are presented in fiscal years) (1):

CentexShort-Term Notes Payable
    
    $
    110,006Senior Debt:Medium-Term Note Programs, weighted-average rate 4.69%, due through 2007
    
    
    258,000Long-Term Notes, weighted-average rate 6.73%, due through 2014
    
    
    1,808,278Other Indebtedness, weighted-average rate 3.38%, due through 2009
    
    
    31,517Subordinated Debt:Subordinated Debentures, 7.38%, due in 2006
    
    
    99,931Subordinated Debentures, 8.75%, due in 2007
    
    
    99,7452,407,477Financial ServicesShort-Term Debt:Short-Term Notes Payable
    
    
    577,654Harwood Street Funding I and II, LLC Secured Liquidity Notes
    
    
    2,514,307Home Equity Loan Asset-Backed Certificates, weighted-average rate 3.68%, due
through 2034
    
    
    4,471,464Harwood Street Funding I, LLC Variable Rate Subordinated Extendable Certificates,
weighted-average rate 3.08%, due through 2007
    
    
    139,000Harwood Street Funding II, LLC Variable Rate Subordinated Notes,
weighted-average rate 3.27%, due through 2009
    
    
    93,7507,796,175Total
    
    $
    10,203,652




|(1) |  | Certain of the borrowings described in the table above vary on a seasonal
basis and depend on the working capital needs of our operations.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

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

Long-term DebtFinancialCentex
    
    
    Services
    
    
    Total2004
    
    $
    1,085
    
    
    $
    370,073
    
    
    $
    371,1582005
    
    
    32,743
    
    
    
    1,300,898
    
    
    
    1,333,6412006
    
    
    341,308
    
    
    
    1,016,735
    
    
    
    1,358,0432007
    
    
    290,465
    
    
    
    1,026,413
    
    
    
    1,316,8782008
    
    
    358,591
    
    
    
    571,525
    
    
    
    930,116Thereafter
    
    
    1,273,279
    
    
    
    418,570
    
    
    
    1,691,849$
    2,297,471
    
    
    $
    4,704,214
    
    
    $
    7,001,685


Financial Services long-term debt associated with Home Equity includes
Asset-Backed Certificates of $4.5 billion at December 31, 2003. These
Asset-Backed Certificates relate to securitized residential mortgage loans
structured as collateralized borrowings and have no recourse to Centex Home
Equity Company, LLC or Centex Corporation; however, Centex Home Equity Company,
LLC remains liable for customary loan representations. The principal and
interest on these certificates are paid from the liquidation of the underlying
residential mortgage loans, which serve as collateral for the debt.
Accordingly, the timing of the principal payments on these certificates is dependent
upon the payment received on the underlying residential mortgage loans. The
expected maturities of this component of long-term debt are based on
contractual maturities adjusted for projected prepayments.

In order to ensure the future availability of land for homebuilding, the
Company enters into lot option purchase agreements. At December 31, 2003, the
Company had deposited or invested with third parties $75.2 million related to
lot option agreements. The lot option agreements related to these deposits had
a total remaining purchase price of approximately $2.7 billion.

CERTAIN OFF-BALANCE SHEET AND OTHER OBLIGATIONS

The following is a summary of certain off-balance sheet arrangements and
other obligations and their possible effects on our liquidity and capital
resources.

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

3333 Holding Corporation, 3333 Development Corporation and the Partnership
are entities that are neither affiliates of nor consolidated with Centex
Corporation and subsidiaries at December 31, 2003. These entities were
established in 1987 to broaden the range of business activities that may be
conducted for the benefit of our stockholders to include general real estate
development. We determined that this expansion would improve stockholder value
through longer-term real estate investments, real estate developments and the
benefits of the partnership form of business. The Partnership is managed by
its general partner, 3333 Development Corporation, a wholly-owned subsidiary of
3333 Holding Corporation. We are not liable for the obligations of
3333 Holding Corporation, 3333 Development Corporation or the Partnership.
However, as of December 31, 2003, we guaranteed approximately $1.1 million of
indebtedness of the Partnership. In addition, we enter into certain land
purchase and other transactions with the Partnership. For additional
information regarding these entities, see the financial statements of the
Partnership, filed with this Report. In addition, for information regarding
these entities and Centex Corporation and subsidiaries, on an aggregate

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basis, see Note (H), Centex Development Company, L.P., of the
Notes to Consolidated Financial Statements of Centex Corporation.

On
November 18, 2003, Centex announced that merger agreements were entered into by and among the Partnership, Holding and Centex,
which will end the tandem trading relationship between Centex common
stock and the common stock of Holding, as well as the stockholder
warrants of the Partnership. The mergers will result in the
consolidation of Holding and the Partnership as indirect,
wholly-owned subsidiaries of Centex. The transaction is subject to the approval by Centex stockholders of the termination of the
nominee agreement, and subject to the approval of the stockholders of
Holding. Pursuant to the transaction, the Holding
common stock and the stockholder warrants would be converted into
cash. A joint special meeting of the stockholders of Centex and
Holding is scheduled for February 25, 2004 to vote on these
matters. The Company anticipates this
transaction will be completed prior to March 31, 2004. If such transaction is
not completed prior to March 31, 2004, the Company will consolidate the
Partnership and Holding as of
March 31, 2004, pursuant to the provisions of FIN 46.

Joint Ventures

We conduct a portion of our land acquisition, development and other
activities through our participation in joint ventures in which we hold less
than a majority interest. These joint ventures typically involve projects that
are large in size, and partnering with other developers allows Centex Homes to
share the risks and rewards of ownership while providing for efficient asset
utilization. Our investment in these non-consolidated joint ventures,
accounted for using the equity method, was $166.2 million and $102.3 million at
December 31, 2003 and March 31, 2003, respectively. These joint ventures had
total outstanding secured construction debt of approximately $246.2 million and
$232.5 million at December 31, 2003 and March 31, 2003, respectively. Our
maximum potential liability with respect to this debt, based on our ownership
percentage of the related joint ventures, is approximately $62.2 million and
$56.4 million at December 31, 2003 and March 31, 2003, respectively. Under the
structure of this debt, we become liable up to these amounts only to the extent
that the construction debt exceeds a certain percentage of the value of the
project. At December 31, 2003 and March 31, 2003, we were not liable for any
of this debt. For a discussion of the impact of FIN 46 on our
accounting for transactions with non-consolidated joint ventures, see Recent
Accounting Pronouncements below.

Letters of Credit and Guarantees

At December 31, 2003, we had outstanding letters of credit of $163.6
million that primarily relate to development obligations of Home Building. We
expect that the obligations secured by these letters of credit will generally
be performed by our subsidiaries in the ordinary course of business and in
accordance with the applicable contractual terms. To the extent that the
underlying commercial obligations are performed by our subsidiaries, the
related letters of credit will be released and we will not have any continuing
obligations. We have no material third-party guarantees.

CRITICAL ACCOUNTING POLICIES

Some of our critical accounting policies require the use of judgment in
their application or require estimates of inherently uncertain matters. Our
accounting policies are in compliance with generally accepted accounting
principles; however, a change in the facts and circumstances of the underlying
transactions could significantly change the application of the accounting
policies and the resulting financial statement impact.

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Listed below are those
policies that we believe are critical and require the use of complex judgment
in their application.

Impairment of Long-Lived Assets

Housing projects and land held for development and sale are stated at the
lower of cost (including direct construction costs, capitalized interest and
real estate taxes) or fair value less cost to sell. Property and equipment is
carried at cost less accumulated depreciation. We assess these assets for
recoverability in accordance with the provisions of Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, or SFAS No. 144. SFAS No. 144 requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets is measured by comparing the carrying amount of an
asset to future undiscounted net cash flows expected to be generated by the
asset. These evaluations for impairment are significantly impacted by
estimates of revenues, costs and expenses and other factors. If these assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets.

Goodwill

Goodwill represents the excess of purchase price over net assets of
businesses acquired. We adopted the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS
No. 142, effective April 1, 2001. Upon the adoption of SFAS No. 142, goodwill
is no longer subject to amortization. Rather, goodwill is subject to at least
an annual assessment for impairment, at the reporting unit level, by applying a
fair value-based test. If the carrying amount exceeds the fair value, an
impairment has occurred. We continually evaluate whether events and
circumstances have occurred that indicate the remaining balance of goodwill may
not be recoverable. Fair value is estimated using a discounted cash flow or
market valuation approach. Such evaluations for impairment are significantly
impacted by estimates of future revenues, costs and expenses and other factors.
If the goodwill is considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the goodwill exceeds
the fair value of the future cash flows. We had no impairment of goodwill in
the nine months ended December 31, 2003.

Consolidation of Variable Interest Entities

In January 2003, the FASB issued FIN 46, which modifies the
accounting for certain entities in which (1) equity investors do not have a
controlling financial interest and/or (2) the entity is unable to finance its
activities without additional subordinated financial support from other
parties. FIN 46 applies immediately to variable interest entities
created, or in which an enterprise obtains an interest, after January 31, 2003.
For certain variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003, FIN 46 applies
to interim or annual periods ending after March 15, 2004. FIN 46
requires significant use of judgment and estimates in determining its
application.

Valuation of Residential Mortgage Loans Held for Investment

Home Equity originates and purchases loans in accordance with standard
underwriting criteria. The underwriting standards are primarily intended to
assess the creditworthiness of the mortgagee and the value of the mortgaged
property and to evaluate the adequacy of the property as collateral for the
home equity loan.

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Home Equity establishes an allowance for losses by charging the provision
for losses in the statement of consolidated earnings when it believes a loss has occurred. When Home Equity
determines that a residential mortgage loan held for investment is
partially or fully uncollectible, the estimated loss is charged against the
allowance for losses. Recoveries on losses previously charged to the allowance
are credited to the allowance at the time the recovery is collected.

We believe that the allowance for losses is sufficient to provide for
credit losses in the existing residential mortgage loans held for investment,
which include real estate owned. We evaluate the allowance on an aggregate
basis considering, among other things, the relationship of the allowance to
residential mortgage loans held for investment and historical credit losses.
The allowance reflects our judgment of the present loss exposure at the end of
the reporting period. A range of expected credit losses is estimated using
historical losses, static pool loss curves and delinquency modeling. These
tools take into consideration historical information regarding delinquency and
loss severity experience and apply that information to the portfolio at each
reporting date.

Although we consider the allowance for losses on residential mortgage
loans held for investment reflected in our consolidated balance sheet to be
adequate, there can be no assurance that this allowance will prove to be
sufficient over time to cover ultimate losses. This allowance may prove to be
insufficient due to unanticipated adverse changes in the economy or discrete
events adversely affecting specific customers or industries.

Mortgage Securitization Residual Interest

Home Equity uses mortgage securitizations to finance its mortgage loan
portfolio. For securitizations prior to April 2000, which Home Equity
accounted for as sales, Home Equity retained a mortgage securitization residual
interest, or MSRI. The MSRI represents the present value of Home Equitys
right to receive, over the life of the securitization, the excess of the
weighted-average coupon on the loans securitized over the interest rates on the
securities sold, a normal servicing fee, a trustee fee and an insurance fee,
where applicable, net of the credit losses relating to the loans securitized.
Home Equity estimates the fair value of MSRI through the application of
discounted cash flow analysis. Such analysis requires the use of various
assumptions, the most significant of which are anticipated prepayments
(principal reductions in excess of contractually scheduled reductions),
estimated future credit losses and the discount rate applied to future cash
flows.

Loan Origination Reserve

CTX Mortgage Company, LLC has established a liability for anticipated
losses associated with loans originated. This liability includes losses
associated with certain borrower payment defaults, credit quality issues or
misrepresentation. CTX Mortgage Company, LLC estimates the losses that may be
incurred for certain loan originations based on, among other factors,
historical loss rates and current trends in loan originations. This liability
reflects managements judgment of the loss exposure at the end of the reporting
period.

Although we consider the loan origination reserve reflected in our
consolidated balance sheet at December 31, 2003 to be adequate, there can be no
assurance that this reserve will prove to be sufficient over time to cover
ultimate losses in connection with our loan originations. This reserve may
prove to be insufficient due to unanticipated adverse changes in the economy or
discrete events adversely affecting specific customers.

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Insurance Accruals

We have certain deductible limits under our workers compensation,
automobile and general liability insurance policies for which reserves are
actuarially determined based on claims filed and an estimate of claims incurred
but not yet reported. Projection of losses concerning these liabilities is
subject to a high degree of variability due to factors such as claim settlement
patterns, litigation trends and legal interpretations, among others.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FIN 46, which modified the
accounting for certain entities in which (1) equity investors do not have a
controlling financial interest and/or (2) the entity is unable to finance its
activities without additional subordinated financial support from other
parties. Certain disclosure requirements of FIN 46 are effective
for financial statements of interim or annual periods issued after January 31,
2003. FIN 46 applies immediately to variable interest entities
created, or in which an enterprise obtains an interest, after January 31, 2003.
For certain variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003, FIN 46 applies
to interim or annual periods ending after March 15, 2004. At December 31,
2003, we have interests in the Partnership, HSF-I, certain joint ventures and
land under option agreements that are or may be affected by this
interpretation. Variable interest entities owned or acquired before February
1, 2003 are: the Partnership, HSF-I, certain land option agreements and joint
ventures. The Company has completed its analysis of the effects of FIN 46 on HSF-I, as explained in Note (G), Indebtedness. The Company
continues to evaluate the impacts of FIN 46 on land option
agreements and joint ventures entered into prior to February 1, 2003. The
nature of these entities operations, our potential maximum exposure related to
these entities and the applicability of FIN 46 to these entities
are discussed as follows:

The Partnership
    
    Financial statements filed with this Report
Note (H), Centex Development Company, L.P.HSF-I
    
    Note (G), IndebtednessLand Option Agreements
    
    Note (J), Land Held Under Option Agreements not
  Owned and Other Land DepositsJoint Ventures
    
    Note (I), Commitments and Contingencies


In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, or SFAS No. 149. The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, or SFAS No. 133, by requiring
that contracts with comparable characteristics be accounted for similarly,
resulting in more consistent reporting of contracts as either derivatives or
hybrid instruments. A portion of this statement is effective for contracts
entered into or modified and for hedging relationships designated after June
30, 2003. The remainder of this statement codifies previously issued SFAS No.
133 implementation guidance, which retains its original effective dates. The
implementation of SFAS No. 149 did not have a material impact on the Companys
results of operations or financial position.

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

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characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within the scope of SFAS No.
150 as a liability (or an
asset in some circumstances). Certain provisions of this statement are
effective for financial instruments entered into or modified after May 31,
2003. In October 2003, FASB deferred indefinitely certain provisions of this
Statement pertaining to non-controlling interests in limited life entities.
The implementation of the provisions of SFAS No. 150 which are effective did
not have an impact on the Companys results of operations or financial
position.

The SEC is currently considering issuance of a Staff Accounting Bulletin
(SAB) that would modify the Companys accounting for interest rate lock
commitments (IRLCs). In accordance with Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, CTX Mortgage Company, LLC currently marks its IRLCs to market with
the resulting gains and losses recognized in income. The proposed SAB may
require that IRLCs be recognized as liabilities, with offsetting entries to
expense accounts, through loan settlement. It is anticipated the SAB will
apply to all IRLCs originated in the first reporting period beginning after
March 15, 2004. This proposed SAB would not have a material effect on the
Companys financial position or results of operations. The proposed SAB would
not have any impact on the Companys cash flow, but it could impact the timing
of revenue recognition for the Financial Services segment. The Company will
continue to monitor this issue for additional developments and potential impact
on the Companys financial statements.

FORWARD-LOOKING STATEMENTS

Various sections of this Report, including Managements Discussion and
Analysis of Financial Condition and Results of Operations, contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may be
identified by the context of the statement and generally arise when we are
discussing our beliefs, estimates or expectations. These statements are not
guarantees of future performance and involve a number of risks and
uncertainties. Actual results and outcomes may differ materially from what we
express or forecast in these forward-looking statements. In addition to the
specific uncertainties discussed elsewhere in this Report, the following risks
and uncertainties may affect our actual performance and results of operations:



| |  | Our Home Building operations are somewhat cyclical and sensitive to
changes in economic conditions, including levels of employment,
consumer confidence and income, availability of financing, interest
rate levels and changes in the economic condition of the local markets
in which we operate.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our Home Building operations are also subject to other risks and
uncertainties, including seasonal variations, adverse weather
conditions, the availability of adequate land in desirable locations,
the cost and availability of labor and construction materials, labor
disputes, the general demand for housing and new construction and the
resale market for existing homes.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our Construction Services operations are also somewhat cyclical and
sensitive to changes in economic conditions, including overall capital
spending trends in the economy, changes in federal and state
appropriations for construction projects and competitive pressures on
the availability and pricing of construction projects.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our Construction Services operations are also subject to other risks
and uncertainties, including the timing of new awards and the funding
of such awards; adverse weather conditions; cancellations of, or
changes in
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | the scope to, existing contracts; the cost and availability of labor and
construction materials; labor disputes; the ability to meet performance or
schedule guarantees and cost overruns.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Virtually all of our homebuyers finance their home acquisitions through our
Financial Services operations or third party lenders. In general, our Home
Building operations can be adversely affected by increases in interest rates.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The results of operations of CTX Mortgage Company, LLC and its related companies
depend to a significant extent on the level of interest rates. Any significant
increases in mortgage rates above currently prevailing levels could adversely
affect the volume of loan originations. There can be no assurance that mortgage
rates will remain at the current level in the future. Our mortgage loan operations
are also dependent upon the securitization market for mortgage-backed securities
and the availability of mortgage warehouse financing.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our Home Equity operations involve holding residential mortgage loans for
investment and establishing an allowance for credit losses on these loans.
Although the amount of this allowance reflects our judgment as to our present loss
exposure on these loans, there can be no assurance that it will be sufficient to
cover any losses that may ultimately be incurred.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Demand for the products that our Construction Products operations produce is
directly related to activity in the homebuilding and construction industries and to
general economic conditions. Our Construction Products operations are also
concentrated in particular regional and local markets that may experience cyclical
downturns at different times than the national economy. The price at which we sell
our construction products, particularly gypsum wallboard, is highly sensitive to
changes in supply and demand for such products, energy costs, raw material prices
and competition from other domestic and foreign producers.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | All of our businesses operate in very competitive environments, which are
characterized by competition from a number of other homebuilders, mortgage lenders,
construction products producers and contractors in each of the markets in which we
operate.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We are subject to various federal, state and local statutes, rules and regulations
that could affect our businesses, including those concerning zoning, construction,
protecting the environment and health. In addition, our businesses could be
affected by changes in federal income tax policy, federal mortgage loan financing
programs and by other changes in regulation or policy.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks related to fluctuations in interest rates
on our direct debt obligations, on mortgage loans receivable, residual interest
in mortgage securitizations and securitizations classified as debt. We utilize
derivative instruments, including interest rate swaps, in conjunction with our
overall strategy to manage the debt outstanding that is subject to changes in
interest rates. We utilize forward sale commitments to mitigate the risk
associated with the majority of our mortgage loan portfolio. Other than the
forward commitments and interest rate swaps discussed earlier, we do not
utilize forward or option contracts on foreign currencies or commodities, or
other types of derivative financial instruments.

There have been no material changes in our market risk from March 31,
2003. For further information regarding our market risk, refer to our Annual
Report on Form 10-K for the fiscal year ended March 31, 2003.

55



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Item 4. Controls and Procedures

An evaluation has been performed under the supervision and with the
participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as of December 31, 2003. Based on that
evaluation, our management, including our Chief Executive Officer and Chief
Financial Officer, concluded that our disclosure controls and procedures were
effective as of December 31, 2003 to provide reasonable assurance that
information required to be disclosed in our reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. There has been no change in our internal
controls over financial reporting subsequent to the date of the foregoing
evaluation that has materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting.

56



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##### Table of Contents









Part II. Other Information







Item 6. Exhibits and Reports on Form 8-K



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

10.3
    
    
    Amended and Restated Distribution
Agreement, dated as of November 4, 2003, between Centex
Corporation and Centex Construction Products, Inc.
(incorporated by reference from Amendment No. 3 to
Schedule 13D of Centex Corporation filed with the
Securities and Exchange Commission on November 5, 2003)10.4
    
    
    Amended and Restated Agreement and Plan
of Merger, dated as of November 4, 2003, among Centex
Corporation, ARG Merger Corporation and Centex
Construction Products, Inc. (incorporated by reference
from Amendment No. 3 to Schedule 13D of Centex Corporation
filed with the Securities and Exchange Commission on
November 5, 2003)31.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.31.2
    
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.32.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.




| | (2) |  | Reports on Form 8-K
| | --- |  | -------------------



| |  |  | Current Report on Form 8-K of Centex Corporation dated October
1, 2003 filing underwriting agreement and indenture relating to
Centex Corporations public offering of $300,000,000 aggregate
principal amount of its Senior Notes due 2013.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation dated October
21, 2003, announcing its operating results for the quarter
ended September 30, 2003.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation dated November
5, 2003, announcing its reaffirmation of its earnings guidance
for fiscal year 2004.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation, 3333 Holding
Corporation and Centex Development Company, L.P. dated November 18, 2003,
announcing proposed termination of the tandem trading of the registrants
securities and proposed transaction
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

57



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##### Table of Contents





| |  |  | by which 3333 Holding Corporation and Centex Development Company,
L.P. will become subsidiaries of Centex Corporation.
| |  |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation dated November
18, 2003, announcing earnings guidance for fiscal year 2005.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation dated December
8, 2003, announcing its request that its common stock be
delisted from the London Stock Exchange.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation, 3333 Holding
Corporation and Centex Development Company, L.P. dated December 19, 2003,
announcing temporary suspension by certain Centex Corporation profit
sharing plans of transactions by plan participants in the Centex
Corporation common stock fund under the plans.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation, 3333 Holding
Corporation and Centex Development Company, L.P. dated December
23, 2003, announcing the amendment of the combined financial
statements of 3333 Holding Corporation and Centex Development
Company, L.P. included in their Form 10-K for the fiscal year
ended March 31, 2003 to reflect subsequent property sales as
discontinued operations, in connection with the proposed
transactions announced in their Form 8-K dated November 18,
2003.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

58



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##### Table of Contents









Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

CENTEX CORPORATIONRegistrantFebruary 9, 2004
    
    /s/ Leldon E. EcholsLeldon E. EcholsExecutive Vice President andChief Financial Officer(principal financial officer)February 9, 2004
    
    /s/ Mark D. KempMark D. KempVice President- Controller(principal accounting officer)


59



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##### Table of Contents



Part I. Financial Information

Item 1. Financial Statements

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Statements of Operations
(Dollars in thousands, except per unit/share data)
(unaudited)

For the Three Months Ended December 31,2003
    
    
    2002Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryRevenues
    
    $
    136,158
    
    
    $
    136,145
    
    
    $
    38
    
    
    $
    103,414
    
    
    $
    103,364
    
    
    $
    87Costs and Expenses
    
    
    126,386
    
    
    
    126,010
    
    
    
    401
    
    
    
    98,130
    
    
    
    98,095
    
    
    
    72Earnings from Unconsolidated Entities
and Other
    
    
    622
    
    
    
    622
    
    
    
    
    
    
    
    25
    
    
    
    25
    
    
    
    Earnings (Loss) from Continuing
Operations
Before Income Taxes
    
    
    10,394
    
    
    
    10,757
    
    
    
    (363
    )
    
    
    5,309
    
    
    
    5,294
    
    
    
    15Income Taxes
    
    
    2,711
    
    
    
    2,711
    
    
    
    
    
    
    
    1,187
    
    
    
    1,187
    
    
    
    Earnings (Loss) from Continuing
Operations
    
    
    7,683
    
    
    
    8,046
    
    
    
    (363
    )
    
    
    4,122
    
    
    
    4,107
    
    
    
    15Discontinued Operations:Earnings (Loss) from Discontinued
Operations (Including Gain on Sale of
$873 and $9,314 for the Three Months
Ended December 31, 2003 and 2002,
respectively)
    
    
    585
    
    
    
    585
    
    
    
    
    
    
    
    8,994
    
    
    
    8,994
    
    
    
    Net Earnings (Loss)
    
    $
    8,268
    
    
    $
    8,631
    
    
    $
    (363
    )
    
    $
    13,116
    
    
    $
    13,101
    
    
    $
    15Net Earnings Allocable to Limited
Partners
    
    
    
    
    
    $
    8,631
    
    
    
    
    
    
    
    
    
    
    $
    13,101Earnings (Loss) from Continuing
Operations
Per Unit/Share
    
    
    
    
    
    $
    33.06
    
    
    $
    (363
    )
    
    
    
    
    
    $
    17.07
    
    
    $
    15Earnings (Loss) from Discontinued
Operations Per Unit/Share
    
    
    
    
    
    
    2.40
    
    
    
    
    
    
    
    
    
    
    
    37.38
    
    
    
    Net Earnings (Loss) Per Unit/Share
    
    
    
    
    
    $
    35.46
    
    
    $
    (363
    )
    
    
    
    
    
    $
    54.45
    
    
    $
    15Weighted-Average Units/Shares
Outstanding
    
    
    
    
    
    
    243,403
    
    
    
    1,000
    
    
    
    
    
    
    
    240,591
    
    
    
    1,000


See Notes to Condensed Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and
3333 Holding Corporation and Subsidiary have been eliminated.

60



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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Statements of Operations
(Dollars in thousands, except per unit/share data)
(unaudited)

For the Nine Months Ended December 31,2003
    
    
    2002Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryRevenues
    
    $
    339,662
    
    
    $
    339,623
    
    
    $
    114
    
    
    $
    290,174
    
    
    $
    290,024
    
    
    $
    262Costs and Expenses
    
    
    320,907
    
    
    
    320,466
    
    
    
    516
    
    
    
    282,977
    
    
    
    282,886
    
    
    
    203Earnings from Unconsolidated Entities
and Other
    
    
    864
    
    
    
    864
    
    
    
    
    
    
    
    600
    
    
    
    600
    
    
    
    Earnings (Loss) from Continuing
Operations
Before Income Taxes
    
    
    19,619
    
    
    
    20,021
    
    
    
    (402
    )
    
    
    7,797
    
    
    
    7,738
    
    
    
    59Income Taxes
    
    
    5,273
    
    
    
    5,273
    
    
    
    
    
    
    
    1,496
    
    
    
    1,496
    
    
    
    Earnings (Loss) from Continuing
Operations
    
    
    14,346
    
    
    
    14,748
    
    
    
    (402
    )
    
    
    6,301
    
    
    
    6,242
    
    
    
    59Discontinued Operations:Earnings from Discontinued
Operations (Including Gain on Sale
of $14,629 and $9,595 for the
Nine Months
Ended December 31, 2003 and 2002,
respectively)
    
    
    11,025
    
    
    
    11,025
    
    
    
    
    
    
    
    10,119
    
    
    
    10,119
    
    
    
    Net Earnings (Loss)
    
    $
    25,371
    
    
    $
    25,773
    
    
    $
    (402
    )
    
    $
    16,420
    
    
    $
    16,361
    
    
    $
    59Net Earnings Allocable to Limited
Partners
    
    
    
    
    
    $
    25,773
    
    
    
    
    
    
    
    
    
    
    $
    16,361Earnings (Loss) from Continuing
Operations
Per Unit/Share
    
    
    
    
    
    $
    60.90
    
    
    $
    (402
    )
    
    
    
    
    
    $
    25.94
    
    
    $
    59Earnings from Discontinued Operations
Per Unit/Share
    
    
    
    
    
    
    45.53
    
    
    
    
    
    
    
    
    
    
    
    42.06
    
    
    
    Net Earnings (Loss) Per Unit/Share
    
    
    
    
    
    $
    106.43
    
    
    $
    (402
    )
    
    
    
    
    
    $
    68.00
    
    
    $
    59Weighted-Average Units/Shares
Outstanding
    
    
    
    
    
    
    242,165
    
    
    
    1,000
    
    
    
    
    
    
    
    240,591
    
    
    
    1,000


See Notes to Condensed Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and
3333 Holding Corporation and Subsidiary have been eliminated.

61



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

December 31, 2003
    
    
    March 31, 2003*Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryAssetsCash and Cash Equivalents
    
    $
    5,117
    
    
    $
    5,105
    
    
    $
    12
    
    
    $
    5,113
    
    
    $
    5,105
    
    
    $
    8Receivables
    
    
    54,995
    
    
    
    59,280
    
    
    
    239
    
    
    
    30,630
    
    
    
    34,658
    
    
    
    261Inventories
    
    
    531,529
    
    
    
    531,529
    
    
    
    
    
    
    
    404,599
    
    
    
    404,599
    
    
    
    Investments-Commercial Properties, net
    
    
    30,048
    
    
    
    30,048
    
    
    
    
    
    
    
    29,791
    
    
    
    29,791
    
    
    
    Real Estate Joint Ventures
    
    
    4,371
    
    
    
    4,371
    
    
    
    
    
    
    
    3,973
    
    
    
    3,973
    
    
    
    Affiliate
    
    
    
    
    
    
    
    
    
    
    1,192
    
    
    
    
    
    
    
    
    
    
    
    1,191Assets Held for Sale
    
    
    35,583
    
    
    
    35,583
    
    
    
    
    
    
    
    118,299
    
    
    
    118,299
    
    
    
    Property and Equipment, net
    
    
    2,281
    
    
    
    2,281
    
    
    
    
    
    
    
    2,308
    
    
    
    2,308
    
    
    
    Other Assets-Goodwill, net
    
    
    34,667
    
    
    
    34,667
    
    
    
    
    
    
    
    30,698
    
    
    
    30,698
    
    
    
    Deferred Charges and Other
    
    
    26,231
    
    
    
    24,460
    
    
    
    1,771
    
    
    
    15,273
    
    
    
    13,502
    
    
    
    1,771$
    724,822
    
    
    $
    727,324
    
    
    $
    3,214
    
    
    $
    640,684
    
    
    $
    642,933
    
    
    $
    3,231Liabilities, StockholdersEquity
and Partners CapitalAccounts Payable and
Accrued Liabilities
    
    $
    210,523
    
    
    $
    210,212
    
    
    $
    4,885
    
    
    $
    127,021
    
    
    $
    126,859
    
    
    $
    4,500Liabilities Related to Assets Held
for Sale
    
    
    33,522
    
    
    
    33,522
    
    
    
    
    
    
    
    100,071
    
    
    
    100,071
    
    
    
    Notes Payable
    
    
    132,679
    
    
    
    132,679
    
    
    
    
    
    
    
    124,744
    
    
    
    124,744
    
    
    
    Total Liabilities
    
    
    376,724
    
    
    
    376,413
    
    
    
    4,885
    
    
    
    351,836
    
    
    
    351,674
    
    
    
    4,500Stockholders Equity and
Partners Capital
    
    
    348,098
    
    
    
    350,911
    
    
    
    (1,671
    )
    
    
    288,848
    
    
    
    291,259
    
    
    
    (1,269
    )$
    724,822
    
    
    $
    727,324
    
    
    $
    3,214
    
    
    $
    640,684
    
    
    $
    642,933
    
    
    $
    3,231


* Condensed from audited financial statements.

See Notes to Condensed Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and
3333 Holding Corporation and Subsidiary have been eliminated.

62



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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Statements of Cash Flows
(Dollars in thousands)
(unaudited)

For the Nine Months Ended December 31,2003
    
    
    2002Centex
    
    
    
    
    
    
    
    
    
    
    CentexDevelopment
    
    
    
    
    
    
    
    
    
    
    DevelopmentCompany, L.P.
    
    
    3333 Holding
    
    
    
    
    
    
    Company, L.P.
    
    
    3333 Holdingand
    
    
    Corporation
    
    
    
    
    
    
    and
    
    
    CorporationCombined
    
    
    Subsidiaries
    
    
    and Subsidiary
    
    
    Combined
    
    
    Subsidiaries
    
    
    and SubsidiaryCash Flows  Operating ActivitiesNet Earnings (Loss)
    
    $
    25,371
    
    
    $
    25,773
    
    
    $
    (402
    )
    
    $
    16,420
    
    
    $
    16,361
    
    
    $
    59Adjustments:Depreciation
    
    
    1,623
    
    
    
    1,623
    
    
    
    
    
    
    
    3,609
    
    
    
    3,609
    
    
    
    Amortization
    
    
    426
    
    
    
    426
    
    
    
    
    
    
    
    712
    
    
    
    712
    
    
    
    Deferred Tax Provision
    
    
    42
    
    
    
    42
    
    
    
    
    
    
    
    225
    
    
    
    225
    
    
    
    Equity in Earnings from Joint Ventures
    
    
    (864
    )
    
    
    (864
    )
    
    
    
    
    
    
    (600
    )
    
    
    (600
    )
    
    
    (Increase) Decrease in Receivables
    
    
    (34,623
    )
    
    
    (34,645
    )
    
    
    22
    
    
    
    803
    
    
    
    917
    
    
    
    (114
    )Decrease in Notes Receivable
    
    
    2,854
    
    
    
    2,854
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Increase in Inventories
    
    
    (52,277
    )
    
    
    (52,277
    )
    
    
    
    
    
    
    (15,504
    )
    
    
    (15,504
    )
    
    
    Decrease in Commercial Properties
    
    
    56,472
    
    
    
    56,472
    
    
    
    
    
    
    
    17,766
    
    
    
    17,766
    
    
    
    Increase in Other Assets
    
    
    (2,893
    )
    
    
    (2,893
    )
    
    
    
    
    
    
    (3,283
    )
    
    
    (3,283
    )
    
    
    Increase (Decrease) in Payables
and Accruals
    
    
    69,611
    
    
    
    69,227
    
    
    
    384
    
    
    
    (10,178
    )
    
    
    (10,250
    )
    
    
    7265,742
    
    
    
    65,738
    
    
    
    4
    
    
    
    9,970
    
    
    
    9,953
    
    
    
    17Cash Flows  Investing ActivitiesDecrease in Advances to Joint
Ventures and Investment in
Affiliate
    
    
    418
    
    
    
    418
    
    
    
    
    
    
    
    1,911
    
    
    
    1,911
    
    
    
    Increase in Property and Equipment, net
    
    
    (59
    )
    
    
    (59
    )
    
    
    
    
    
    
    (211
    )
    
    
    (211
    )
    
    
    359
    
    
    
    359
    
    
    
    
    
    
    
    1,700
    
    
    
    1,700
    
    
    
    Cash Flows  Financing ActivitiesDecrease in Notes Payable
    
    
    (65,891
    )
    
    
    (65,891
    )
    
    
    
    
    
    
    (4,682
    )
    
    
    (4,682
    )
    
    
    (65,891
    )
    
    
    (65,891
    )
    
    
    
    
    
    
    (4,682
    )
    
    
    (4,682
    )
    
    
    Effect of Exchange Rate Changes
on Cash
    
    
    (206
    )
    
    
    (206
    )
    
    
    
    
    
    
    2,324
    
    
    
    2,324
    
    
    
    Net Increase in Cash
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    9,312
    
    
    
    9,295
    
    
    
    17Cash and Cash Equivalents
at Beginning of Period
    
    
    5,113
    
    
    
    5,105
    
    
    
    8
    
    
    
    22,538
    
    
    
    22,529
    
    
    
    9Cash and Cash Equivalents
at End of Period
    
    $
    5,117
    
    
    $
    5,105
    
    
    $
    12
    
    
    $
    31,850
    
    
    $
    31,824
    
    
    $
    26


See Notes to Condensed Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and
3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Notes to Condensed Combining Financial Statements
December 31, 2003
(Dollars in thousands, except per share data)
(unaudited)

(A) BASIS OF PRESENTATION

The condensed combining interim financial statements include the accounts
of 3333 Holding Corporation (Holding) and subsidiary and Centex Development
Company, L.P. (the Partnership) and subsidiaries (collectively, the
Companies) after elimination of all significant intercompany balances and
transactions. These statements have been prepared, without audit, in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted.

In the opinion of the Companies, all adjustments (consisting of normal,
recurring adjustments) necessary to present fairly the information in the
condensed combining financial statements of the Companies have been included.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year. The Companies suggest that these
condensed combining financial statements be read in conjunction with the
financial statements and the notes thereto included in the Companies latest
Annual Report on Form 10-K.

(B) ORGANIZATION

The Partnership is a master limited partnership formed by Centex
Corporation and subsidiaries (Centex) in March 1987 to broaden the range of
business activities that may be conducted for the benefit of Centexs
stockholders to include general real estate development. Centex believed that
this expansion would improve stockholder value through longer-term real estate
investments, real estate developments and the benefits of the partnership form
of business.

The Partnership is authorized to issue three classes of limited
partnership interest. Centex Corporation indirectly holds 100% of the
Partnerships Class A and Class C limited partnership units (Class A Units
and Class C Units, respectively), which are collectively convertible into 20%
of the Partnerships Class B limited partnership units (Class B Units). The
Partnership may issue additional Class C Units in connection with the
acquisition of real property and other assets. No Class B Units have been
issued. However, the stockholders of Centex hold warrants to purchase
approximately 80% of the Class B Units. The warrants are held through a
nominee arrangement and trade in tandem with the common stock of Centex.

As holder of the Class A and Class C Units, Centex is entitled to a
cumulative preferred return of 9% per annum on the average outstanding balance
of its capital contributions to the Partnership, adjusted for cash and other
distributions representing return of capital. As of December 31, 2003, these
adjusted capital contributions, or Unrecovered Capital, were $243.9 million and
preference payments in arrears totaled $58.4 million.

The Partnership is managed by its general partner, 3333 Development
Corporation, a wholly-owned subsidiary of Holding. The common stock of Holding
is held by the stockholders of Centex through a

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nominee arrangement and trades in tandem with the common stock of Centex.
The stockholders of Centex elect the four-person board of directors of Holding,
three of whom are independent outside directors who are not directors,
affiliates or employees of Centex. Thus, through Holding, the stockholders of
Centex control the general partner of the Partnership. The general partner,
through its independent board and the independent board of Holding, including
its non-executive Chairman, oversees the Partnerships activities, including
the acquisition, development, maintenance, operation and sale of properties.
Consent of the limited partners for the activities of the Partnership is not
required, and the limited partners cannot remove the general partner. As a
result, Centex accounts for its limited partnership interest in the Partnership
using the equity method of accounting for investments.

On
November 18, 2003 Centex and the Companies announced that merger
agreements were entered into by and among the Partnership, Holding
and Centex, which will end the tandem trading relationship between
Centex common stock and the common stock of Holding, as well as the
stockholder warrants of the Partnership. The mergers will result in
the consolidation of Holding and the Partnership as indirect,
wholly-owned subsidiaries of Centex. The transaction is subject to
the approval by Centex stockholders of the termination of the nominee
agreement, and subject to the approval of the stockholders of
Holding. Pursuant to the transaction, the Holding
common stock and the stockholder warrants would be converted into
cash. A joint special meeting of the stockholders of Centex and
Holding is scheduled for February 25, 2004 to vote on these
matters. The Companies anticipate this
transaction will be completed prior to March 31, 2004. If such transaction is
not completed prior to March 31, 2004, Centex will consolidate the Partnership
and Holding as of March 31, 2004, pursuant to the provisions of FIN 46.

See Note (H) to the consolidated financial statements of Centex included
elsewhere in this Report for supplementary condensed combined financial
statements for Centex and subsidiaries, Holding and subsidiary, and the
Partnership and subsidiaries.

(C) STATEMENTS OF COMBINING CASH FLOWS  SUPPLEMENTAL DISCLOSURES

For the Three MonthsEnded December 31,2003
    
    
    2002Cash Paid for Interest
    
    $
    2,988
    
    
    $
    4,550Net Cash Paid for Taxes
    
    $
    1,960
    
    
    $
    697Class C Units Issued for Land
    
    $
    
    
    
    $
    


For the Nine MonthsEnded December 31,2003
    
    
    2002Cash Paid for Interest
    
    $
    10,081
    
    
    $
    13,673Net Cash Paid for Taxes
    
    $
    2,440
    
    
    $
    728Class C Units Issued for Land
    
    $
    2,812
    
    
    $
    


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For the Three MonthsEnded December 31,2003
    
    
    2002Total Interest Incurred
    
    $
    2,699
    
    
    $
    5,103Interest Capitalized
    
    
    (1,318
    )
    
    
    (1,791
    )Interest Expense
    
    $
    1,381
    
    
    $
    3,312


For the Nine MonthsEnded December 31,2003
    
    
    2002Total Interest Incurred
    
    $
    10,019
    
    
    $
    13,933Interest Capitalized
    
    
    (4,368
    )
    
    
    (4,406
    )Interest Expense
    
    $
    5,651
    
    
    $
    9,527


(D) RELATED PARTY TRANSACTIONS

At December 31, 2003 and March 31, 2003, Centex Homes had $4.9 million and
$7.2 million, respectively, deposited with the Partnership as option deposits
for the purchase of land. Centex Homes also entered into agreements to
reimburse the Partnership for certain costs and fees incurred by the
Partnership in the purchase and ownership of these tracts of land. During the
three months ended December 31, 2003 and 2002, Centex Homes paid $0.5 million
and $1.0 million, respectively, to the Partnership in fees and reimbursements
pursuant to these agreements and $5.4 million and $3.3 million, respectively,
for the purchase of residential lots. During the nine months ended December
31, 2003 and 2002, Centex Homes paid $1.6 million and $2.6 million,
respectively, to the Partnership in fees and reimbursements pursuant to these
agreements and $19.0 million and $27.4 million, respectively, for the purchase
of residential lots. The Partnership expects Centex Homes to pay an additional
$14.9 million to the Partnership to complete the purchase of these tracts of
land.

Construction Services has historically executed construction contracts
with the Partnership. At March 31, 2003, contracts for the construction of two
industrial facilities were completed and no additional contracts were
outstanding. At December 31, 2003, a $9.7 million contract for the
construction of an office building had been executed with the Partnership and
was outstanding. During the three months ended December 31, 2003 and 2002, the
Partnership paid $3.1 million and $0.6 million, respectively, to Construction
Services pursuant to these contracts. During the nine months ended December
31, 2003 and 2002, the Partnership paid $3.6 million and $5.3 million,
respectively, to Construction Services pursuant to these contracts.

During the nine months ended December 31, 2003, the Partnership issued
2,182 Class C Units to Centex Homes in exchange for land with a fair market
value of $2.8 million.

During the nine months ended December 31, 2003, a subsidiary of the
Partnership entered into a lease agreement (the Lease) with a Centex
subsidiary for 160,000 square feet of office space currently under

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construction in Lewisville, Texas. The Lease is for a ten-year primary
term commencing upon the date that the premises is ready for occupancy.

(E) COMPREHENSIVE INCOME

A summary of comprehensive income for the three months ended December 31,
2003 and 2002 is presented below:

For the Three MonthsEnded December 31,2003
    
    
    2002Net Earnings
    
    $
    8,268
    
    
    $
    13,116Other Comprehensive Income:Foreign Currency Translation Adjustments
    
    
    16,420
    
    
    
    5,829Unrealized Gain on Hedging Instruments
    
    
    599
    
    
    
    91Comprehensive Income
    
    $
    25,287
    
    
    $
    19,036


For the Nine MonthsEnded December 31,2003
    
    
    2002Net Earnings
    
    $
    25,371
    
    
    $
    16,420Other Comprehensive Income (Loss):Foreign Currency Translation Adjustments
    
    
    29,716
    
    
    
    23,462Unrealized Gain (Loss) on Hedging
Instruments
    
    
    1,351
    
    
    
    (735
    )Comprehensive Income
    
    $
    56,438
    
    
    $
    39,147


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(F) STOCKHOLDERS EQUITY

A summary of changes in stockholders equity is presented below:

Centex Development Company
    
    
    3333 Holding CorporationL.P. and Subsidiaries
    
    
    and SubsidiaryClass B
    
    
    General
    
    
    Limited
    
    
    
    
    
    
    Capital in
    
    
    RetainedUnit
    
    
    Partner's
    
    
    Partner's
    
    
    Stock
    
    
    Excess of
    
    
    EarningsCombined
    
    
    Warrants
    
    
    Capital
    
    
    Capital
    
    
    Warrants
    
    
    Par Value
    
    
    (Deficit)Balance at March 31, 2003
    
    $
    288,848
    
    
    $
    500
    
    
    $
    1,142
    
    
    $
    289,617
    
    
    $
    1
    
    
    $
    800
    
    
    $
    (2,070
    )Net Earnings (Loss)
    
    
    25,371
    
    
    
    
    
    
    
    
    
    
    
    25,773
    
    
    
    
    
    
    
    
    
    
    
    (402
    )Issuance of Class C Units
    
    
    2,812
    
    
    
    
    
    
    
    
    
    
    
    2,812
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
OtherComprehensive Income:Foreign Currency
Translation Adjustments
    
    
    29,716
    
    
    
    
    
    
    
    
    
    
    
    29,716
    
    
    
    
    
    
    
    
    
    
    
    Unrealized Gain on
Hedging Instruments
    
    
    1,351
    
    
    
    
    
    
    
    
    
    
    
    1,351
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31,
2003
    
    $
    348,098
    
    
    $
    500
    
    
    $
    1,142
    
    
    $
    349,269
    
    
    $
    1
    
    
    $
    800
    
    
    $
    (2,472
    )


(G) BUSINESS SEGMENTS

The Companies operate in three principal business segments: International
Home Building, Commercial Development and Corporate-Other. All of the
segments, except for International Home Building, operate in the United States.
International Home Buildings accounting policies are the same as those
described in the summary of significant accounting policies in the Companies
latest Annual Report on Form 10-K.

International Home Building acquires and develops residential properties
and constructs single and multi-family housing units in the United Kingdom.
Commercial Development develops office, industrial, retail and mixed-use
projects, for sale and for investment. Corporate-Other is involved in the
acquisition and disposition of land and other assets of the Partnership not
identified with another specific business segment. Prior to April 1, 2003, the
Companies operated a multi-family business segment (Multi-Family). Effective
April 1, 2003, the operations of this segment were restructured to focus on
leasing and disposition of remaining projects rather than new development. The
operations of these projects are reflected in the Corporate-Other segment for
the current and prior comparative period.

On
November 18, 2003, Centex and the Companies announced that
merger agreements were entered into by and among the Partnership,
Holding and Centex, which will end the tandem trading relationship
between Centex common stock and the common stock of Holding, as well
as the stockholder warrants of the Partnership. The mergers will
result in the consolidation of Holding and the Partnership as
indirect, wholly-owned subsidiaries of Centex. Centex and the
Companies anticipate this
transaction will be completed prior to March 31, 2004.

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For the Three Months Ended December 31, 2003Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    120,359
    
    
    $
    2,245
    
    
    $
    13,554
    
    
    $
    136,158Cost of Sales
    
    
    (99,061
    )
    
    
    (363
    )
    
    
    (12,910
    )
    
    
    (112,334
    )Selling, General and Administrative Expenses
    
    
    (10,363
    )
    
    
    (1,246
    )
    
    
    (1,175
    )
    
    
    (12,784
    )Interest Expense
    
    
    (509
    )
    
    
    (380
    )
    
    
    (379
    )
    
    
    (1,268
    )Earnings from Unconsolidated Subsidiaries
    
    
    
    
    
    
    622
    
    
    
    
    
    
    
    622Earnings (Loss) from Continuing Operations
Before Income Taxes
    
    
    10,426
    
    
    
    878
    
    
    
    (910
    )
    
    
    10,394Earnings (Loss) from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    1,557
    
    
    
    (972
    )
    
    
    585Earnings (Loss) Before Income Taxes
    
    $
    10,426
    
    
    $
    2,435
    
    
    $
    (1,882
    )
    
    $
    10,979


For the Three Months Ended December 31, 2002Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    95,348
    
    
    $
    2,945
    
    
    $
    5,121
    
    
    $
    103,414Cost of Sales
    
    
    (80,526
    )
    
    
    (878
    )
    
    
    (3,298
    )
    
    
    (84,702
    )Selling,
General and Administrative Expenses
    
    
    (8,634
    )
    
    
    (1,563
    )
    
    
    (1,576
    )
    
    
    (11,773
    )Interest Expense
    
    
    (631
    )
    
    
    (387
    )
    
    
    (637
    )
    
    
    (1,655
    )Earnings from Unconsolidated Subsidiaries
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Earnings (Loss) from Continuing Operations
Before Income Taxes
    
    
    5,557
    
    
    
    142
    
    
    
    (390
    )
    
    
    5,309Earnings from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    8,994
    
    
    
    
    
    
    
    8,994Earnings (Loss) Before Income Taxes
    
    $
    5,557
    
    
    $
    9,136
    
    
    $
    (390
    )
    
    $
    14,303


For the Nine Months Ended December 31, 2003Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    305,096
    
    
    $
    6,179
    
    
    $
    28,387
    
    
    $
    339,662Cost of Sales
    
    
    (254,463
    )
    
    
    (1,506
    )
    
    
    (26,498
    )
    
    
    (282,467
    )Selling, General and Administrative Expenses
    
    
    (27,426
    )
    
    
    (4,188
    )
    
    
    (2,820
    )
    
    
    (34,434
    )Interest Expense
    
    
    (1,617
    )
    
    
    (1,153
    )
    
    
    (1,236
    )
    
    
    (4,006
    )Earnings from Unconsolidated Subsidiaries
    
    
    
    
    
    
    864
    
    
    
    
    
    
    
    864Earnings (Loss) from Continuing Operations
Before Income Taxes
    
    
    21,590
    
    
    
    196
    
    
    
    (2,167
    )
    
    
    19,619Earnings (Loss) from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    11,550
    
    
    
    (525
    )
    
    
    11,025Earnings (Loss) Before Income Taxes
    
    $
    21,590
    
    
    $
    11,746
    
    
    $
    (2,692
    )
    
    $
    30,644


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For the Nine Months Ended December 31, 2002Int'l Home
    
    
    Commercial
    
    
    Corporate-Building
    
    
    Development
    
    
    Other
    
    
    TotalRevenues
    
    $
    250,774
    
    
    $
    8,039
    
    
    $
    31,361
    
    
    $
    290,174Cost of Sales
    
    
    (216,270
    )
    
    
    (2,012
    )
    
    
    (27,476
    )
    
    
    (245,758
    )Selling,
General and Administrative Expenses
    
    
    (23,337
    )
    
    
    (4,599
    )
    
    
    (4,778
    )
    
    
    (32,714
    )Interest Expense
    
    
    (1,808
    )
    
    
    (1,108
    )
    
    
    (1,589
    )
    
    
    (4,505
    )Earnings from Unconsolidated Subsidiaries
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    600Earnings (Loss) from Continuing Operations
Before Income Taxes
    
    
    9,359
    
    
    
    920
    
    
    
    (2,482
    )
    
    
    7,797Earnings from Discontinued Operations
Before Income Taxes
    
    
    
    
    
    
    10,119
    
    
    
    
    
    
    
    10,119Earnings (Loss) Before Income Taxes
    
    $
    9,359
    
    
    $
    11,039
    
    
    $
    (2,482
    )
    
    $
    17,916


(H) GOODWILL

The Partnerships International Home Building segment carries all of the
Partnerships goodwill, which arose from the April 15, 1999 acquisition of all
of the voting shares of Fairclough Homes Group Limited, a British homebuilder
(Fairclough). The carrying amount of goodwill was $34.7 million and $30.7
million at December 31, 2003 and March 31, 2003, respectively. The increase
during the nine months ended December 31, 2003 reflects the impact of foreign
currency translation adjustments.

(I) DERIVATIVES AND HEDGING

The Partnership is exposed to the risk of interest rate fluctuations on
its debt obligations. As part of its strategy to manage the obligations that
are subject to changes in interest rates, the Partnership has entered into
interest rate swap agreements, designated as cash flow hedges, on a portion of
its debt. The swap agreements are recorded at aggregate fair value in Other
Assets or Accrued Liabilities in the condensed combining balance sheets. To
the extent the hedging relationship is effective, fluctuations in the fair
value of the derivatives are deferred as a component of Accumulated Other
Comprehensive Income. Fluctuations in the fair value of the ineffective
portion of the derivatives would be reflected in the current period earnings.
During the three and nine months ended December 31, 2003 there was no hedge
ineffectiveness related to these derivatives.

The swaps expire in March 2006. Amounts to be received or paid as a
result of the swap agreements are recognized as adjustments to interest
incurred on the related debt instrument. As of December 31, 2003, the
Accumulated Other Comprehensive Gain was $1.3 million ($0.9 million net of
tax).

(J) RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 144 (SFAS 144), Accounting
for the Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement was effective for the Companies beginning April 1, 2002.

Due to the adoption of SFAS 144, the Companies now report assets
identified subsequent to March 31, 2002 as held for sale (as defined by SFAS
144), if any, and any such assets sold in the current period, as discontinued
operations. All results of these discontinued operations, less applicable
income taxes, are included as discontinued operations in the statements of
operations. Prior periods are restated for comparative

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purposes. Land assets, and any other assets sold prior to adoption of
SFAS 144, are reported in continuing operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45), which requires certain
guarantees to be recorded at fair value. FIN 45 also requires a guarantor to
make certain disclosures about guarantees, including product warranties, even
when the likelihood of making any payments under the guarantee is remote. We
have applied the recognition and measurement provisions of FIN 45 to guarantees
issued or modified after December 31, 2002. The implementation of FIN 45 did
not have a material impact on the Companies results of operations or financial
position.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, as amended (FIN 46), which modifies
the accounting for certain entities in which (1) equity investors do not have
the characteristics of a controlling financial interest and/or (2) the entity
is unable to finance its activities without additional subordinated financial
support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods
issued after January 31, 2003. See Note (K), Investments in Certain Joint
Ventures, for disclosure of the Companies potential maximum exposure related
to these entities.

FIN 46 applies immediately to variable interest entities
created, or in which an enterprise obtains an interest, after January 31, 2003.
For certain variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003, FIN 46 applies
to interim or annual periods ending after March 15, 2004. As discussed above
in Note (B), Organization, Centex indirectly holds 100% of the Partnerships
Class A and Class C Units. On November 18, 2003, Centex and the Companies
announced that merger agreements were entered into by and among
the Partnership, Holding and Centex, which will end the tandem
trading relationship between Centex common stock and the common stock
of Holding, as well as the stockholder warrants of the Partnership.
The mergers will result in the consolidation of Holding and the
Partnership as indirect, wholly-owned subsidiaries of Centex. Centex and
the Companies anticipate this transaction will be completed prior to March 31,
2004. If such transaction is not completed prior to March 31, 2004, Centex
will consolidate the Partnership and Holding as of March 31,
2004, pursuant to the provisions of FIN
46. See Note (P) to the consolidated
financial statements of Centex included elsewhere in this Report for further
discussion regarding this interpretation.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, or SFAS No. 149. The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, or SFAS No. 133, by requiring
that contracts with comparable characteristics be accounted for similarly,
resulting in more consistent reporting of contracts as either derivatives or
hybrid instruments. A portion of this statement is effective for contracts
entered into or modified and for hedging relationships designated after June
30, 2003. The remainder of this statement codifies previously issued SFAS No.
133 implementation guidance, which retains its original effective dates. The
implementation of SFAS No. 149 did not have a material impact on the Companies
results of operations or financial position.

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

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statement are
effective for financial instruments entered into or modified after May 31,
2003. In October 2003, FASB deferred indefinitely certain provisions of this
Statement pertaining to non-controlling interests in limited life entities. The estimated settlement value of non-controlling interests in
limited life entities subject to the deferral is approximately $1.5 million as
of December 31, 2003. The implementation of the provisions of SFAS No. 150
which are effective did not have an impact on the Companys results of
operations or financial position.

(K) INVESTMENTS IN CERTAIN JOINT VENTURES

The Partnership conducts certain operations through its participation in
joint ventures in which the Partnership holds less than a majority interest.
These non-consolidated joint ventures had total debt outstanding of
approximately $24.4 million as of December 31, 2003 and $35.8 million as of
March 31, 2003. The Partnerships liability for the obligations of these
non-consolidated joint ventures is limited to approximately $8.1 million as of
December 31, 2003.

(L) COMMITMENTS AND CONTINGENCIES

As of December 31, 2003, the Partnership had remaining commitments of
approximately $8.1 million on construction contracts.

To obtain construction financing for projects being developed by its
subsidiaries, the Partnership is often required to guarantee, for the benefit
of the construction lender, the completion of the project. In some instances,
the Partnership has also executed recourse payment guarantees. At December 31,
2003, our subsidiaries had outstanding letters of credit of $3.8 million that
primarily relate to development obligations of Multi-Family Communities.

Subsidiaries of the Partnership have also obtained demand notes or letters
of credit from Centex for up to 10% of the construction loan commitment amount.
These demand notes or letters of credit have been pledged or endorsed to the
lenders as additional collateral on the construction loans, and may be called
only in the event of an uncured default by the Partnership. This additional
collateral totals approximately $1.1 million as of December 31, 2003.

A subsidiary of the Partnership has agreed to develop a mixed-use project
in Saint Paul, Minnesota consisting of various types of residential housing and
ancillary retail space. The subsidiary has performed a significant portion of
the infrastructure work and has sold several of the development sites to
reputable home builders (including a 1.5 acre site to Centex Homes) pursuant to
contracts that obligate the purchasers to fulfill certain of the sellers
development obligations at the project. The subsidiary of the Partnership (as
the seller) retains the right to repurchase the site if the purchaser fails to
commence the performance of such obligations. Ultimately, the Partnerships
subsidiary remains responsible for the development of the project.

The subsidiary anticipates that the costs expended for infrastructure work
will be reimbursed from the proceeds of a bond offering by a special taxing
district established to aid in the development of the project. These costs
will be reimbursed over time as improvements at the project generate property
taxes sufficient to fund debt service on the bonds. A receivable of
approximately $12.4 million is included in Other Receivables in the
accompanying Combining Balance Sheets. The subsidiary has deferred recognition
of this income as of December 31, 2003 as improvements to the project that will
generate property taxes are not yet complete.

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In the normal course of its business, the Partnership issues certain
representations, warranties and guarantees related to its home sales, land
sales and building sales that are affected by the Financial
Accounting Standards Boards recent issuance of FIN 45. The implementation of FIN 45
did not result in a material effect on our consolidated financial condition or
operations. See further discussion on our warranty liability below. See
further discussion of FIN 45 in Note (J), Recent Accounting Pronouncements.

International Home Building offers a ten-year limited warranty for most
homes constructed and sold in the United Kingdom. The warranty covers defects
in materials or workmanship in various components of the home for the first two
years and designated structural elements of the home in the third through tenth
years. International Home Building estimates the costs that may be incurred
under its warranty program for which it will be responsible and records a
liability at the time each home is closed. Factors that affect International
Home Buildings warranty liability include the number of homes closed,
historical and anticipated rates of warranty claims and cost per claim.
International Home Building periodically assesses the adequacy of its recorded
warranty liability and adjusts the amounts as necessary.

Changes in International Home Buildings contractual warranty liability
during the period are as follows:

Balance as of March 31, 2003
    
    $
    3,390Warranties Issued
    
    
    2,822Settlements Made
    
    
    (2,362
    )Balance as of December 31, 2003
    
    $
    3,850


(M) RECLASSIFICATIONS

Certain prior year balances have been reclassified to be consistent with
the December 31, 2003 presentation.

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

On a combined basis, our revenues from continuing operations were $136.2
million for the three months ended December 31, 2003, a 31.7% increase compared
to our revenues from continuing operations of $103.4 million for the same
period last year. On a combined basis, our revenues from continuing operations
were $339.7 million for the nine months ended December 31, 2003, a 17.1%
increase over our revenues from continuing operations of $290.2 million for the
same period last year. The revenue increase for the nine months ended December
31, 2003 is primarily related to an increase in International Home Buildings
unit closings and average unit sales price, offset by a decline in
International Home Buildings land sales and a reduction in Corporate-Others
sale of residential lots to Centex Homes. Revenues from residential lot sales
and commercial land sales can vary significantly from period to period.

Our operating earnings from continuing operations for the three months
ended December 31, 2003 were $10.4 million compared to operating earnings from
continuing operations of $5.3 million for the same period last year. Our
operating earnings from continuing operations for the nine months ended
December 31, 2003 were $19.6 million compared to operating earnings from
continuing operations of $7.8 million for the same period last year. Our net
earnings from continuing operations for the three months ended December 31,
2003 were $7.7 million compared to net earnings from continuing operations of
$4.1 million for the same period last year. Our net earnings from continuing
operations for the nine months ended December 31, 2003 were $14.3 million
compared to net earnings from continuing operations of $6.3 million for the
same period last year. The increase in operating earnings and net earnings
from continuing operations for the three and nine months ended December 31,
2003 is primarily related to increased earnings from the International Home
Building segment.

Our net earnings from discontinued operations for the three and nine
months ended December 31, 2003 were $0.6 million and $11.0 million,
respectively. In accordance with Statement of Financial Accounting Standards
No. 144, or SFAS 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, effective for us beginning April 1, 2002, we report assets as
discontinued operations if such assets are held for sale (as defined by SFAS
144), or if such assets are sold in the current period. We sold or
reclassified fourteen of these properties as held for sale during the nine
months ended December 31, 2003. Land assets are reported in continuing
operations.

Prior to April 1, 2003, the Companies operated a multi-family business
segment. Effective April 1, 2003, the operations of this segment were
restructured to focus on leasing and disposition of remaining projects rather
than new development. The operations of these projects are reflected in the
Corporate-Other segment for the current and prior comparative period.

On
November 18, 2003, Centex and the Companies announced that
merger agreements were entered into by and among the Partnership, Holding and Centex,
which will end the tandem trading relationship between Centex common
stock and the common stock of Holding, as well as the stockholder
warrants of the Partnership. The mergers will result in the
consolidation of Holding and the Partnership as indirect,
wholly-owned subsidiaries of Centex. Centex and the Companies anticipate this
transaction will be completed prior to March 31, 2004.

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

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INTERNATIONAL HOME BUILDING

The following summarizes International Home Buildings results for the
three and nine months ended December 31, 2003 compared to the same periods last
year (dollars in thousands, except per unit data):

For the Three Months Ended December 31,2003
    
    
    2002Revenues  Home Building
    
    $
    114,857
    
    
    
    95.4
    %
    
    $
    77,484
    
    
    
    81.3
    %Revenues  Land Sales and Other
    
    
    5,502
    
    
    
    4.6
    %
    
    
    17,864
    
    
    
    18.7
    %Cost of Sales  Home Building
    
    
    (96,631
    )
    
    
    (80.3
    %)
    
    
    (68,109
    )
    
    
    (71.4
    %)Cost of Sales  Land Sales
    
    
    (2,430
    )
    
    
    (2.0
    %)
    
    
    (12,417
    )
    
    
    (13.0
    %)General and Administrative Expenses
    
    
    (10,363
    )
    
    
    (8.6
    %)
    
    
    (8,634
    )
    
    
    (9.1
    %)Operating Earnings
    
    
    10,935
    
    
    
    9.1
    %
    
    
    6,188
    
    
    
    6.5
    %Interest
    
    
    (509
    )
    
    
    (0.4
    %)
    
    
    (631
    )
    
    
    (0.7
    %)Earnings Before Income Taxes
    
    $
    10,426
    
    
    
    8.7
    %
    
    $
    5,557
    
    
    
    5.8
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    422
    
    
    
    30.2
    %
    
    
    324
    
    
    
    2.2
    %Average Unit Sales Price
    
    $
    272,173
    
    
    
    13.8
    %
    
    $
    239,148
    
    
    
    23.3
    %Average Operating Earnings Per Unit
    
    $
    25,912
    
    
    
    35.7
    %
    
    $
    19,099
    
    
    
    112.1
    %Backlog Units
    
    
    451
    
    
    
    (5.1
    %)
    
    
    475
    
    
    
    105.6
    %


For the Nine Months Ended December 31,2003
    
    
    2002Revenues  Home Building
    
    $
    298,596
    
    
    
    97.9
    %
    
    $
    229,041
    
    
    
    91.3
    %Revenues  Land Sales and Other
    
    
    6,500
    
    
    
    2.1
    %
    
    
    21,733
    
    
    
    8.7
    %Cost of Sales  Home Building
    
    
    (252,033
    )
    
    
    (82.6
    %)
    
    
    (200,033
    )
    
    
    (79.8
    %)Cost of Sales  Land Sales
    
    
    (2,430
    )
    
    
    (0.8
    %)
    
    
    (16,237
    )
    
    
    (6.5
    %)General and Administrative Expenses
    
    
    (27,426
    )
    
    
    (9.0
    %)
    
    
    (23,337
    )
    
    
    (9.3
    %)Operating Earnings
    
    
    23,207
    
    
    
    7.6
    %
    
    
    11,167
    
    
    
    4.4
    %Interest
    
    
    (1,617
    )
    
    
    (0.5
    %)
    
    
    (1,808
    )
    
    
    (0.7
    %)Earnings Before Income Taxes
    
    $
    21,590
    
    
    
    7.1
    %
    
    $
    9,359
    
    
    
    3.7
    %% Change
    
    
    
    
    
    % ChangeUnits Closed
    
    
    1,114
    
    
    
    14.1
    %
    
    
    976
    
    
    
    4.8
    %Average Unit Sales Price
    
    $
    268,039
    
    
    
    14.2
    %
    
    $
    234,673
    
    
    
    19.9
    %Average Operating Earnings Per Unit
    
    $
    20,832
    
    
    
    82.1
    %
    
    $
    11,442
    
    
    
    13.2
    %Backlog Units
    
    
    451
    
    
    
    (5.1
    %)
    
    
    475
    
    
    
    105.6
    %


International Home Buildings revenues for the three months ended December
31, 2003 increased by $25.0 million from revenues for the same period last
year. This increase is comprised of $10.7 million from an increase in the
average unit sales price and $26.7 million from an increase in the number of
units closed, offset by a $12.4 million decline in other revenues caused by
reduced land sales. Home sales totaled 422 units during the three months ended
December 31, 2003, compared to 324 units during the same period in the
preceding year, representing a 30.2% increase. International Home Buildings
revenues for the nine months

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ended December 31, 2003 increased by $54.3 million from revenues for the same
period last year. This increase is comprised of $32.6 million from an increase
in the average unit sales price and $36.9 million from an increase in the
number of units closed, offset by a $15.2 million decline in other revenues
caused by reduced land sales. Home sales totaled 1,114 units during the nine
months ended December 31, 2003, compared to 976 units during the same period in
the preceding year, representing a 14.1% increase.

International Home Buildings gross homebuilding margins increased for the
three months ended December 31, 2003 to 15.9% from 12.1% and increased for the
nine months ended December 31, 2003 to 15.6% from 12.7% compared to the same
periods last year. The improvement in gross margins was primarily due to an
increase in the average unit sales price, partially offset by increases in
labor costs caused by a shortage of skilled labor.

International Home Buildings general and administrative expenses, as a
percentage of revenues, decreased 0.5% and 0.3%, respectively, for the three
and nine months ended December 31, 2003 compared to the same periods last year,
primarily due to the impact of increased revenues in the three and nine month
periods ended December 31, 2003, offset by increased personnel and regulatory
compliance expenses.

International Home Buildings financial statements are affected by
fluctuations in exchange rates. International Home Building, whose functional
currency is the British pound sterling, translates its financial statements
into U.S. dollars. Income statement accounts are translated using the average
exchange rate for the period, except for significant, non-recurring
transactions that are translated at the rate in effect as of the date of the
transaction. For the three months ended December 31, 2003 and 2002,
respectively, the average exchange rate used for translation was 1.71 and 1.57,
representing an increase of 8.5%. For the nine months ended December 31, 2003
and 2002, respectively, the average exchange rate used for translation was 1.65
and 1.53, representing an increase of 7.7%.

The backlog of homes sold but not closed at December 31, 2003 was 451
units, 5.1% less than the 475 units at the same point in the preceding year.

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##### Table of Contents



COMMERCIAL DEVELOPMENT

The following summarizes Commercial Developments results for the three
and nine months ended December 31, 2003, compared to the same periods last year
(dollars and square feet in thousands):

For the Three MonthsEnded December 31,2003
    
    
    2002Sales Revenues
    
    $
    850
    
    
    $
    1,900Rental Income and Other Revenues
    
    
    1,395
    
    
    
    1,045Cost of Sales
    
    
    (363
    )
    
    
    (878
    )Selling, General and Administrative Expense
    
    
    (1,056
    )
    
    
    (1,294
    )Interest
    
    
    (380
    )
    
    
    (387
    )Operating Earnings Before Depreciation and Earnings from
Unconsolidated Subsidiaries
    
    
    446
    
    
    
    386Depreciation and Amortization
    
    
    (190
    )
    
    
    (269
    )Earnings from Unconsolidated Subsidiaries
    
    
    622
    
    
    
    25Operating Earnings
    
    
    878
    
    
    
    142Earnings from Discontinued Operations
    
    
    1,557
    
    
    
    8,994Earnings Before Income Taxes
    
    $
    2,435
    
    
    $
    9,136Operating Square Footage at December 31
    
    
    821
    
    
    
    2,370


For the
Nine MonthsEnded December 31,2003
    
    
    2002Sales Revenues
    
    $
    1,893
    
    
    $
    4,235Rental Income and Other Revenues
    
    
    4,286
    
    
    
    3,804Cost of Sales
    
    
    (1,506
    )
    
    
    (2,012
    )Selling, General and Administrative Expense
    
    
    (3,619
    )
    
    
    (4,025
    )Interest
    
    
    (1,153
    )
    
    
    (1,108
    )Operating Earnings (Loss) Before Depreciation and Earnings
From Unconsolidated Subsidiaries
    
    
    (99
    )
    
    
    894Depreciation and Amortization
    
    
    (569
    )
    
    
    (574
    )Earnings from Unconsolidated Subsidiaries
    
    
    864
    
    
    
    600Operating Earnings
    
    
    196
    
    
    
    920Earnings from Discontinued Operations
    
    
    11,550
    
    
    
    10,119Earnings Before Income Taxes
    
    $
    11,746
    
    
    $
    11,039Operating Square Footage at December 31
    
    
    821
    
    
    
    2,370


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##### Table of Contents



Commercial Developments operations during the nine months ended December 31, 2003 included:



| |  |  | completion of shell construction for a 138,000 square foot retail project in Santa Clara, California;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | continued construction of a 62,000 square foot light industrial project in Camarillo, California;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | completion of shell construction of a 39,000 square foot light
industrial project in Oxnard, California; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | commencement of construction on a 160,000 square foot office building
in Lewisville, Texas.
| | - |  | -------------------------------------------------------------------------------------------

Commercial Developments discontinued operations during the nine months ended
December 31, 2003 included:



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



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



| |  |  | sale of two light industrial projects totaling 88,000 square feet in Oxnard, California;
| | - |  | ----------------------------------------------------------------------------------------



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



| |  |  | sale of a 58,000 square foot retail project in Lewisville, Texas; and
| | - |  | ---------------------------------------------------------------------



| |  |  | operation of a 123,000 square foot industrial project in Charlotte,
North Carolina and a 113,000 square foot industrial project in
Camarillo, California.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Sales revenues and cost of sales for the nine months ended December 31,
2003 reflect the sale of a pad site at a retail project in Lewisville, Texas
and the sale of land in Ann Arbor, Michigan. Sales revenues and cost of sales
for the nine months ended December 31, 2002 reflect the sale of four pad sites
at a retail project in Lewisville, Texas. Rental income and other revenues
increased as the result of leasing at an industrial project in Grand Prairie,
Texas. Selling, general and administrative expense decreased as the result of
staffing reductions and a decrease in property operation expenses. Earnings
from unconsolidated entities have increased as the result of leasing at a
retail project in Santa Clara, California and the sale of our interest in four
medical office buildings.

December 31, 2003
    
    
    December 31, 2002(000's)
    
    
    Weighted
    
    
    (000's)
    
    
    WeightedRentable
    
    
    Average
    
    
    Rentable
    
    
    AverageSq. Ft.
    
    
    Occupancy
    
    
    Sq. Ft.
    
    
    OccupancyOperating Properties*Industrial
    
    
    464
    
    
    
    74.2
    %
    
    
    1,969
    
    
    
    79.7
    %Office/Medical
    
    
    219
    
    
    
    95.0
    %
    
    
    343
    
    
    
    71.6
    %Retail
    
    
    138
    
    
    
    96.9
    %
    
    
    58
    
    
    
    74.8
    %821
    
    
    
    83.6
    %
    
    
    2,370
    
    
    
    78.3
    %(000's)
    
    
    
    
    
    
    (000's)Rentable
    
    
    
    
    
    RentableSq. Ft
    
    
    
    
    
    Sq. Ft.Projects Under Construction*Industrial
    
    
    62
    
    
    
    
    
    
    
    155Office/Medical
    
    
    160
    
    
    
    
    
    
    
    Retail
    
    
    
    
    
    
    
    
    
    
    136222
    
    
    
    
    
    
    
    291


* Includes assets classified as Held for Sale.

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##### Table of Contents



CORPORATE-OTHER

The following summarizes the results of Corporate-Other for the three and
nine months ended December 31, 2003, compared to the same periods last year
(dollars in thousands):

For the Three MonthsEnded December 31,2003
    
    
    2002Revenues
    
    $
    13,554
    
    
    $
    5,121Cost of Sales
    
    
    (12,910
    )
    
    
    (3,298
    )Selling, General and Administrative Expenses
    
    
    (1,175
    )
    
    
    (1,576
    )Interest Expense
    
    
    (379
    )
    
    
    (637
    )Operating Loss
    
    
    (910
    )
    
    
    (390
    )Loss from Discontinued Operations
    
    
    (972
    )
    
    
    Loss Before Income Taxes
    
    $
    (1,882
    )
    
    $
    (390
    )


For the Nine MonthsEnded December 31,2003
    
    
    2002Revenues
    
    $
    28,387
    
    
    $
    31,361Cost of Sales
    
    
    (26,498
    )
    
    
    (27,476
    )Selling, General and Administrative Expenses
    
    
    (2,820
    )
    
    
    (4,778
    )Interest Expense
    
    
    (1,236
    )
    
    
    (1,589
    )Operating Loss
    
    
    (2,167
    )
    
    
    (2,482
    )Loss from Discontinued Operations
    
    
    (525
    )
    
    
    Loss Before Income Taxes
    
    $
    (2,692
    )
    
    $
    (2,482
    )


Our Corporate-Other segment acquires and disposes of land and other assets
that are not identified with another specific business segment. Revenues and
cost of sales for the three and nine months ended December 31, 2003 relate
primarily to the sale of residential lots to Centex Homes. Revenues and cost of
sales for the three and nine months ended December 31, 2002 also relate
primarily to sales of residential lots to Centex Homes.

Selling, general and administrative expenses decreased for the three and
nine months ended December 31, 2003 compared to the same periods last year,
primarily due to staffing reductions in the former Multi-Family segment.
Interest expense for the three and nine months ended December 31, 2003 and 2002
relates primarily to debt incurred to finance the purchase of residential lots.

The loss from discontinued operations for the three and nine months ended
December 31, 2003 relates primarily to the sale of a Multi-Family project in
San Antonio, Texas.

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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES

We finance land acquisition and development activities primarily from
financial institution borrowings, equity contributions from third-party
investors in project-specific joint ventures, seller financing, issuance of
Class C limited partnership units to Centex affiliates and cash flow from
operations, which is comprised largely of proceeds from the sale of real estate
and operating projects.

We typically finance properties under development through short-term
variable and fixed-rate secured construction loans, and to a limited extent
depending on the timing of the project construction, cash flow from operations.
Construction loans totaled $44.3 million, including $32.7 million related to
assets held for sale, at December 31, 2003. Under the terms of various
construction loan agreements, we are required to maintain certain minimum
liquidity and net worth levels. At December 31, 2003, we were in compliance
with these covenants.

Permanent commercial project loans outstanding at December 31, 2003
totaled $17.2 million. The project loan is collateralized by a completed
commercial property and has a fixed interest rate of 7.79%. This loan is
non-recourse to the Partnership and its subsidiaries.

No new seller-financed land loans were obtained during the quarters ended
December 31, 2003 and 2002. Outstanding balances on seller-financed loans at
December 31, 2003 totaled $14.9 million, with terms of up to three years and
fixed interest rates ranging from 8.00% to 9.00%.

The International Home Building segment has secured a revolving bank
credit facility of 100 million in British pounds sterling. Advances under this
facility totaled £50.0 million, or $88.9 million, at December 31, 2003. Under
the terms of this facility, the International Home Building segment is required
to maintain certain leverage and interest coverage ratios and a minimum
tangible net worth. At December 31, 2003, the International Home Building
segment was in compliance with all of these covenants.

We believe that the revenues, earnings, and liquidity from the sale of
single-family homes, land sales, the sale of development projects and issuance
of Class C Units will be sufficient to provide the necessary funding for our
current and future needs.

CERTAIN OFF-BALANCE SHEET AND OTHER OBLIGATIONS

The following is a summary of certain off-balance sheet arrangements and
other obligations and their possible effects on our liquidity and capital
resources.

Joint Ventures

We conduct certain operations through our participation in joint ventures
in which we hold less than a majority interest. These non-consolidated joint
ventures had total debt outstanding of approximately $24.4 million as of
December 31, 2003 and $35.8 million as of March 31, 2003. Our liability for
the obligations of these non-consolidated joint ventures is limited to
approximately $8.1 million as of December 31, 2003.

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##### Table of Contents



Letters of Credit, Guarantees and Leases

At December 31, 2003, we had outstanding performance bonds and bank
guarantees of $29.9 million that relate to projects undertaken by International
Home Building and development obligations of International Home Building.

To obtain construction financing for commercial and multi-family projects
being developed by our subsidiaries, we are often required to guarantee, for
the benefit of the construction lender, the completion of the project. In some
instances, we have also executed partial recourse payment guarantees. At
December 31, 2003, our subsidiaries had outstanding letters of credit of $3.8
million that primarily relate to development obligations of Multi-Family
Communities.

We expect that our subsidiaries will satisfy their loan and other
contractual obligations in the ordinary course of business and in accordance
with applicable contractual terms. As that occurs, our liability exposure will
be decreased and, eventually, we will not have any continuing obligations with
respect to these projects.

We have no material capital or operating leases.

RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 144, or SFAS 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement was effective for us beginning April 1, 2002.

Due to the adoption of SFAS 144, we now report assets identified
subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any,
and any such assets sold in the current period, as discontinued operations.
All results of these discontinued operations, less applicable income taxes, are
included as discontinued operations in the statements of operations. Prior
periods are restated for comparative purposes. Land assets, and any other
assets sold prior to adoption of SFAS 144, are reported in continuing
operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, or FIN 45, which requires certain
guarantees to be recorded at fair value. FIN 45 also requires a guarantor to
make certain disclosures about guarantees, including product warranties, even
when the likelihood of making any payments under the guarantee is remote. We
have applied the recognition and measurement provisions of FIN 45 to guarantees
issued or modified after December 31, 2002. The implementation of FIN 45 did
not have a material impact on our results of operations or financial position.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, as amended or FIN 46, which modifies
the accounting for certain entities in which (1) equity investors do not have
the characteristics of a controlling financial interest and/or (2) the entity
is unable to finance its activities without additional subordinated financial
support from other parties. Certain disclosure requirements of
FIN 46 are effective for financial statements of interim or annual periods
issued after January 31, 2003. FIN 46 applies immediately to
variable interest entities created, or in which an enterprise obtains an
interest, after January 31, 2003. For certain variable interest entities in
which an enterprise holds a variable interest that it acquired before
February 1, 2003, FIN 46 applies to interim or annual periods ending after
March 15, 2004. As discussed in Note (B), Organization, of our Notes to
Condensed Combining Financial Statements, Centex indirectly holds 100% of the
Partnerships Class A and Class C Units. On
November 18, 2003, Centex

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and the Companies announced
that merger agreements were entered into by and among the
Partnership, Holding and Centex, which will end the tandem trading
relationship between Centex common stock and the common stock of
Holding, as well as the stockholder warrants of the Partnership. The
mergers will result in the consolidation of Holding and the
Partnership as indirect, wholly-owned subsidiaries of Centex. Centex and the
Companies anticipate this transaction will be completed prior to March 31,
2004. If such transaction is not completed prior to March 31, 2004, Centex
will consolidate the Partnership and Holding as of March 31,
2004, pursuant to the provisions of FIN 46. See Note (P) to the consolidated
financial statements of Centex included elsewhere in this Report for further
discussion regarding this interpretation.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, or SFAS No. 149. The statement amends and clarifies financial
accounting and reporting for derivative instruments and hedging activities
under Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, or SFAS No. 133, by requiring
that contracts with comparable characteristics be accounted for similarly,
resulting in more consistent reporting of contracts as either derivatives or
hybrid instruments. A portion of this statement is effective for contracts
entered into or modified and for hedging relationships designated
after June 30, 2003. The remainder of this statement codifies
previously issued SFAS No. 133 implementation guidance, which retains its original effective dates. The
implementation of SFAS No. 149 did not have a material impact on the Companies
results of operations or financial position.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity, (SFAS No. 150). The statement establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within the
scope of SFAS No. 150 as a
liability (or an asset in some circumstances). Certain provisions of this
statement are effective for financial instruments entered into or modified
after May 31, 2003. In October 2003, FASB deferred indefinitely certain
provisions of this Statement pertaining to non-controlling interests in limited
life entities. The estimated settlement value of non-controlling interests in
limited life entities subject to the deferral is approximately $1.5 million as
of December 31, 2003. The implementation of the provisions of SFAS No. 150
which are effective did not have an impact on the Companys results of
operations or financial position.

FORWARD-LOOKING STATEMENTS

Various sections of this Report, including Managements Discussion and
Analysis of Financial Condition and Results of Operations, contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the context of the statement and generally arise when we
are discussing our beliefs, estimates or expectations. These statements are
not guarantees of future performance and involve a number of risks and
uncertainties. Actual results and outcomes may differ materially from what is
expressed or forecasted in these forward-looking statements. In addition to
the specific uncertainties discussed elsewhere in this Report, the following
risks and uncertainties may affect the actual performance and results of
operations of the Companies:



| |  |  | Our homebuilding, commercial, multi-family and land sales operations
are somewhat cyclical and sensitive to changes in economic conditions,
including levels of employment, consumer confidence
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | and income,
availability of financing, interest rate levels and changes in the
economic condition of the local markets in which we operate.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our homebuilding, commercial, multi-family and land sales operations
are also subject to other risks and uncertainties, including seasonal
variations, adverse weather conditions, the availability of adequate
land in desirable locations, the cost and availability of labor and
construction materials, labor disputes, the general demand for housing
and new construction and the resale market for existing homes.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All of our businesses operate in very competitive environments, which
are characterized by competition from a number of other homebuilders,
developers and landowners in each of the markets in which we operate.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are subject to various federal, state and local statutes, rules
and regulations that could affect our businesses, including those
concerning zoning, construction, protecting the environment and health.
In addition, our businesses could be affected by changes in federal
income tax policy, federal mortgage loan financing programs and by other
changes in regulation or policy.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other risks and uncertainties may also affect the outcome of the actual
performance and results of operations of the Partnership and Holding.

Item 3. Quantitative and
Qualitative Disclosures about Market Risk

There have been no material changes in the Companies market risk from
March 31, 2003. For further information regarding the Companies market risk,
refer to the Companies Annual Report on Form 10-K for the fiscal year ended
March 31, 2003.

Item 4. Controls and Procedures

An evaluation has been performed under the supervision and with the
participation of the management of 3333 Holding Corporation and of Centex
Development Company, L.P. (through its general partner, 3333 Holding
Corporation), including the Chief Executive Officer and Chief Financial Officer
of both 3333 Holding Corporation and 3333 Development Corporation, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of December 31, 2003. Based on that evaluation, the management
of 3333 Holding Corporation and of Centex Development Company, L.P. (through
its general partner, 3333 Holding Corporation), including the Chief Executive
Officer and Chief Financial Officer of both 3333 Holding Corporation and 3333
Development Corporation, concluded that our disclosure controls and procedures
were effective as of December 31, 2003 to provide reasonable assurance that
information required to be disclosed in our reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. There has been no change in our internal
controls over financial reporting subsequent to the date of the
foregoing evaluation that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.

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Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K



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

2.1
    
    
    Agreement and Plan of Merger dated as of
November 17, 2003, by and among 3333 Holding Corporation,
Centex Corporation and 3333 Acquisition Corp. (filed as
Exhibit 2.1 to Form 8-K of Centex Corporation, 3333
Holding Corporation and Centex Development Company, L.P.
dated November 18, 2003 and incorporated herein by
reference).2.2
    
    
    Agreement and Plan of Merger dated as of November 17, 2003,
by and among Centex Development Company, L.P., 3333 Development
Corporation, Centex Corporation, Centex Development
Acquisition, L.P. and Centex Homes (filed as Exhibit 2.2 to
Form 8-K of Centex Corporation, 3333 Holding Corporation and
Centex Development Company, L.P. dated November 18, 2003 and
incorporated herein by reference).4.1
    
    
    Amendment to Nominee Agreement dated as
of November 17, 2003, by and between Centex Corporation,
3333 Holding Corporation, Centex Development Company, L.P.
and Mellon Investor Services LLC (filed as Exhibit 4.1 to
Form 8-K of Centex Corporation, 3333 Holding Corporation
and Centex Development Company, L.P. dated November 18,
2003 and incorporated herein by reference).31.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.32.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.


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32.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P. pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.




| | (4) |  | Reports on Form 8-K
| | --- |  | -------------------



| |  |  | Current Report on Form 8-K of Centex Corporation, 3333 Holding
Corporation and Centex Development Company, L.P. dated November 18, 2003,
announcing proposed termination of the tandem trading of the registrants
securities and proposed transaction by which 3333 Holding Corporation and
Centex Development Company, L.P. will become subsidiaries of Centex
Corporation.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation, 3333 Holding
Corporation and Centex Development Company, L.P. dated December 19, 2003,
announcing temporary suspension by certain Centex Corporation profit
sharing plans of transactions by plan participants in the Centex
Corporation common stock fund under the plans.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K of Centex Corporation, 3333 Holding
Corporation and Centex Development Company, L.P. dated December 23,
2003, announcing the amendment of the combined financial statements
of 3333 Holding Corporation and Centex Development Company, L.P.
included in their Form 10-K for the fiscal year ended March 31, 2003
to reflect subsequent property sales as discontinued operations, in
connection with the proposed transactions announced in their Form 8-K
dated November 18, 2003.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

3333 HOLDING CORPORATIONRegistrantFebruary 9, 2004
    
    /s/ Todd D. NewmanTodd D. NewmanSenior Vice President, Chief FinancialOfficer and Treasurer(principal financial officer andprincipal accounting officer)


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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, 3333
Development Corporation, as general partner of, and on behalf of the
registrant, has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

CENTEX DEVELOPMENT COMPANY, L.P.RegistrantBy 3333 Development CorporationGeneral PartnerFebruary 9, 2004
    
    /s/ Todd D. NewmanTodd D. NewmanSenior Vice President, Chief FinancialOfficer and Treasurer(principal financial officer andprincipal accounting officer)


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Exhibit Index for
Centex Corporation

ExhibitNumber
    
    
    Description10.3
    
    
    Amended and Restated Distribution
Agreement, dated as of November 4, 2003, between Centex
Corporation and Centex Construction Products, Inc.
(incorporated by reference from Amendment No. 3 to
Schedule 13D of Centex Corporation filed with the
Securities and Exchange Commission on November 5, 2003).10.4
    
    
    Amended and Restated Agreement and Plan
of Merger, dated as of November 4, 2003, among Centex
Corporation, ARG Merger Corporation and Centex
Construction Products, Inc. (incorporated by reference
from Amendment No. 3 to Schedule 13D of Centex Corporation
filed with the Securities and Exchange Commission on
November 5, 2003).31.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.31.2
    
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities Exchange Act of
1934, as amended.32.1
    
    
    Certification of the Chief Executive
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Chief Financial
Officer of Centex Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.






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Exhibit Index for
3333 Holding Corporation and
Centex Development Company, L.P.

ExhibitNumber
    
    
    Description2.1
    
    
    Agreement and Plan of Merger dated as of
November 17, 2003, by and among 3333 Holding Corporation,
Centex Corporation and 3333 Acquisition Corp. (filed as
Exhibit 2.1 to Form 8-K of Centex Corporation, 3333
Holding Corporation and Centex Development Company, L.P.
dated November 18, 2003 and incorporated herein by
reference).2.2
    
    
    Agreement and Plan of Merger dated as of November 17, 2003,
by and among Centex Development Company, L.P., 3333 Development
Corporation, Centex Corporation, Centex Development
Acquisition, L.P. and Centex Homes (filed as Exhibit 2.2 to
Form 8-K of Centex Corporation, 3333 Holding Corporation and
Centex Development Company, L.P. dated November 18, 2003 and
incorporated herein by reference).4.1
    
    
    Amendment to Nominee Agreement dated as
of November 17, 2003, by and between Centex Corporation,
3333 Holding Corporation, Centex Development Company, L.P.
and Mellon Investor Services LLC (filed as Exhibit 4.1 to
Form 8-K of Centex Corporation, 3333 Holding Corporation
and Centex Development Company, L.P. dated November 18,
2003 and incorporated herein by reference).31.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to Rules
13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.31.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
Rules 13a-14 and 15d-14 promulgated under the Securities
Exchange Act of 1934, as amended.32.3
    
    
    Certification of the Chief Executive
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.4
    
    
    Certification of the Chief Financial
Officer of 3333 Holding Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.5
    
    
    Certification of the Chief Executive
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P., pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.6
    
    
    Certification of the Chief Financial
Officer of 3333 Development Corporation, as the general
partner of Centex Development Company, L.P. pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.