Centex 8-K Results of Operations and Financial Condition

www.centex.com
P.O. Box 199000
Dallas, Texas 75219-9000

 
2728 North Harwood
Dallas, Texas 75201-1516

 
Phone: (214) 981-5000

N e w s R e l e a s e

FOR IMMEDIATE RELEASE

For additional information, contact at (214) 981-5000:
Leldon E. Echols, Executive Vice President and Chief Financial Officer
Matthew G. Moyer, Vice President—Investor Relations
http://www.centex.com

CENTEX REPORTS RECORD FOURTH QUARTER
AND FISCAL YEAR RESULTS

Fourth quarter earnings per diluted share of $3.04
Fiscal year 2006 earnings per diluted share of $9.71

DALLAS— April 26, 2006: Centex Corporation(NYSE: CTX)today announced record revenues, operating earnings and diluted earnings per share for the quarter ended March 31, 2006, as well as record results for the tenth consecutive fiscal year.

Highlights of the quarter ended March 31, 2006 (compared to last year’s fourth quarter):

• Revenues grew 25% to $4.55 billion

• Earnings per diluted share from continuing operations grew 17% to $2.92

• Home closings increased 22% to 12,336

• Home Building operating earnings grew 15% to $601 million

• Unit backlog declined 6% on a sales (orders) decline of 11% in units

Highlights of fiscal year 2006 (compared to fiscal year 2005):

• Revenues grew 23% to $14.40 billion

• Earnings per diluted share from continuing operations grew 35% to $9.20

• Home Building operating earnings increased 38% to $1.91 billion

• Repurchased 9.25 million shares, or approximately 7% of shares outstanding

• Return on average stockholders’ equity exceeded 27%

     Tim Eller, Centex Corporation Chairman and CEO, said, “Our record results in fiscal year 2006 reflect the strength of our product mix and geographic diversity as well as the fundamental strength of the U.S. economy. Core demand for our housing products remains strong despite a current transition to more normal conditions in those markets that have exhibited above trend pricing growth. One of the ways we have positioned ourselves for this changing environment is by slowing the growth of our land position. While closings growth will moderate for fiscal 2007, we will continue to expand our local market shares and improve our operating efficiency with a particular focus on overhead management.”

Centex Corporation, Page 2 of 3

HOME BUILDING

     Fiscal 2006’s fourth quarter revenues were $3.98 billion, 29% higher than the same quarter last year. Operating earnings were $601 million for the quarter, 15% higher than the same quarter a year ago.

     The 15% increase in operating earnings was achieved on a 22% increase in closings to 12,336 homes in this year’s fourth quarter and a 10% increase in the average sales prices of homes delivered.

     The total home building operating margin, including land sales, was 15.1%, down 190 basis points versus last year’s fourth quarter, mainly due to significantly less earnings from land sales in this quarter. Additionally, the company wrote down the value of certain option deposits and pre-acquisition costs, and certain land parcels, to align the company’s land position to current conditions in markets such as Washington D.C., Sacramento, and San Diego. The net effect of these provisions reduced reported earnings in the quarter by approximately $0.14 per share.

     The housing operating margin increased 20 basis points to 15.2%, reflective of 20 basis points of SG&A leverage on housing revenues and a flat gross margin.

     Full year fiscal 2006 operating earnings reached a record $1.91 billion, 38% higher than fiscal 2005. Revenues of $12.27 billion for fiscal year 2006 were 31% higher than last year’s revenues. For fiscal 2006, Centex delivered 39,232 homes, up 18% over last year.

OTHER BUSINESSES

CTX Mortgage, Title and Insurance Group (CMTIG)

     Operating earnings from CMTIG totaled $21 million for the fourth quarter of fiscal 2006, equal to the same quarter a year ago. Total originations increased 6%, helped by a significant increase in originations from Centex’s home building operations. CMTIG provided loans to 77% of Centex Homes’ buyers during the fourth quarter, up four percentage points versus last year’s fourth quarter.

Construction Services

     Operating earnings from Construction Services were $14 million for the fourth quarter this year, resulting in an operating margin of 3.1%, up 130 basis points from last year’s fourth quarter. New contracts for the quarter were approximately $452 million, increasing the backlog of uncompleted construction contracts at March 31, 2006 to $2.96 billion, 48% more than a year ago.

ADDITIONAL DEVELOPMENTS

     As previously announced, Centex has entered into a definitive agreement to sell Centex Home Equity Company, LLC (CHEC), its sub-prime home equity mortgage lender. The sale is subject to certain conditions including regulatory approvals and is expected to close in approximately 90 days. Based on current information, Centex estimates that net after-tax cash available in connection with the sale, at closing, will be approximately $575 million. As a result of the proposed sale, CHEC’s financial results are now reported as a component of discontinued operations.

     In the fourth fiscal quarter, Centex repurchased 2,500,000 shares at an average price of $70.56 per share. There are 2,500,000 shares remaining in the current repurchase authorization.

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Centex Corporation, Page 3 of 3

OUTLOOK

     Taking into consideration its current backlog and the housing market conditions, as well as the classification of CHEC’s earnings into results from discontinued operations, Centex’s full year 2007 earnings guidance is now $8.50 to $10.00 per fully diluted share from continuing operations. Additionally, Centex issued guidance for its first fiscal quarter ending June 30, 2006 of $1.35 to $1.45 per fully diluted share from continuing operations.

     Centex’s senior management will conduct a conference call to discuss the fourth quarter fiscal year 2006 financial results at 10 a.m. Eastern Time (9 a.m. Central Time) on Thursday, April 27. The conference call, accompanied by a slide presentation, will be webcast simultaneously on the Centex Web site athttp://www.centex.com. A replay of the call, as well as the presentation, will be archived on that site.

# # #

Forward-Looking Statements. This press release contains 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 Centex is discussing its beliefs, estimates or expectations. Such statements include projections, forecasts, and plans and objectives of management for future operations and operating and financial performance, as well as any related assumptions. These statements are not historical facts or guarantees of future performance but instead represent only Centex’s belief at the time the statements were made regarding future events, which are subject to significant risks, uncertainties and other factors, many of which are outside of Centex’s control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. These risks and uncertainties are described in greater detail in Centex’s most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2005 (including under the captions “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), as well as recent Quarterly Reports on Form 10-Q, which are on file with the SEC and may be obtained free of charge through the Web site maintained by the SEC at http://www.sec.gov. The factors discussed in these reports include, but are not limited to, changes in national or regional economic or business conditions, including employment levels and interest rates, competition, shortages or price changes in raw materials or labor, and other factors that could affect demand for our homes, mortgage loans or construction services or the profitability of our operations. With respect to a possible sale of CHEC, although Centex has entered into a definitive agreement, there can be no assurance that a sale of CHEC will be completed, or if completed, as to the terms or timing of the transaction. Centex’s earnings guidance assumes that share repurchases will be made during the fiscal year. If repurchases are not made as anticipated, our earnings per share will be affected and may be lower. All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this press release will increase with the passage of time. Centex makes no commitment, and disclaims any duty, to update or revise any forward-looking statement to reflect future events or changes in Centex’s expectations.

NOTE ATTACHMENTS:
(1) Revenues and Earnings by Lines of Business
(2) Condensed Consolidated Balance Sheets
(3) Condensed Consolidated Cash Flows
(4) Supplemental Home Building Data
(5) Housing Activity by Geographic Area
(6) Housing Activity Dollar Values by Geographic Area
(7) Supplemental Financial Services Data
(8) Supplemental Financial Data

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Attachment 1

Centex Corporation and Subsidiaries
Revenues and Earnings by Lines of Business
(Dollars in thousands, except per share data)

	Quarter Ended									Fiscal Year Ended
	March 31,									March 31,
	(unaudited)									(unaudited)
	2006			2005 (C)			Change			2006			2005 (C)			Change
Revenues
Home Building (A)	$	3,980,967		$	3,089,617			29	%	$	12,272,203		$	9,359,741			31	%
Financial Services (B)		118,498			106,110			12	%		462,223			421,653			10	%
Construction Services		445,705			406,690			10	%		1,606,609			1,738,603			(8	%)
Other (Including Intersegment Eliminations)		5,064			31,096			(84	%)		58,634			152,888			(62	%)
Total	$	4,550,234		$	3,633,513			25	%	$	14,399,669		$	11,672,885			23	%
Operating Earnings
Home Building (A)	$	601,349		$	524,889			15	%	$	1,905,812		$	1,378,818			38	%
Financial Services (B)		20,922			21,224			(1	%)		84,465			95,972			(12	%)
Construction Services		13,646			7,146			91	%		26,838			23,524			14	%
Other (Including Intersegment Eliminations)		(1,194	)		(5,812	)		79	%		(9,400	)		5,566			(269	%)
Total Operating Earnings		634,723			547,447			16	%		2,007,715			1,503,880			34	%
Corporate General Expenses		(29,220	)		(21,136	)					(100,155	)		(82,877	)
Interest Expense		(3,362	)		(5,270	)					(12,067	)		(19,348	)
Earnings from Continuing Operations Before Income Taxes		602,141			521,041			16	%		1,895,493			1,401,655			35	%
Income Taxes		(226,370	)		(186,966	)					(674,472	)		(502,113	)
Earnings from Continuing Operations		375,771			334,075			12	%		1,221,021			899,542			36	%
Earnings (Loss) from Discontinued Operations, net (A, B)		15,998			35,673						68,292			111,822
Net Earnings	$	391,769		$	369,748			6	%	$	1,289,313		$	1,011,364			27	%
Earnings Per Share — Basic
Earnings per Share — Continuing Operations	$	3.04		$	2.61			16	%	$	9.62		$	7.19			34	%
Earnings (Loss) per Share — Discontinued Operations		0.13			0.28						0.54			0.89
Earnings Per Share — Basic	$	3.17		$	2.89			10	%	$	10.16		$	8.08			26	%
Earnings Per Share — Diluted
Earnings per Share — Continuing Operations	$	2.92		$	2.49			17	%	$	9.20		$	6.79			35	%
Earnings (Loss) per Share — Discontinued Operations		0.12			0.26						0.51			0.85
Earnings Per Share — Diluted	$	3.04		$	2.75			11	%	$	9.71		$	7.64			27	%
Average Shares Outstanding:
Basic		123,622,796			127,739,654			(3	%)		126,870,887			125,226,596			1	%
Diluted		128,732,705			134,248,349			(4	%)		132,749,797			132,397,961			—	%

(A)	Home Building excludes the United Kingdom Home Building operations which was sold in September, 2005 and is reflected in discontinued operations.
(B)	Financial Services excludes the Centex Home Equity operation which is to be sold under current agreement and is reflected in discontinued operations.
(C)	Certain prior year items have been reclassified to conform to current period classifications.

Attachment 2

Centex Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in millions)
(unaudited)

	Centex Corporation and Subsidiaries				Centex Corporation (A)				Financial Services
	March 31,		March 31,		March 31,		March 31,		March 31,		March 31,
	2006		2005		2006		2005		2006		2005
Assets
Cash -
Unrestricted	$	47	$	502	$	37	$	491	$	10	$	11
Restricted		135		88		71		53		64		35
Receivables -
Residential Mortgage Loans Held for Sale		2,130		1,775		—		—		2,130		1,775
Other Receivables		704		637		660		594		44		43
Inventories -
Homebuilding		8,828		6,439		8,828		6,439		—		—
Land Held Under Option Agreements not Owned		818		457		818		457		—		—
Other		12		33		6		27		6		6
Investments		310		164		965		736		—		—
Property and Equipment, net		183		141		161		117		22		24
Goodwill		219		217		207		205		12		12
Deferred Charges and Other Assets		469		379		430		333		39		46
Assets of Discontinued Operations		7,510		9,179		—		677		7,510		8,502
	$	21,365	$	20,011	$	12,183	$	10,129	$	9,837	$	10,454
Liabilities and Stockholders’ Equity
Accounts Payable and Accrued Liabilities	$	2,760	$	2,056	$	2,658	$	1,950	$	93	$	61
Debt
Non-Financial Services		3,982		3,108		3,982		3,108		—		—
Financial Services		2,077		1,696		—		—		2,077		1,696
Liabilities of Discontinued Operations		7,002		8,412		—		334		7,002		8,078
Minority Interests		532		458		531		456		1		2
Stockholders’ Equity		5,012		4,281		5,012		4,281		664		617
	$	21,365	$	20,011	$	12,183	$	10,129	$	9,837	$	10,454

(A) In the supplemental data presented above, “Centex Corporation” represents the consolidation of all subsidiaries other than those included in Financial Services. Transactions between Centex Corporation and Financial Services have been eliminated from the Centex Corporation and Subsidiaries balance sheets. We believe that separate disclosure of the consolidating information is useful because: the Financial Services subsidiaries operate in a distinctly different financial environment that generally requires significantly less equity to support their higher debt levels compared to the operations of our other subsidiaries; the Financial Services subsidiaries have structured their financing programs substantially on a stand-alone basis; and Centex Corporation has limited obligations with respect to the indebtedness of its Financial Services subsidiaries. Management uses this information in its financial and strategic planning.

Attachment 3

Centex Corporation and Subsidiaries
Condensed Consolidated Cash Flows
(Dollars in millions)
(unaudited)

	Centex Corporation and Subsidiaries (A)						Centex Corporation (B)						Financial Services (A)
	For the Fiscal Year Ended March 31,						For the Fiscal Year Ended March 31,						For the Fiscal Year Ended March 31,
	2006			2005			2006			2005			2006			2005
Cash Flows — Operating Activities
Net Earnings	$	1,289		$	1,011		$	1,289		$	1,011		$	119		$	126
Adjustments -
Depreciation and Amortization		63			58			48			40			15			18
Other Noncash Adjustments		46			175			(39	)		(61	)		22			159
(Increase) Decrease in Loans Held for Sale		(354	)		44			—			—			(354	)		44
(Increase) Decrease in Inventories		(2,449	)		(1,880	)		(2,449	)		(1,883	)		—			3
Other Operating Activities		471			223			466			387			41			(200	)
		(934	)		(369	)		(685	)		(506	)		(157	)		150
Cash Flows — Investing Activities
Decrease (Increase) in Loans Held for Investment		952			(1,515	)		—			—			952			(1,515	)
Other Investing Activities		102			(98	)		94			(51	)		(11	)		(11	)
		1,054			(1,613	)		94			(51	)		941			(1,526	)
Cash Flows — Financing Activities
Increase in Short-Term Debt, net		764			371			119			8			645			363
(Repayment) Issuance of Long-Term Debt, net		(728	)		1,873			629			817			(1,357	)		1,056
Other Financing Activities		(610	)		67			(610	)		67			(73	)		(49	)
		(574	)		2,311			138			892			(785	)		1,370
Effect of Exchange Rate on Cash		(1	)		(5	)		(1	)		(5	)		—			—
Net Decrease in Cash and Cash Equivalents		(455	)		324			(454	)		330			(1	)		(6	)
Cash and Cash Equivalents at Beginning of Period		503			179			491			161			12			18
Cash and Cash Equivalents at End of Period	$	48		$	503		$	37		$	491		$	11		$	12

(A)

Beginning and ending cash balances include approximately $1 million in cash from the discontinued operations of Financial Services’ Home Equity operations.

(B)

In the supplemental data presented above, “Centex Corporation” represents the consolidation of all subsidiaries other than those included in Financial Services. Transactions between Centex Corporation and Financial Services have been eliminated from the Centex Corporation and Subsidiaries cash flows. We believe that separate disclosure of the consolidating information is useful because: the Financial Services subsidiaries operate in a distinctly different financial environment that generally requires significantly less equity to support their higher debt levels compared to the operations of our other subsidiaries; the Financial Services subsidiaries have structured their financing programs substantially on a stand-alone basis; and Centex Corporation has limited obligations with respect to the indebtedness of its Financial Services subsidiaries. Management uses this information in its financial and strategic planning.

Attachment 4

Centex Corporation and Subsidiaries
Supplemental Home Building Data
(Dollars in thousands, except per unit data)
(unaudited)

	Quarter Ended March 31,										Fiscal Year Ended March 31,
	2006					2005					2006					2005
HOME BUILDING
Revenues — Housing	$	3,890,256		100.0	%	$	2,909,274		100.0	%	$	11,920,634		100.0	%	$	9,007,148		100.0	%
Cost of Sales — Housing		(2,782,087	)	(71.5	%)		(2,078,839	)	(71.5	%)		(8,458,995	)	(71.0	%)		(6,486,709	)	(72.0	%)
Gross Margin — Housing		1,108,169		28.5	%		830,435		28.5	%		3,461,639		29.0	%		2,520,439		28.0	%
Revenues — Land Sales & Other		90,711					180,343					351,569					352,593
Cost of Sales — Land Sales & Other		(100,823	)				(107,306	)				(296,938	)				(261,394	)
Gross Margin — Land Sales & Other		(10,112	)				73,037					54,631					91,199
Total Gross Margin		1,098,057		27.6	%		903,472		29.2	%		3,516,270		28.7	%		2,611,638		27.9	%
Selling, General & Administrative		(515,432	)	(12.9	%)		(392,863	)	(12.7	%)		(1,696,456	)	(13.8	%)		(1,301,606	)	(13.9	%)
Other Income		18,724		0.4	%		14,280		0.5	%		85,998		0.6	%		68,786		0.7	%
Operating Earnings	$	601,349		15.1	%	$	524,889		17.0	%	$	1,905,812		15.5	%	$	1,378,818		14.7	%
Units Closed		12,336					10,126					39,232					33,387
Average Unit Sales Price	$	315,358				$	287,307				$	303,850				$	269,780
% Change		9.8	%				17.1	%				12.6	%				11.3	%
Operating Earnings per Unit	$	48,747				$	51,836				$	48,578				$	41,298
% Change		(6.0	%)				41.4	%				17.6	%				29.8	%
Average Neighborhoods		646					613					626					589
% Change		5.4	%				10.1	%				6.3	%				5.6	%

LOT POSITION

	As of March 31,
	2006		2005		Change
Lot Owned and Controlled:
Lots Owned		108,828		96,945		12	%
Lots Controlled		186,893		168,350		11	%
Total		295,721		265,295		11	%

Attachment 5

Centex Corporation and Subsidiaries
Supplemental Home Building Data
Housing Activity (Units) by Geographic Area

	Closings
	Quarter Ended March 31,							Fiscal Year Ended March 31,
	2006		2005		Change			2006		2005		Change
Mid-Atlantic		2,079		1,839		13	%		7,182		5,823		23	%
Southeast		2,510		1,992		26	%		7,235		5,879		23	%
Midwest		2,159		1,821		19	%		7,153		6,712		7	%
Southwest		3,354		2,816		19	%		10,720		9,158		17	%
West Coast		2,234		1,658		35	%		6,942		5,815		19	%
		12,336		10,126		22	%		39,232		33,387		18	%

	Sales (Orders) Backlog
	As of March 31,
	2006		2005		Change
Mid-Atlantic		3,073		3,461		(11	%)
Southeast		4,116		5,006		(18	%)
Midwest		2,755		3,273		(16	%)
Southwest		4,094		3,688		11	%
West Coast		3,349		3,161		6	%
		17,387		18,589		(6	%)

	Sales (Orders)
	Quarter Ended March 31,							Fiscal Year Ended March 31,
	2006		2005		Change			2006		2005		Change
Mid-Atlantic		1,785		1,883		(5	%)		6,833		6,483		5	%
Southeast		1,470		2,006		(27	%)		6,345		7,178		(12	%)
Midwest		1,840		2,128		(14	%)		6,596		6,593		—	%
Southwest		2,765		3,363		(18	%)		11,126		9,977		12	%
West Coast		2,068		1,834		13	%		7,130		6,331		13	%
		9,928		11,214		(11	%)		38,030		36,562		4	%

Attachment 6

Centex Corporation and Subsidiaries
Supplemental Home Building Data
Housing Activity (Values) by Geographic Area

	Housing Revenues - Closings
	(Dollars in thousands)
	Quarter Ended March 31,							Fiscal Year Ended March 31,
	2006		2005		Change			2006		2005		Change
Mid-Atlantic	$	708,838	$	564,217		26	%	$	2,422,302	$	1,700,818		42	%
Southeast		752,802		532,750		41	%		2,089,115		1,506,468		39	%
Midwest		485,262		397,463		22	%		1,583,002		1,431,825		11	%
Southwest		748,355		513,053		46	%		2,119,540		1,557,119		36	%
West Coast		1,194,999		901,791		33	%		3,706,675		2,810,918		32	%
	$	3,890,256	$	2,909,274		34	%	$	11,920,634	$	9,007,148		32	%

	Sales (Orders) Backlog Value
	(Dollars in thousands)
	As of March 31,
	2006		2005		Change
Mid-Atlantic	$	1,044,086	$	1,227,296		(15	%)
Southeast		1,350,484		1,458,037		(7	%)
Midwest		644,140		725,950		(11	%)
Southwest		968,250		804,248		20	%
West Coast		1,766,748		1,725,896		2	%
	$	5,773,708	$	5,941,427		(3	%)

Attachment 7

Centex Corporation and Subsidiaries
Supplemental Financial Services Data

CTX Mortgage Company

	Quarter Ended March 31,							Fiscal Year Ended March 31,
	2006		2005		Change			2006		2005		Change
Originations
Builder		8,884		6,829		30	%		27,364		22,517		22	%
Retail		8,291		9,416		(12	%)		43,319		44,816		(3	%)
Total		17,175		16,245		6	%		70,683		67,333		5	%
Applications
Builder		7,393		7,301		1	%		27,765		24,631		13	%
Retail		8,546		10,421		(18	%)		38,521		39,848		(3	%)
Total		15,939		17,722		(10	%)		66,286		64,479		3	%
Loan Volume (in billions)	$	3.99	$	3.38		18	%	$	15.83	$	13.04		21	%
Average Loan Size	$	232,300	$	208,200		12	%	$	223,900	$	193,600		16	%
Operating Profit per Loan	$	1,218	$	1,306		(7	%)	$	1,195	$	1,425		(16	%)

Attachment 8

Centex Corporation and Subsidiaries
Supplemental Financial Data — Debt-to-Capitalization Ratio
(Dollars in millions)

	As of March 31, 2006			As of March 31, 2005			As of March 31, 2004
Debt/Capitalization *
Debt	$	3,982		$	3,108		$	2,318
Minority Interests		531			456			335
Less Minority Interests on Lot Options		(492	)		(416	)		(333	)
Stockholders’ Equity		5,012			4,281			3,050
Capitalization		9,033			7,429			5,370
Less Unrestricted Cash		(37	)		(491	)		(160	)
Net Capitalization	$	8,996		$	6,938		$	5,210
Debt-to-Capitalization Ratio		44.1	%		41.8	%		43.2	%
Net Debt-to-Capitalization Ratio		43.9	%		37.7	%		41.4	%
Consolidated Debt/Capitalization **
Debt	$	6,059		$	4,804		$	3,995
Minority Interests		532			458			336
Less Minority Interests on Lot Options		(492	)		(416	)		(333	)
Stockholders’ Equity		5,012			4,281			3,050
Capitalization		11,111			9,127			7,048
Less Unrestricted Cash		(47	)		(502	)		(171	)
Net Capitalization	$	11,064		$	8,625		$	6,877
Consolidated Debt-to-Capitalization Ratio		54.5	%		52.6	%		56.7	%
Consolidated Net Debt-to-Capitalization Ratio		54.3	%		49.9	%		55.6	%

*	Capitalization includes debt, minority interest (excluding lot options), and stockholders’ equity. Capitalization presented above reflects Financial Services on an equity basis and does not include debt attributable to Financial Services.
**	Consolidated capitalization includes debt, minority interest (excluding lot options), and stockholders’ equity, including Financial Services.
	Net debt-to-capitalization ratios are provided reflecting net capitalization, including net debt (debt less unrestricted cash), minority interest (excluding lot options), and stockholders’ equity. See Attachments 2 and 3 of the Earnings Release for more information.