1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 8-K/A-1 --------------------- AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 29, 1999 (April 15, 1999) Commission File No. 1-9625 CENTEX DEVELOPMENT COMPANY, L.P. --------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE ------------------------ (State of incorporation) 75-2168471 ------------------------------------ (I.R.S. Employer Identification No.) 3100 MCKINNON, SUITE 370 DALLAS, TEXAS 75291-1081 ---------------------------------------- (Address of principal executive offices) (214) 981-5000 ------------------------------- (Registrant's telephone number) ================================================================================ 2 Amendment No. 1 This Amendment No. 1 amends that certain Current Report on Form 8-K dated as of April 29, 1999. Item 7 is hereby amended and restated to read in its entirety as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses Acquired -- Fairclough Homes Group Limited. Page ---- Independent Auditors' Report 1 Consolidated profit and loss accounts for the years ended December 31, 1998, 1997 and 1996 2 Consolidated balance sheets as of December 31, 1998 and 1997 3 Consolidated cash flow statements for the years ended December 31, 1998, 1997 and 1996 4 Consolidated note of historical cost profits and losses for the years ended December 31, 1998, 1997 and 1996 5 Notes to Consolidated financial statements 6 (b) Pro Forma Financial Information. Page ---- Unaudited Pro Forma Condensed Consolidated Financial Statement Headnote 23 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1999 25 Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended March 31, 1999 26 Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements 27 3 Independent Auditors' Report The Board of Directors and Shareholders Fairclough Homes Group Limited We have audited the accompanying consolidated balance sheets of Fairclough Homes Group Limited and subsidiaries at 31 December 1997 and 1998, and the related consolidated profit and loss accounts, statements of total recognised gains and losses, note of historical cost profit and losses, reconciliation of movements in shareholders' funds and cash flow statements for each of the years in the three year period ended 31 December 1998. These consolidated financial statements are the responsibility of the management of Fairclough Homes Group Limited. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United Kingdom and in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principals used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fairclough Homes Group Limited and subsidiaries at 31 December 1997 and 1998, and the results of their operations and their cash flows for each of the years in the three year period ended 31 December 1998, in conformity with generally accepted accounting principles in the United Kingdom. Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected net profit for the two years ended 31 December 1998 and shareholders' funds at 31 December 1997 and 1998, to the extent summarised in Note 29 to the consolidated financial statements. KPMG AUDIT PLC Chartered Accountants England 1 4 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) Consolidated profit and loss accounts (expressed in British pounds sterling) Note YEARS ENDED 31 DECEMBER 1998 1997 1996 L.000 L.000 L.000 TURNOVER 2 199,287 233,482 192,317 Cost of sales (including exceptional costs of L.nil; 1997: L.nil; 1996: L.12,383,000) 4 (169,502) (200,375) (182,268) ---------- ---------- ---------- GROSS PROFIT 29,785 33,107 10,049 Administrative expenses (10,549) (11,318) (9,261) ---------- ---------- ---------- OPERATING PROFIT 19,236 21,789 788 Share of result of associated undertakings (530) 699 (435) Net interest (payable)/receivable and similar (charges)/income 7 (13,024) (13,657) 1,964 ---------- ---------- ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 3 5,682 8,831 2,317 Tax on profit on ordinary activities 8 (1,315) (688) 103 ---------- ---------- ---------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 4,367 8,143 2,420 Dividends payable 9 (14,930) - - ---------- ---------- ---------- RETAINED (LOSS)/PROFIT FOR THE FINANCIAL 19,20 (10,563) 8,143 2,420 PERIOD ========== ========== ========== All amounts relate to continuing operations. Consolidated statements of total recognised gains and losses for the three years ended 31 December 1998 The profit of L.4,367,000 (1997: L.8,143,000; 1996: L.2,420,000) shown in the profit and loss account is the only gain or loss recognised in these financial statements. 2 5 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) Consolidated balance sheets (expressed in British pounds sterling) Note 31 December 1998 1997 L.000 L.000 FIXED ASSETS Intangible assets 10 667 513 Tangible assets 11 2,076 2,069 Investments 12 -- (9,008) ---------- ---------- CURRENT ASSETS 2,743 (6,426) Stocks 13 134,499 135,275 Debtors - due within one year 14 34,283 27,481 - due after one year 14 -- 3,636 Cash at bank and in hand 7 2,516 ---------- ---------- 168,789 168,908 CREDITORS: amounts falling due within one year 15 (96,566) (91,502) ---------- ---------- NET CURRENT ASSETS 72,223 77,406 ---------- ---------- TOTAL ASSETS LESS CURRENT LIABILITIES 74,966 70,980 CREDITORS: amounts falling due after more than one year 16 (24,966) (10,417) ---------- ---------- NET ASSETS 50,000 60,563 ========== ========== CAPITAL AND RESERVES Called up share capital 18 50,000 50,000 Profit and loss account 20 -- 10,563 ---------- ---------- EQUITY SHAREHOLDERS' FUNDS 19 50,000 60,563 ========== ========== 3 6 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) Consolidated cash flow statements (expressed in British pounds sterling) Note YEARS ENDED 31 DECEMBER 1998 1997 1996 L.000 L.000 L.000 CASH FLOW FROM OPERATING ACTIVITIES 26 24,615 (17,618) 3,786 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 27 (12,933) (13,657) 1,964 CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 27 (9,722) 2,581 (1,577) ---------- ---------- ---------- Cash inflow/(outflow) before financing 1,960 (28,694) 4,173 FINANCING 27 -- (204) (204) ---------- ---------- ---------- INCREASE/(DECREASE) IN CASH IN THE PERIOD 1,960 (28,898) 3,969 ========== ========== ========== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT INCREASE/(DECREASE) IN CASH IN THE PERIOD 1,960 (28,898) 3,969 Cash flow from decrease in debt and lease financing -- 204 204 ---------- ---------- ---------- MOVEMENT IN NET DEBT IN THE PERIOD 28 1,960 (28,694) 4,173 NET DEBT AT THE START OF THE PERIOD 28 (32,681) (3,987) (8,160) ---------- ---------- ---------- NET DEBT AT THE END OF THE PERIOD 28 (30,721) (32,681) (3,987) ========== ========== ========== 4 7 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) Consolidated note of historical cost profits and losses (expressed in British pounds sterling) YEARS ENDED 31 DECEMBER 1998 1997 1996 L.000 L.000 L.000 Reported profit on ordinary activities before taxation 5,682 8,831 2,317 Difference between historical cost depreciation and the actual depreciation charge for the year calculated on the revalued amount 5 7 12 ---------- ---------- ---------- Historical cost profit on ordinary activities before taxation 5,687 8,838 2,329 ========== ========== ========== HISTORICAL COST (LOSS)/PROFIT FOR THE PERIOD RETAINED AFTER TAXATION AND DIVIDEND (10,558) 8,150 2,432 ========== ========== ========== 5 8 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) Notes to the consolidated financial statements (expressed in British pounds sterling) 1 ACCOUNTING POLICIES BASIS OF THE PREPARATION OF THE FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention in accordance with applicable Accounting Standards. The directors have taken advantage of the exemption in FRS8, paragraph 3(c) and have not disclosed related party transactions with parent and fellow subsidiary undertakings. BASIS OF CONSOLIDATION The group financial statements consolidate the accounts of Fairclough Homes Group Limited and all its subsidiary undertakings. These accounts are made up to 31 December for each year. For associated undertakings the group includes its share of profits and losses in the consolidated profit and loss account and its share of post acquisition retained profits or accumulated deficits in the consolidated balance sheet. The consolidated accounts are based on accounts of subsidiary undertakings which are coterminous with those of the parent company and of accounts of associated undertakings which are coterminous with those of the parent company. Unless otherwise stated, the acquisition method of accounting has been adopted. Under this method, the results of subsidiary and associated undertakings acquired or disposed of in the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal. TURNOVER Turnover represents sales and value of work done including transactions with other group undertakings, and includes the amounts (excluding value added tax) derived from the sales of new houses, land sales, build contracts and management fees earned from residential development activities. Turnover from house sales represents the selling price for the unit, net of any incentives, together with any amounts receivable for showhouse fixtures and fittings, and is recognised on the serving of notice to complete, which is written notification sent to the purchaser where the property is physically complete and fit for occupation, and where a contract has been exchanged. Turnover for land sales is recognised on unconditional exchange of contracts. INTANGIBLE FIXED ASSETS AND AMORTISATION Ground rents are capitalised at a multiple of between 5 times and 9.5 times the annual income stream receivable which they generate. The multiple used is dependent upon market rates at the time of capitalisation. No amortisation is provided on ground rents. 6 9 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) Notes to the consolidated financial statements (continued) (expressed in British pounds sterling) 1 ACCOUNTING POLICIES (continued) DEPRECIATION Depreciation is provided on all tangible assets, other than freehold land and assets in the course of construction, at rates calculated to write off the cost less estimated residual value of each asset on a straight line basis over its anticipated useful life, as follows: Freehold buildings - 50 years Leasehold land and buildings - shorter of lease term or 50 years Plant and equipment - mainly 3 to 5 years The treatment adopted in respect of investment properties may be a departure from the requirements of the Companies Act concerning depreciation of fixed assets. However, these properties are not held for consumption but for investments and the directors consider that systematic annual depreciation would be appropriate. The accounting policy adopted is therefore necessary for the accounts to give a true and fair view. Depreciation is only one of many factors reflected in periodic valuations and the amount which might otherwise have been shown cannot be separately identified or quantified. STOCKS AND WORK IN PROGRESS Stocks and work in progress including part exchange properties are stated at the lower of cost including attributable overheads and net realisable value. For work in progress and finished goods in respect of house building, cost may be taken as build cost, which includes expenditure on site supervision, plant hire and similar costs referred to as "preliminaries". Work in progress is stated at costs incurred, less those transferred to the profit and loss account, and may include certain sales and marketing costs including brochures, signage, flag poles and flags, permanent sales office costs and showhouse costs. Other sales and marketing costs including advertising, temporary sales office costs, sales staff salaries, sales office and showhouse running costs and selling fees are written off to cost of sales as incurred subject to a review of site performance. LONG TERM CONTRACTS The amount of profit attributable to the stage of completion of long-term contracts is recognised when the outcome of the contract can be foreseen with reasonable certainty. Turnover for such contracts is stated at the cost appropriate to their stage of completion plus attributable profits, less amounts recognised in previous years. Provision is made for any losses as soon as they are foreseen. Contract work in progress is stated at costs incurred, less those transferred to the profit and loss account, after deducting foreseeable losses and payments on account not matched with turnover. Amounts recoverable on contracts are included in debtors and represent turnover recognised in excess of payments on account. TAXATION The liability for current, deferred and future taxation has been assumed by AMEC p.l.c. Provision is made for taxation deferred in respect of all timing differences except where it is considered there is reasonable probability that such taxation will not be payable in the foreseeable future. 7 10 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 1 ACCOUNTING POLICIES (continued) LAND OPTIONS Land options are included within debtors and are written off if it becomes apparent that the option will not be exercised. PENSIONS Contributions to pension schemes are allocated to the profit and loss account on a systematic basis over the normal expected service lives of employees. 2 TURNOVER The activities are regarded by the directors as a single class of business. 1998 1997 1996 L.000 L.000 L.000 Turnover by geographical area: United Kingdom 199,287 233,482 192,317 ========== ========== ========== 3 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1998 1997 1996 L.000 L.000 L.000 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION IS STATED AFTER CHARGING Auditors' remuneration: Audit 33 55 59 Depreciation and other amounts written off tangible fixed assets: Owned 191 194 249 Hire of plant and equipment 1,277 1,161 1,494 Hire of other assets -- 167 167 ========== ========== ========== 8 11 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 4 EXCEPTIONAL ITEMS 1998 1997 1996 L.000 L.000 L.000 Amounts written off housing assets -- -- 9,683 Amounts written off investments -- -- 2,700 ---------- ---------- ---------- -- -- 12,383 ========== ========== ========== 5 REMUNERATION OF DIRECTORS 1998 1997 1996 L.000 L.000 L.000 Directors' emoluments: Salary (including benefits in kind) 172 126 206 Pension contributions 20 23 37 ---------- ---------- ---------- 192 149 243 ========== ========== ========== 6 STAFF NUMBERS AND COSTS The average number of persons employed by the Group (including directors) during the year was as follows: NUMBER OF EMPLOYEES 1998 1997 1996 537 574 550 ===== ===== ===== The aggregate payroll costs of these persons were as follows: 1998 1997 1996 L.000 L.000 L.000 Wages and salaries 11,068 10,884 10,819 Social security costs 997 988 916 Other pension costs (see note 23) 634 856 656 --------- ---------- ---------- 12,699 12,728 12,391 ========= ========== ========== 9 12 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) Notes to the consolidated financial statements (continued) (expressed in British pounds sterling) 7 NET INTEREST (PAYABLE)/RECEIVABLE AND SIMILAR (CHARGES)/INCOME 1998 1997 1996 L.000 L.000 L.000 Receivable: Bank interest -- -- 692 Interest on loans to associated undertakings -- 408 -- Group interest and management charge -- -- 3,278 Other 58 428 43 ---------- ---------- ---------- 58 836 4,013 Payable: On bank loans and overdrafts repayable within 5 years (426) (1,626) (1,354) Interest on loans from associated undertakings (92) -- (695) Group interest and management charge (12,564) (12,867) -- ---------- ---------- ---------- (13,082) (14,493) (2,049) ---------- ---------- ---------- Net interest (13,024) (13,657) 1,964 ========== ========== ========== 8 TAXATION 1998 1997 1996 L.000 L.000 L.000 UK corporation tax at 31% (1997 31.5%; 1996:33%) on the profit for the year on ordinary activities 1,334 889 279 Share of associated undertakings tax (19) (201) (382) ---------- ---------- ---------- 1,315 688 (103) ========== ========== ========== 9 DIVIDENDS 1998 1997 1996 L.000 L.000 L.000 Ordinary shares: Final proposed 14,930 -- -- ========== ========== ========== 10 13 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 10 INTANGIBLE FIXED ASSETS 1998 1997 L.000 L.000 Ground rents at beginning of year 513 469 Additions 264 212 Disposals (110) (168) ---------- ---------- At end of year 667 513 ========== ========== 11 TANGIBLE FIXED ASSETS LAND AND PLANT AND BUILDINGS EQUIPMENT TOTAL L.000 L.000 L.000 COST OR VALUATION At 1 January 1997 4,777 2,169 6,946 Additions 36 219 255 Intergroup transfers (1,305) (427) (1,732) Reclassification (6) 6 - Disposals (1,519) (396) (1,915) ---------- ---------- ---------- At 1 January 1998 1,983 1,571 3,554 Additions -- 202 202 Disposals (52) (6) (58) ---------- ---------- ---------- At 31 December 1998 1,931 1,767 3,698 ---------- ---------- ---------- DEPRECIATION AND DIMINUTION IN VALUE At 1 January 1997 218 1,907 2,125 Charge for year 48 146 194 Intra group transfers -- (389) (389) Disposals (51) (394) (445) ---------- ---------- ---------- At 1 January 1998 215 1,270 1,485 Charge for year 54 137 191 On disposals (51) (3) (54) ---------- ---------- ---------- At 31 December 1998 218 1,404 1,622 ---------- ---------- ---------- NET BOOK VALUE At 31 December 1998 1,713 363 2,076 ========== ========== ========== At 31 December 1997 1,768 301 2,069 ========== ========== ========== 11 14 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 11 TANGIBLE FIXED ASSETS (continued) The net book value of land and buildings comprises: 1998 1997 L.000 L.000 Freehold 1,679 1,726 Short leasehold 34 42 ---------- ---------- 1,713 1,768 ========== ========== Particulars relating to revalued assets are given below: 1998 1997 L.000 L.000 At 1994 open market value 1,870 1,870 Aggregate depreciation thereon (200) (151) ---------- ---------- Net book value 1,670 1,719 ========== ========== Historical cost of revalued assets 2,845 2,845 Aggregate depreciation based on historical cost (389) (345) ---------- ---------- Historical cost net book value 2,456 2,500 ========== ========== 1998 1997 L.000 L.000 Tangible fixed assets not depreciated: Land 251 301 ========== ========== 12 15 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 12 INVESTMENTS (HELD AS FIXED ASSETS) Balance Profit and Inter Group Balance 1 January loss account Transfer 31 Dec 1998 1998 L.000 L.000 L.000 L.000 ASSOCIATED UNDERTAKINGS Homehurst Ltd (4,265) (510) 4,775 -- Carlinian Ltd (1,355) -- 1,355 -- Mutanderis 23 Ltd 85 -- (85) -- Fibaside Ltd 13 -- (13) -- Eurowait Ltd (1,045) (80) 1,125 -- F&NE Ltd (1,361) 52 1,309 -- F&NE (1990) Ltd (1,080) (83) 1,163 -- ---------- ----------- ----------- ---------- (9,008) (621) 9,629 -- ========== =========== =========== ========== All the above companies are incorporated in England and have principal activities in housing and development. 13 STOCKS 1998 1997 L.000 L.000 Development land and work in progress 134,499 135,275 ========== ========== 14 DEBTORS 1998 1997 L.000 L.000 Due within one year: Trade debtors 13,280 11,851 Amounts owed by undertakings in which the company has a participating interest 517 10,064 Amounts owed by fellow subsidiary undertaking 13,905 -- Other debtors and prepayments 6,581 5,566 ---------- ---------- 34,283 27,481 ========== ========== Due after one year: Other debtors and prepayments -- 3,636 ---------- ---------- -- 3,636 ========== ========== 13 16 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 15 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 1998 1997 L.000 L.000 Bank loans and overdrafts 30,728 35,197 Trade creditors 56,945 46,589 Amounts owed to associated undertakings 36 671 Amounts owed to fellow subsidiary undertakings 2,962 1,021 Other taxation and social security costs 453 182 Other creditors 4,573 5,755 Accruals and deferred income 869 2,087 ---------- ---------- 96,566 91,502 ========== ========== 16 CREDITORS: DUE AFTER MORE THAN ONE YEAR 1998 1997 L.000 L.0000 Trade creditors 3,241 -- Amounts owed to parent undertaking -- 7,221 Amount owed to fellow subsidiary undertaking 6,067 -- Amounts owed to associated undertaking 728 -- Dividends proposed 14,930 -- Other creditors -- 2,465 Accruals and deferred income -- 731 ---------- ---------- 24,966 10,417 ========== ========== 17 LEASE COMMITMENTS 1998 1997 Land and Land and building buildings L.000 L.000 Current annual commitments payable under non-cancellable operating leases: In the second to fifth years 182 167 ========== ========== 14 17 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 18 SHARE CAPITAL AUTHORISED ALLOTTED, CALLED UP AND FULLY PAID 1998 1997 L.000 L.000 50,000,000 ordinary shares of L.1 each 50,000 50,000 ========== ========== 19 CONSOLIDATED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Years ended 31 December 1998 1997 1996 L.000 L.000 L.000 Profit for the financial year 4,367 8,143 2,420 Dividends (14,930) -- -- ---------- ---------- ---------- NET (REDUCTION)/ADDITION TO SHAREHOLDERS' FUNDS ARISING IN THE PERIOD (10,563) 8,143 2,420 Opening shareholders' funds 60,563 52,420 50,000 ---------- ---------- ---------- CLOSING SHAREHOLDERS' FUNDS 50,000 60,563 52,420 ========== ========== ========== 15 18 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 20 RESERVES PROFIT AND LOSS ACCOUNT L.000 At 1 January 1996 -- Retained profit for year 2,420 ---------- At 1 January 1997 2,420 Retained profit for year 8,143 ---------- At 1 January 1998 10,563 Retained loss for year (10,563) ---------- At 31 December 1998 -- ========== 21 SIGNIFICANT EVENTS With effect from 31 December 1997 the agency agreements previously entered into between AMEC Developments Limited, AMEC Properties Limited, AMEC Properties (ZVI), AMEC Regeneration Limited, Almondvale Development Limited, Carisfall Limited, Denskill Limited, IDC Property Investments Limited, Newcastle Quayside Limited, Rail Link Scotland Limited and Fairclough Homes Group Limited were cancelled. With effect from 31 December 1997 the trade and assets of the previously named companies were transferred to their respective balance sheets. 22 ULTIMATE PARENT COMPANY The company regarded by the directors as the ultimate parent company is AMEC p.l.c. which is incorporated in England. Copies of the group accounts can be obtained from AMEC p.l.c., Sandiway House, Hartford, Northwich, Cheshire, CW8 2YA. 16 19 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 23 PENSION SCHEME AMEC p.l.c., operates a number of pension schemes for United Kingdom and overseas employees. All United Kingdom members are in defined benefit schemes. Contributions paid by employees and employers are held in funds that are separate from the group's finances and which are administered by trustees. Pension costs are assessed in accordance with the advice of independent qualified actuaries. The projected unit method is used to assess liabilities and future funding rates for the major scheme which covers 90 per cent of United Kingdom members. The latest actuarial valuation of this scheme was undertaken as at 1 April 1996. This showed that the market value of the assets was L.618 million with the actuarial value of assets being sufficient to cover 118 per cent of the accrued benefits. The valuation assumed that the investment returns would be two percent higher than the rate of annual salary increases. 24 DISPOSALS Year ended 31 December 1998 On 31 December 1998 the Group disposed of the following subsidiaries: Consideration Net assets given sold L.000 L.000 SUBSIDIARY UNDERTAKINGS: Bonnyfields Homes Limited -- -- Claremont Projects Limited -- -- Danafield Limited -- -- Downsview Developments Limited -- -- Portriver Limited -- -- Perchstand Limited -- -- Imberplace Limited -- -- Zincbell Properties Limited -- -- Carlinian (Commercial) Limited -- -- Carlinian (Commercial No 2) Limited -- -- Carlinian (Residential Limited -- -- ------------- ---------- -- -- ============= ========== 17 20 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 25 SUBSIDIARY UNDERTAKINGS The following is a list of subsidiary undertakings: % Country Equity of held incorporation Viewton Properties Limited 100 England Fairpine Limited 50 England 26 RECONCILIATION OF OPERATING PROFIT/(LOSS) TO OPERATING CASH FLOWS 1998 1997 1996 L.000 L.000 L.000 Operating profit 19,236 21,789 788 Depreciation charge 191 194 249 Loss/(profit) on sale of fixed assets 5 487 (840) Ground rents capitalised (264) (212) (186) Decrease in stocks 776 15,454 2,293 (Increase)/decrease in debtors (3,166) 58,977 44,588 Increase/(decrease) in creditors 7,837 (114,307) (43,106) ---------- ---------- ---------- NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 24,615 (17,618) 3,786 ========== ========== ========== 18 21 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 27 ANALYSIS OF CASH FLOWS 1998 1997 1996 L.000 L.000 L.000 RETURNS ON INVESTMENT AND SERVICING OF FINANCE Interest received 58 836 4,013 Interest paid (12,991) (14,493) (2,049) ---------- ---------- ---------- (12,933) (13,657) 1,964 ========== ========== ========== CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of tangible fixed assets (203) (255) (126) Sale of tangible fixed assets -- 2,326 2,172 Transfer of investments (9,629) 342 (3,820) Sale of ground rents 110 168 197 ---------- ---------- ---------- (9,722) 2,581 (1,577) ========== ========== ========== FINANCING Repayment of loans -- (204) (204) ========== ========== ========== 28 ANALYSIS OF NET DEBT At 1 Cash flow At 1 Cash flow At 1 Cash Flow At 31 January January January December 1996 1997 1998 1998 L.000 L.000 L.000 L.000 L.000 L.000 L.000 Cash in hand, at bank 11,149 2,024 13,173 (10,657) 2,516 (2,509) 7 Overdrafts (18,901) 1,945 (16,956) (18,241) (35,197) 4,469 (30,728) ---------- ---------- ---------- ---------- ---------- ---------- ---------- (7,752) 3,969 (3,783) (28,898) (32,681) 1,960 (30,721) Debt due after one year (408) 204 (204) 204 -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL (8,160) 4,173 (3,987) (28,694) (32,681) 1,960 (30,721) ========== ========== ========== ========== ========== ========== ========== 19 22 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 29 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The Group's consolidated financial statements are prepared in conformity with generally accepted accounting principles applicable in the United Kingdom (UK GAAP), which differ in certain significant respects from those applicable in the United States of America (US GAAP). These differences, together with the approximate effects of the adjustments on net profit and shareholders' funds, relate principally to the items set out below: a) Deferred taxation: UK GAAP requires that no provision for deferred taxation should be made if there is reasonable evidence that such taxation will not be payable in the foreseeable future. Under US GAAP, deferred taxation is recognised under the full liability method which permits deferred tax assets to be recognised if their realisation is considered more likely than not. b) Cash flows: The principal difference between UK GAAP and US GAAP is in respect of classification. Under UK GAAP, the Group presents its cash flows for operating activities, returns on investments and servicing of finance, taxation, investing activities, and financing activities. US GAAP requires only three categories of cash flow activities which are operating, investing and financing. Cash flows arising from taxation and returns on investments and servicing of finance under UK GAAP would, with the exception of dividends paid, be included as operating activities under US GAAP; dividend payments would be included as a financing activity under US GAAP. In addition, under UK GAAP, cash and cash equivalents include overdraft which under US GAAP would be presented as financing activities. Under US GAAP, the following amounts would be reported: 1998 1997 1996 L.000 L.000 L.000 Net cash provided by/(used in) operating activities 11,682 (31,275) 5,750 Net cash (used in)/provided by investing activities (9,722) 2,581 (1,577) Net cash (used in)/provided by financing activities (4,469) 18,037 (2,149) ---------- ----------- --------- Net (decrease)/increase in cash and cash equivalents (2,509) (10,657) 2,024 ---------- ----------- --------- Cash and cash equivalents under US GAAP 7 2,516 13,173 ========== =========== ========= 20 23 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 29 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) c) Pensions: Under UK GAAP, the expected cost of pensions is charged to the profit and loss account so as to spread the cost of pensions over the expected service lives of employees. Surpluses arising from the actuarial valuation are similarly spread. Under US GAAP, costs and surpluses are also spread over the expected service lives but based on prescribed actuarial assumptions, allocation of costs and valuation methods, which differ from those used for UK GAAP. The profit and loss effect during the three years ended 31 December 1998 is unlikely to be material. However an estimate was made of the prepayment at 31 December 1997 and 31 December 1998 which is included within the statement showing approximate effects on shareholders' funds of the differences between UK and US GAAP. d) Dividend: Under UK GAAP the proposed dividend in respect of the year ended 31 December 1998 has been accrued in the financial statements. However to comply with US GAAP this should be added back to profits and reflected in the year in which it is declared. e) Turnover: Under UK GAAP the group recognises house sales and resulting profit on the serving of notice to complete, which is written confirmation sent to the purchaser where the property is physically complete and fit for occupation and where a contract has been exchanged. Under US GAAP, house sales and resulting profit is generally recognised on closing and when all consideration has been exchanged. Under UK GAAP the group recognises turnover and resulting profit for land sales on the unconditional exchange of contracts. Under US GAAP, land sales and resulting profit is generally recognised on closing and when all consideration has been exchanged. f) Intangible assets: Under UK GAAP the group capitalises ground rents at a multiple of between 5 and 9.5 times the annual income stream receivable which they generate. Under US GAAP ground rents are not capitalised. g) Interest: Under UK GAAP the group writes off interest to the profit and loss account as incurred. Under US GAAP interest incurred on finance provided for developments is included within work in progress as part of the cost of the development and released to the profit and loss account as the development is sold. 21 24 FAIRCLOUGH HOMES GROUP LIMITED (formerly AMEC Housing and Development Limited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) (expressed in British pounds sterling) 29 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) Approximate effects on net profit of differences between UK and US GAAP: 1998 1997 L.000 L.000 Retained (loss)/profit in conformity with UK GAAP (10,563) 8,143 Adjustments: Deferred taxes (221) (1,337) Dividend 14,930 -- House sales recognition 280 766 Land sales recognition (322) 110 Ground rents (154) (44) Interest capitalisation adjustment 68 (386) ---------- ---------- Net profit/(loss) in conformity with US GAAP 4,018 7,252 ========== =========== Approximate effects on shareholders' funds of the differences between UK and US GAAP: 1998 1997 L.000 L.000 Shareholders' funds in conformity with UK GAAP 50,000 60,563 Adjustments: Deferred taxation (51) 170 Dividend 14,930 -- House sales recognition (2,094) (2,374) Land sales recognition (322) -- Ground rents (667) (513) Interest capitalisation adjustment 6,572 6,504 Pension costs adjustment 1,800 1,500 ---------- ---------- Shareholders' funds in conformity with US GAAP 70,168 65,850 ========== ========== 30 COMPANIES ACT 1985 These consolidated financial statements do not comprise the company's statutory accounts within the meaning of Section 240 of the Companies Act 1985 of Great Britain. Statutory accounts have been prepared for each of the years ended 31 December 1998, 1997 and 1996, on which the auditors' reports were unqualified and have been delivered to the Registrar of Companies for England and Wales. 22 25 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS HEADNOTE On April 15, 1999, Centex Development Company UK Limited ("Purchaser"), a company incorporated in England and Wales and wholly owned subsidiary of Centex Development Company, L.P. (the "Registrant") closed its acquisition from AMEC Finance Limited ("Seller"), a company incorporated in England and Wales, of the entire class A share capital of Fairclough Homes Group Limited, a company incorporated in England ("Fairclough"). In return for such share capital, which carries 100% of the voting rights in Fairclough, the Purchaser issued to the Seller non-interest bearing promissory notes totaling approximately $221 million. No payments will be required under the notes until March 30, 2001, at which time the notes will mature and become payable. During the two year period between closing and March 31, 2001, the Seller will receive all of Fairclough's income up to a pre-determined level, net of tax and other deductions as defined in the acquisition agreements (the "Distribution"). The Purchaser will receive a portion of Fairclough's income above those amounts. Pursuant to a shareholders agreement, the Purchaser's operating control of Fairclough during the two year period will be subject to certain mutual approvals required by both the Purchaser and the Seller. The Unaudited Pro Forma Condensed Consolidated Statement of Operations reflect the Distribution as interest expense in accordance with generally accepted accounting principles. The accompanying Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1999 gives effect to the April 15, 1999 acquisition of Fairclough as if the transaction had occurred on March 31, 1999. The accompanying Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended March 31, 1999 gives effect to the April 15, 1999 acquisition of Fairclough as if such transaction had occurred on April 1, 1998. Financial information for Fairclough included in the Unaudited Pro Forma Condensed Consolidated Financial Statements is derived from audited financial statements included elsewhere in this Form 8-K/A-1, and is as of and for the year ended December 31, 1998, the most recent fiscal year for Fairclough. The Unaudited Pro Forma Condensed Consolidated Financial Statements are based on the historical financial statements of the Registrant and the historical financial statements of Fairclough. The pro forma adjustments are preliminary and are based upon available information. These adjustments are directly attributable to the transaction referenced above, and are expected to have a continuing impact on the Registrant's business, results of operations, and financial position. The purchase of Fairclough will be accounted for using the purchase method of accounting, pursuant to which the total cost of the acquisition will be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values. The final allocation of the purchase price will be determined upon an opening balance sheet audit, final analysis of the acquired assets and a review for other intangible assets. The Unaudited Pro Forma Condensed Consolidated Financial Statements should be 23 26 read in conjunction with the historical audited financial statements of the Registrant for the year ended March 31, 1999. The Unaudited Pro Forma Condensed Consolidated Statement of Operations are not necessarily indicative of what actual results of operations of the Registrant would have been for the period, nor do they represent the Registrant's results of operations for future periods. 24 27 CENTEX DEVELOPMENT COMPANY, L.P. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET--MARCH 31, 1999 (Dollars in thousands) (A) Centex Fairclough Development Homes Pro Forma ASSETS Company, LP Group Limited Adjustments Consolidated ------ ----------- ------------- ----------- ------------ CASH $ 331 $ 12 $ (12) (B) $ 331 ACCOUNTS RECEIVABLE 3,133 53,025 (42,921) (B) 13,237 PROJECTS UNDER DEVELOPMENT AND HELD FOR SALE 102,389 234,713 23,014 (C) 360,116 NOTES RECEIVABLE 3,554 -- -- 3,554 INVESTMENT IN REAL ESTATE JOINT VENTURES 672 -- -- 672 COMMERCIAL PROPERTIES, net 1,899 -- -- 1,899 PROPERTY AND EQUIPMENT, net 89 3,454 (383) (B) 3,160 OTHER ASSETS, net 1,166 2,422 31,572 (D) 35,160 ----------- ------------- --------- ------------ Total assets $ 113,233 $ 293,626 $ 11,270 $ 418,129 =========== ============= ========= ============ LIABILITIES, PARTNERS' CAPITAL, AND STOCKHOLDERS' EQUITY --------------------------------- PAYABLES AND ACCRUED LIABILITIES $ 9,008 $ 175,023 $ (90,987) (E) $ 93,044 NOTES PAYABLE 41,896 -- 220,859 (F) 262,755 PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY- Class B Unit Warrants 500 -- -- 500 Preferred Stock in Fairclough -- -- 1 (D) 1 Common Stock in Fairclough -- 88,576 (88,576) (D) -- Retained Earnings -- 24,187 (24,187) (E) -- Accumulated other comprehensive income (foreign currency translation) 5,840 (5,840) (D) -- Partners' capital 61,829 -- -- 61,829 ----------- ------------- --------- ------------ Total partners' capital and stockholders' equity 62,329 118,603 (118,602) 62,330 ----------- ------------- --------- ------------ Total liabilities, partners' capital, and stockholders' equity $ 113,233 $ 293,626 $ 11,270 $ 418,129 =========== ============= ========= ============ 25 28 CENTEX DEVELOPMENT COMPANY, L.P. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1999 (Amounts in thousands, except per unit data) (A) Centex Fairclough Development Homes Pro Forma Company, LP Group Limited Adjustments Consolidated ----------- ------------- ----------- ------------ REVENUES $ 28,228 $ 327,763 $ -- $ 355,991 COST AND EXPENSES: Cost of revenues 22,755 278,567 -- 301,322 Selling, general and administrative 3,567 18,466 1,526 (G) 23,559 Interest 91 21,552 2,975 (H) 24,618 ----------- ------------- --------- ------------ 26,413 318,585 4,501 349,499 ----------- ------------- --------- ------------ EARNINGS (LOSS) BEFORE INCOME TAXES 1,815 9,178 (4,501) 6,492 PROVISION FOR INCOME TAXES(J) -- 2,467 2,219 (I) 4,686 ----------- ------------- --------- ------------ NET EARNINGS (LOSS) $ 1,815 $ 6,711 $ (6,720) $ 1,806 =========== ============= ========= ============ NET EARNINGS PER UNIT $ 33.38 $ -- $ -- $ 33.21 =========== ============ WEIGHTED AVERAGE UNITS OUTSTANDING 54,377 -- -- 54,377 26 29 CENTEX DEVELOPMENT COMPANY, L.P. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1999 (Dollars in thousands) (A) Reflects the historical assets, liabilities, stockholders' equity, revenues, and expenses of Fairclough, presented in accordance with U.S. generally accepted accounting principles and translated to U.S. dollars as of and for the year ended December 31, 1998, Fairclough's most recent fiscal year ended. The United Kingdom to United States GAAP reconciliation for Fairclough can be found in note 29 of the audited consolidated financial statements of Fairclough included elsewhere in this Form 8-K/A-1. (B) Represents the elimination of specific assets not acquired by Purchaser and the estimated change in certain Fairclough assets between January 1, 1999, and April 15, 1999, the closing date of the transaction. Cash retained by Seller $ 12 ========== Receivables not acquired by Purchaser $ 3,183 Affiliate receivables not acquired by Purchaser 22,387 Estimated decrease in receivables between January 1, 1999, and April 15, 1999 17,351 ---------- $ 42,921 ========== Estimated decrease in Property and Equipment between January 1, 1999, and April 15, 1999 $ 383 ========== (C) This amount represents the fair value adjustment to projects under development and held for sale and the estimated increase in projects under development and held for sale from January 1, 1999, through April 15, 1999, as follows: Fair value adjustment to assets acquired $ (10,934) Estimated increase in assets between January 1, 1999 and April 15, 1999 $ 33,948 ---------- $ 23,014 ========== (D) Represents the elimination of Fairclough historical equity, issuance of preferred stock at par value, recognition of goodwill and recognition of deferred debt issuance costs. Goodwill $ 30,525 Deferred debt issuance costs 1,047 ---------- $ 31,572 ========== 27 30 (E) Reflects the elimination of liabilities not assumed by Purchaser (primarily parent company debt of Fairclough), the accrual of a significant dividend paid by Fairclough subsequent to December 31, 1998, the accrual of acquisition costs, and the estimated change in certain Fairclough liabilities between January 1, 1999 and April 15, 1999. Liabilities not assumed $ 88,046 Estimated decrease in liabilities between January 1, 1999 and April 15, 1999 30,667 Accrued dividend (24,187) Acquisition costs payable (3,539) ---------- $ 90,987 ========== (F) Represents the notes payable to Seller to finance the acquisition. (G) Represents amortization of goodwill and other intangibles based upon Purchaser's allocation of purchase price as if the acquisition of Fairclough was completed on April 1, 1998. Goodwill is being amortized over a 20-year period. This reflects a preliminary allocation of the purchase price. The final allocation of the purchase price will be determined upon an opening balance sheet audit, final analysis of the acquired assets and a review for other intangible assets. (H) Reflects the following: 1) Elimination of the historical interest expense of Fairclough related to debt that will not be assumed by Purchaser. 2) Additional interest expense representing the Distribution to the Seller as defined in the Headnote to the Unaudited Pro Forma Condensed Consolidated Financial Statements. This interest expense is not fully deductible for tax reporting purposes. As a result, a limited tax benefit has been recorded for this amount in the accompanying Unaudited Pro Forma Condensed Consolidated Statement of Operations. 3) Fronting fees and commissions associated with a letter of credit securing the notes issued by a financial institution. 4) Amortization of deferred debt issuance costs that would have been incurred had the debt incurred to finance the acquisition of Fairclough been outstanding from the beginning of the period. The deferred debt issuance costs are being amortized over the estimated term of the debt, 2 years. Elimination of historical interest $ (21,552) Distribution to Seller 22,433 Fronting fees and commissions 1,570 Amortization of deferred debt issuance costs 524 ---------- $ 2,975 ========== (I) Represents the increase in the Fairclough foreign tax provision for the elimination of the historical interest expense described in footnote (H), which was tax deductible to Fairclough in the United Kingdom, and the benefits for Federal tax deductions to be received by the Purchaser. (J) The taxable income of the Registrant has been allocated to the holders of its class A and class C partner units. Accordingly, no tax provision for the partnership earnings is shown in the Unaudited Condensed Consolidated Pro Forma Financial Statements. 28 31 (c) Exhibits. Exhibits required by Item 601 of Regulation S-K: Exhibit No. Exhibit - ----------- ------- 10.18 Share Purchase Agreement dated April 15, 1999 by and among AMEC p.l.c., as Guarantor, AMEC Finance Limited, as Seller, and Centex Development Company UK Limited, as Purchaser (Previously filed with the Current Report on Form 8-K dated April 29, 1999.) 23 Consent of KPMG 32 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 hereunto duly authorized. CENTEX DEVELOPMENT COMPANY, L.P. Registrant By: 3333 Development Corporation, General Partner June 29, 1999 By: /s/ Raymond G. Smerge ------------------------- Raymond G. Smerge Secretary 33 EXHIBIT INDEX Exhibit Number Exhibit 10.18 Share Purchase Agreement dated April 15, 1999 by and among AMEC p.l.c., as Guarantor, AMEC Finance Limited, as Seller, and Centex Development Company UK Limited, as Purchaser (Previously filed with the Current Report on Form 8-K dated April 29, 1999.) 23 Consent of KPMG