UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2002


Commission File No. 1-6776 CENTEX CORPORATION		Commission File Nos. 1-9624 and 1-9625, respectively 3333 HOLDING CORPORATION and CENTEX DEVELOPMENT COMPANY, L.P.
(Exact name of registrant as specified in its charter) Nevada (State of incorporation)		(Exact name of registrants as specified in their charters) Nevada and Delaware, respectively (States of incorporation or organization)
75-0778259 (I.R.S. Employer Identification No.) 2728 N. Harwood, Dallas, Texas 75201 (Address of principal executive office, including zip code) (214) 981-5000		75-2178860 and 75-2168471, respectively (I.R.S. Employer Identification Nos.) 2728 N. Harwood, Dallas, Texas 75201 (Address of principal executive office, including zip code) (214) 981-6770
(Registrant’s telephone number)		(Registrants’ telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Name of each exchange on which registered	Title of each class	Name of each exchange on which registered

Centex Corporation

3333 Holding Corporation

Common Stock ($.25 par value)		New York Stock Exchange		Common Stock ($.01 par value)		New York Stock Exchange
		London Stock Exchange				London Stock Exchange

				Centex Development Company, L.P.
				Warrants to Purchase Class B Units of		New York Stock Exchange
				Limited Partnership Interest Expiring November 30, 2007		London Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether each registrant: (1) has 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 (or for such shorter period that each such registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to Form 10-K.

The aggregate market value of the tandem traded Centex Corporation common stock, 3333 Holding Corporation common stock and Centex Development Company, L.P. warrants to purchase Class B units of limited partnership interest held by non-affiliates of the registrants on May 31, 2002 was approximately $3.3 billion.

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 May 31, 2002:


Centex Corporation	Common Stock	61,543,403	shares
3333 Holding Corporation	Common Stock	1,000	shares
Centex Development Company, L.P.	Class A Units of Limited Partnership Interest	32,260	units
Centex Development Company, L.P.	Class C Units of Limited Partnership Interest	208,330	units

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in Parts A.III and B.III of this Report:

(a) Proxy statements for the annual meetings of stockholders of Centex Corporation and 3333 Holding Corporation to be held on July 18, 2002.

TABLE OF CONTENTS


PART A. CENTEX CORPORATION AND SUBSIDIARIES
PART I
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
	ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
SIGNATURES
PART B. 3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
PART I
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
	ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES
EX-3.2 By-laws of 3333 Development Corporation
EX-10.1 Amended and Restated Services Agreement
EX-10.2(A) Amended and Restated Services Agreement
EX-10.2(B) Management Agreement
EX-10.3 Centex Corporation 2001 Stock Plan
EX-10.10 Centex Corp. Long Term Incentive Plan
EX-10.12 First Amendment of Credit Agreement
EX-21 List of Subsidiaries
EX-23 Consent of Independent Public Accountants
EX-24.1 Powers of Attorney - Centex Corporation
EX-24.2 Powers of Attorney - 3333 Holding Corp.
EX-24.3 Powers of Attorney - Centex Development Co

JOINT ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2002

CENTEX CORPORATION AND SUBSIDIARIES
AND
3333 HOLDING CORPORATION AND SUBSIDIARY
AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES

JOINT EXPLANATORY STATEMENT

On November 30, 1987, Centex Corporation distributed as a dividend to its stockholders, through a nominee, all of the 1,000 issued and outstanding shares of common stock of 3333 Holding Corporation and 900 warrants to purchase Class B Units of limited partnership interest in Centex Development Company, L.P. Pursuant to an agreement with the nominee, the nominee is the recordholder of the 3333 Holding Corporation common stock and warrants to purchase Class B Units of Centex Development Company on behalf of and for the benefit of persons who are from time to time the holders of the Centex Corporation common stock. Each Centex Corporation stockholder owns a beneficial interest in that portion of the common stock of 3333 Holding Corporation and the warrants to purchase Class B Units of Centex Development Company that the total number of shares of Centex Corporation common stock held by such stockholder bears to the total number of shares of Centex Corporation common stock outstanding from time to time. This beneficial interest is not represented by a separate certificate or receipt. Instead, each stockholder’s beneficial interest in such pro rata portion of the shares of 3333 Holding Corporation common stock and the Centex Development Company warrants is represented by the certificate or certificates evidencing his Centex Corporation common stock and is currently tradable only in tandem with, and as a part of, each stockholder’s Centex Corporation common stock. The tandem securities are listed and traded on the New York Stock Exchange and the London Stock Exchange and are registered with the Securities and Exchange Commission separately under Section 12(b) of the Securities Exchange Act of 1934, or the Exchange Act. 3333 Holding Corporation and Centex Development Company were each organized in 1987 in connection with the distribution described above. 3333 Development Corporation, a wholly-owned subsidiary of 3333 Holding Corporation, holds a 1% interest in, and is the sole general partner of, Centex Development Company. Centex Corporation indirectly owns 100% of the Class A Units and 100% of the Class C Units of limited partnership interest in Centex Development Company. These units are collectively convertible into 20% of the Class B Units of limited partnership in Centex Development Company. Please refer to the ownership chart on page 3.

At present, Centex Corporation, 3333 Holding Corporation and Centex Development Company have elected to satisfy their respective periodic reporting obligations under the Exchange Act by preparing and filing joint periodic reports. Part A of this Annual Report on Form 10-K for the fiscal year ended March 31, 2002, or fiscal 2002, relates to Centex Corporation and its subsidiaries. Part B of this Report relates to 3333 Holding and its subsidiary, 3333 Development Corporation, and to Centex Development Company and its subsidiaries.

You should read this Report together with the proxy statements of Centex Corporation and 3333 Holding Corporation for their respective 2002 annual meetings of stockholders, the Annual Report to Stockholders of Centex Corporation for fiscal 2002 and the Annual Report to Stockholders of 3333 Holding Corporation and Centex Development Company for fiscal 2002. For a complete understanding of the tandem-traded securities, you should read both Part A and Part B of this Report.

We include information concerning the earnings and financial condition of the three companies, on an aggregate basis, in Note (J) of the Notes to Consolidated Financial Statements of Centex Corporation and subsidiaries on pages 78-79 of this Report.

For a description of this ownership chart, please see the Joint Explanatory Statement on the previous page.

OWNERSHIP CHART

(FLOW CHART)

TABLE OF CONTENTS

FORM 10-K


		Page

JOINT EXPLANATORY STATEMENT			2
Part A. CENTEX CORPORATION AND SUBSIDIARIES
	PART I
Item 1. Business			6
Item 2. Properties			22
Item 3. Legal Proceedings			23
Item 4. Submission of Matters to a Vote of Security Holders			23
	PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters			25
Item 6. Selected Financial Data			26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			48
Item 8. Financial Statements and Supplementary Data			51
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			87
	PART III
Item 10. Directors and Executive Officers of the Registrant			87
Item 11. Executive Compensation			88
Item 12. Security Ownership of Certain Beneficial Owners and Management			88
Item 13. Certain Relationships and Related Transactions			88
	PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K			88
SIGNATURES			90

TABLE OF CONTENTS (continued)


		Page

Part B.	3333 HOLDING CORPORATION AND SUBSIDIARY AND CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES
	PART I
Item 1. Business			91
Item 2. Properties			97
Item 3. Legal Proceedings			101
Item 4. Submission of Matters to a Vote of Security Holders			101
	PART II
Item 5. Market for Registrants’ Common Equity and Related Stockholder Matters			103
Item 6. Selected Financial Data			104
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			105
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			114
Item 8. Financial Statements and Supplementary Data			115
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			138
	PART III
Item 10. Directors and Executive Officers of the Registrants			139
Item 11. Executive Compensation			140
Item 12. Security Ownership of Certain Beneficial Owners and Management			141
Item 13. Certain Relationships and Related Transactions			144
	PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K			144
SIGNATURES			146

	__________________

INDICES TO EXHIBITS
CENTEX CORPORATION AND SUBSIDIARIES
3333 HOLDING CORPORATION AND SUBSIDIARY
CENTEX DEVELOPMENT COMPANY, L.P. AND SUBSIDIARIES

PART A.

CENTEX CORPORATION AND SUBSIDIARIES

PREFATORY STATEMENT

Part A of this Report (pages 6 through 90) includes information relating to Centex Corporation and its subsidiaries, SEC File No. 1-6776. See Joint Explanatory Statement on page 2 of this Report. Part B of this Report (pages 91 through 147) includes information relating separately to 3333 Holding Corporation and its subsidiary, 3333 Development Corporation, and to Centex Development Company, L.P. and subsidiaries.

PART I

ITEM 1. BUSINESS

General Development of Business

Centex Corporation is a Nevada corporation. Our common stock, par value $.25 per share, began trading publicly in 1969. Our common stock is traded on the New York Stock Exchange, or the NYSE, and the London Stock Exchange. As of May 31, 2002, 61,543,403 shares of our common stock were outstanding. Any reference herein to we, us or our includes Centex Corporation and its subsidiary companies.

Since our founding in 1950 as a Dallas, Texas-based residential construction company, we have evolved into a multi-industry company. Our subsidiary companies operate in five principal business segments: Home Building, Financial Services, Construction Products, Construction Services and Investment Real Estate. We provide a brief overview of each segment below, and we provide a more detailed discussion of each segment later in this section.

Our Home Building operations currently involve the purchase and development of land or lots and the construction and sale of single-family homes, townhomes and low-rise condominiums. We have participated in the conventional homebuilding business since 1950. We currently rank as the nation’s fourth largest homebuilder based on revenues.

Our Financial Services operations consist primarily of home financing, sub-prime home equity lending and the sale of title insurance and various other insurance coverages. These activities include mortgage origination, servicing and other related services for purchasers of homes sold by our Home Building operations and others. We have been in the mortgage banking business since 1973.

Our Construction Products operations involve the manufacture, production, distribution and sale of cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete. Our involvement in the construction products business started in 1963 when we began construction of our first cement plant. During the quarter ended June 30, 1994, our construction products subsidiary, Centex Construction Products, Inc., completed an initial public offering of 51% of its stock and began trading on the NYSE under the symbol “CXP.” Primarily as a result of Construction Products’ repurchase of its own stock, our ownership has increased to 65.2% as of March 31, 2002. Accordingly, we have consolidated Construction

Products’ financial statements with those of Centex Corporation for the years ended March 31, 2002, 2001 and 2000, or fiscal 2002, 2001 and 2000.

Our Construction Services operations involve the construction of buildings for both private and government interests, including office, commercial and industrial buildings, hospitals, hotels, correctional facilities, educational institutions, museums, libraries, airport facilities and sports facilities. We entered the Construction Services business in 1966 by acquiring a Dallas-based contractor that had been in business since 1936. We also acquired significant construction companies in 1978, 1982, 1987 and 1990. We currently rank among the nation’s largest general building contractors based on construction revenues.

Our Investment Real Estate operations involve the acquisition, development and sale of land, primarily for industrial, office, multi-family, retail, residential and mixed-use projects.

In fiscal 1988, we established Centex Development Company. Please refer toPart B of this Report for a discussion of the business of Centex Development Company.

Financial Information about Industry Segments

Note (K) of the Notes to Consolidated Financial Statements of Centex Corporation on pages 79-81 of this Report contains additional information about our business segments for fiscal 2002, 2001 and 2000.

Narrative Description of Business

HOME BUILDING

Our conventional homebuilding subsidiary, Centex Homes, purchases and develops land or lots and constructs and sells single-family homes, townhomes and low-rise condominiums. As of March 31, 2002, Centex Homes operated in 474 neighborhoods in 88 different markets. Centex Homes is also the only company to rank among the nation’s top 10 homebuilders for each of the past 34 years according to Professional Builder magazine. Centex Homes sells to both first-time and move-up buyers. Over 86% of the homes we sold in fiscal 2002 were single-family detached homes, and the remainder were townhomes and low-rise condominiums.

Markets

Centex Homes follows a strategy of reducing exposure to local market volatility by diversifying operations across geographically and economically diverse markets. As of March 31, 2002, Centex Homes was building in 88 market areas in 23 states and in Washington, D.C. The markets are listed below by geographic areas.


Region	States	Markets

Mid-Atlantic	Maryland	Baltimore
	New Jersey	Atlantic/Cape May
		Middlesex/Somerset/Hunterdon
		Monmouth/Ocean
		Trenton
	North Carolina	Charlotte/Gastonia/Rock Hill
		Greensboro/Winston Salem/High Point
		Raleigh/Durham/Chapel Hill
		Wilmington
	Pennsylvania	Philadelphia
		Pittsburgh
	South Carolina	Charleston/North Charleston
		Hilton Head
		Myrtle Beach
	Virginia	Norfolk/Virginia Beach/Newport
		Richmond/Petersburg
		Washington, D.C.
Midwest	Colorado	Boulder/Longmont
		Denver
		Fort Collins
	Indiana	Indianapolis
		Fort Wayne
	Illinois	Chicago
	Michigan	Ann Arbor
		Detroit
		Grand Rapids/Muskegon
		Kalamazoo/Battle Creek
	Minnesota	Minneapolis/St. Paul
	Ohio	Akron
		Canton/Massillon
		Cincinnati
		Cleveland/Lorain/Elyria
		Columbus
		Dayton/Springfield
		Mansfield
		Toledo
		Youngstown/Warren
Mountain States	Arizona	Phoenix/Mesa
	Colorado	Eagle County
	Nevada	Las Vegas
		Reno
	New Mexico	Albuquerque
		Santa Fe
	Oregon	Eugene
		Portland/Vancouver
		Salem
	Utah	Salt Lake City
	Washington	Seattle/Bellevue/Everett
		Tacoma


Region	States	Markets

South Central	Texas	Austin/San Marcos
		Brazoria
		Dallas
		Ft. Worth/Arlington
		Galveston/Texas City
		Houston
		Killeen/Temple
		San Antonio
	Tennessee	Nashville
Southeast	Florida	Daytona Beach
		Ft. Lauderdale
		Ft. Myers/Cape Coral
		Ft. Pierce/St. Lucie
		Ft. Walton Beach
		Jacksonville
		Lakeland/Winter Haven
		Melbourne/Titusville
		Miami
		Naples
		Orlando
		Punta Gorda
		Sarasota/Bradenton
		Tampa/St. Petersburg/Clearwater
		West Palm Beach/Boca Raton
	Georgia	Atlanta
	South Carolina	Columbia
		Greenville/Spartanburg/Anderson
West Coast	California	Bakersfield
		Fresno
		Kings County
		Los Angeles/Long Beach
		Oakland
		Orange County
		Riverside/San Bernardino
		Sacramento/Yolo
		San Diego
		San Luis Obispo
		Ventura
		Visalia/Tulare/Porterville

In fiscal 2002, Centex Homes closed 22,960 homes, including first-time, move-up and, in some markets, custom homes, ranging in price from approximately $63,000 to about $2.2 million. The average sale price in fiscal 2002 was $213,738.

Our practice has been to acquire land, build homes on the land and sell the homes within 24 to 36 months from the date of land acquisition. Generally, this involves acquiring land that is properly zoned and is either ready for development or, to some degree, already developed. The purchase of finished lots generally allows us to shorten the lead time to commence construction and reduces the risk of unforeseen improvement costs and volatile market conditions. We have acquired a substantial amount of finished and partially improved lots and land through option agreements that we exercise over specified time periods or, in certain cases, as the lots are needed. At March 31, 2002, Centex Homes owned approximately 43,000

lots and had rights to purchase approximately 51,000 lots. In addition, Centex Homes enters into joint ventures for land acquisition, development and other activities. Centex Homes holds less than a majority interest in these joint ventures, and therefore we do not consolidate these joint ventures in our financial statements.

Our growth strategy for Centex Homes has been focused primarily on internally generated, organic growth opportunities through land acquisition and development in existing business units. As a secondary driver, we have also grown the business through the acquisition of other homebuilding companies. Since April 1998 we have acquired homebuilding operations of the following companies:


Company	Date Acquired	Description

Wayne Homes	April 1998	Builds single-family homes in the “build-on-owner’s” lot market segment.
Teal Homes	May 1998	Builds single-family homes for the first-time and move-up buyer in the Richmond, Virginia area.
Calton Homes	December 1998	Builds single-family homes for the first-time and move-up buyer in New Jersey.
Real Homes	September 1999	Builds single-family homes for the first-time and move-up buyer in the Las Vegas, Nevada area.
Selective Group	March 2001	Builds single-family homes for the first-time and move-up buyer in the Detroit, Michigan area.
CityHomes	March 2001	Builds upscale urban townhomes and condominiums in the Dallas, Texas area.

In addition, we acquired substantially all of the land and other operating assets for the construction of single-family homes, townhomes and duplexes from Sundance Homes, a suburban Chicago homebuilder, in July 1999. Sundance Homes retained its name and continues to operate in other markets in which we do not compete.

The table below summarizes by geographic area Centex Homes’ home closings, sales (orders) backlog and sales (orders) for the five most recent fiscal years. Some of the prior year balances have been reclassified to be consistent with the fiscal 2002 presentation.

Closings (in units):


		For the Years Ended March 31,

		2002		2001		2000		1999		1998

	Mid-Atlantic		3,877		3,395		3,058		2,332		1,826
	Southeast		4,280		3,991		4,012		3,426		3,064
	Midwest		3,619		3,294		3,089		2,062		1,147
	South Central		5,154		4,104		3,924		3,197		2,664
	Mountain States		2,697		2,338		1,812		1,350		1,336
	West Coast		3,333		3,537		3,009		2,425		2,381

			22,960		20,659		18,904		14,792		12,418

Average Sales Price (in 000’s)		$	214	$	206	$	192	$	186	$	183

Sales (Orders) Backlog, at the end of the period (in units):


	For the Years Ended March 31,

	2002		2001		2000		1999		1998

Mid-Atlantic		1,503		1,365		1,210		1,061		657
Southeast		2,273		1,898		1,848		1,794		1,400
Midwest		2,086		2,008		1,628		1,355		433
South Central		1,962		2,064		1,462		1,410		1,174
Mountain States		646		803		579		502		456
West Coast		901		1,127		852		670		796

		9,371		9,265		7,579		6,792		4,916

Sales (Orders) (in units):


	For the Years Ended March 31,

	2002		2001		2000		1999		1998

Mid-Atlantic		3,936		3,550		3,207		2,464		1,888
Southeast		4,655		4,041		4,066		3,824		3,331
Midwest		3,697		3,541		3,207		2,515		1,139
South Central		5,052		4,685		3,976		3,433		2,879
Mountain States		2,540		2,562		1,760		1,396		1,369
West Coast		3,107		3,812		3,191		2,299		2,420

		22,987		22,191		19,407		15,931		13,026

Competition and Other Factors

The conventional homebuilding industry is essentially a “local” business and is highly competitive. We compete in each of Centex Homes’ market areas with numerous other homebuilders, including national, large regional and local builders. Centex Homes’ top ten competitors based on revenues for their most recent year-end are as follows: Beazer Homes, D. R. Horton, Inc., KB Homes, Lennar Corporation, MDC Holdings, NVR Inc., Pulte, Ryland, Standard Pacific and Toll Brothers. Centex Homes’ operations accounted for approximately 1.5% of the total for-sale housing starts in the United States for the twelve months ended March 31, 2002. The main competitive factors affecting Centex Homes’ operations are location, price, cost of providing mortgage financing for customers, construction costs, design and quality of homes, customer service, marketing expertise, availability of land, price of land and reputation. We believe that Centex Homes competes effectively by maintaining geographic diversity, being responsive to the specific demands of each market and managing the operations at a local level.

The homebuilding industry is cyclical and is particularly affected by changes in national and local economic conditions, job growth, long-term and short-term interest rates, consumer confidence, governmental policies, zoning restrictions and, to a lesser extent, changes in property taxes, energy costs, federal income tax laws, federal mortgage financing programs and various demographic factors. The political and economic environments affect both the demand for housing constructed and the subsequent cost of financing. Unexpected climatic conditions, such as unusually heavy or prolonged rain or snow, may affect operations in certain areas.

The homebuilding industry is subject to extensive and complex regulations. Centex Homes and its subcontractors must comply with various federal, state and local laws and regulations, including worker

health and safety, zoning, building standards, advertising, consumer credit rules and regulations and the extensive and changing federal, state and local laws, regulations and ordinances governing the protection of the environment, including the protection of endangered species. Centex Homes is also subject to other rules and regulations in connection with its manufacturing and sales activities, including requirements as to incorporated building materials and building designs. All of these regulatory requirements are applicable to all homebuilding companies, and, to date, compliance with these requirements has not had a material impact on us. We believe that Centex Homes is in material compliance with these requirements.

We purchase materials, services and land from numerous sources and believe that we can deal effectively with the problems we may experience relating to the supply or availability of materials, services and land.

FINANCIAL SERVICES

Our Financial Services operations consist primarily of home financing, sub-prime home equity lending and the sale of title insurance and other insurance coverages. These activities include mortgage origination, servicing and other related services for purchasers of homes sold by our subsidiaries and others.

Conforming Mortgage Banking

We established CTX Mortgage Company, L.L.C., or CTX Mortgage, together with its predecessors and affiliates, to provide mortgage financing for homes built by Centex Homes. By opening CTX Mortgage offices in Centex Homes’ housing markets, we have been able to provide mortgage financing for an average of 68% of Centex Homes’ sales, other than cash sales, over the past five years. In fiscal 2002, this capture ratio was 72%. In 1985, we expanded CTX Mortgage’s operations to include mortgage loans that are not associated with the sale of homes built by Centex Homes. We refer to mortgage financing for homes built by Centex Homes as Builder loans and to mortgage financing for homes built by others as Retail loans.

At March 31, 2002, CTX Mortgage had 217 offices located in 37 states. The offices vary in size depending on loan volume.

The following table shows the unit breakdown of Builder and Retail loans for CTX Mortgage for the five years ended March 31, 2002:


		For the Years Ended March 31,

		2002			2001			2000			1999			1998

Loan Types:
	Builder		15,435			12,506			10,958			9,882			8,748
	Retail		64,949			48,244			48,301			66,496			44,096

			80,384			60,750			59,259			76,378			52,844

Origination Volume (in billions)		$	12.5		$	8.9		$	8.1		$	10.1		$	6.7
Percent of Centex Non-Cash Closings Financed			72	%		64	%		61	%		70	%		75	%

We provide mortgage origination and other mortgage-related services for the Federal Housing Administration, or FHA, the Department of Veterans’ Affairs, or VA, and conventional loans on homes that Centex Homes or others build and sell, as well as resale homes and refinancing of existing mortgages. Our loans are generally first-lien mortgages secured by one- to four-family residences. A majority of the loans qualify for inclusion in programs sponsored by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or

FHLMC. These loans are known in the industry as “conforming” loans. The remainder of the loans are either pre-approved and individually underwritten by CTX Mortgage or private investors who subsequently purchase the loans or are funded by private investors who pay a broker fee to CTX Mortgage for referring a loan.

CTX Mortgage’s principal sources of income consist of gains on the sale of mortgage loans, inclusive of all service rights, and, to a lesser extent, net interest income and other fees. Generally, we sell our right to service the mortgage loans and, therefore, retain no mortgage servicing rights or other residual interests.

We also participate in joint-venture agreements with third-party homebuilders and other real estate professionals to provide mortgage originations for their customers. These joint venture companies are fully consolidated in CTX Mortgage’s financial statements. At March 31, 2002, CTX Mortgage had 22 of these agreements, operating in 24 offices located in 10 states.

In fiscal 2000, CTX Mortgage entered into a mortgage loan purchase agreement with Harwood Street Funding I, L.L.C., or HSF-I, that we refer to as the HSF-I Purchase Agreement. HSF-I is an unaffiliated entity that is not consolidated with Financial Services or Centex Corporation. Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage loans that satisfy certain eligibility criteria and portfolio requirements. 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 $2.0 billion. Under the terms of the sales agreements, CTX Mortgage is the sole manager of HSF-I and, in that capacity, arranges for the sale of these loans into the secondary market. For a subservicing fee, CTX Mortgage also acts as servicer of these mortgage loans for HSF-I until HSF-I sells the loans. At March 31, 2002, CTX Mortgage was servicing approximately $1.3 billion of mortgage loans owned by HSF-I. For further discussion of HSF-I, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Off-Balance-Sheet and Other Obligations” below.

Sub-Prime Home Equity Lending

We formed the predecessors of Centex Home Equity Company, L.L.C., or Home Equity, in fiscal 1995. The business of Home Equity involves the origination of primarily nonconforming home equity loans. The sub-prime lending market comprises borrowers whose financing needs are not being met by traditional mortgage lenders for a variety of reasons, including credit histories that may limit a borrower’s access to credit or a borrower’s need for specialized loan products. Since its inception, Home Equity has focused on lending to individuals who have substantial equity in their homes but have impaired or limited credit histories. Home Equity’s mortgage loans to these borrowers are made primarily for such purposes as debt consolidation, refinancing, home improvement or educational expenses. Substantially all of Home Equity’s mortgage loans are secured by first mortgage liens on one- to four-family residences and have amortization schedules ranging from 5 to 30 years.

At March 31, 2002, Home Equity had 134 offices doing business in 48 states. Home Equity originates home equity loans through five major origination sources:

	•		a retail branch network;

	•		a broker referral network;

	•		referrals from its conforming mortgage affiliate, CTX Mortgage;

	•		a correspondent mortgage banker network; and

	•		Home Equity’s direct sales unit that sources loans through telemarketing.

The following table summarizes Home Equity’s origination statistics for the five-year period ended March 31, 2002:


	For the Years Ended March 31,

	2002		2001		2000		1999		1998

Loans		26,955		26,418		20,568		15,582		7,982
Origination Volume (in billions)	$	2.1	$	1.7	$	1.3	$	1.0	$	0.5

We began servicing loans through Home Equity in fiscal 1997. Servicing fees for sub-prime loans are significantly higher than for conforming loans. Servicing encompasses, among other activities, the following processes: billing, collection of payments, movement of cash to the payment clearing bank accounts, investor reporting, customer help, recovery of delinquent payments, instituting foreclosure and liquidation of the underlying collateral. As of March 31, 2002, Home Equity was servicing a sub-prime loan portfolio of approximately $4.4 billion.

From October 1997 through March 2000, a majority of Home Equity’s loans originated were included in securitizations that utilized a structure that caused them to be accounted for as sales. Under this structure, Home Equity retained a residual interest as well as the servicing rights to the securitized loans. We call this retained residual interest the mortgage securitization residual interest, or MSRI. As a result, our balance sheet does not reflect the mortgage loans receivable and offsetting debt resulting from these securitizations. The estimated gain on the sale of these loans was included in earnings during the period in which the securitization transaction closed. Between February 1998 and March 2000, Home Equity completed nine securitizations totaling approximately $2.2 billion in loans under this structure. As of March 31, 2002, Home Equity had a remaining MSRI of $125.3 million.

We changed the structure of securitizations beginning April 1, 2000. Securitizations since that time have been accounted for as borrowings. Under this structure, we record interest over the life of the loans using the interest, or actuarial, method. The mortgage loans receivable and the securitization debt remain on Home Equity’s balance sheet. From April 1, 2000 to March 31, 2002, Home Equity completed eight securitizations totaling approximately $3.6 billion in loans under this structure.

Home Equity’s principal sources of income are from interest income, loan origination fees and servicing fees.

Other Financial Services Operations

We offer title agent, title underwriting, closing, appraisal and other settlement services in 23 states under the names of Commerce Title Company, Commerce Title Agency and Commerce Title Insurance Company. Our Optima Information Solutions subsidiary provides property information reports, document recording and retrieval, due diligence reports and pre-foreclosure information electronically in all 50 states. Through Westwood Insurance, a multi-line property and casualty insurance agency, we market homeowners and auto insurance to some of our customers and customers of approximately 53 other homebuilders in 50 states. Westwood Insurance also provides coverage for some commercial customers. Our Technologies Group, headquartered in Edmond, Oklahoma, provides mortgage quality control services, owns and operates an automated mortgage processing system and provides the mortgage industry with regulations and guidelines in an electronic format.

Competition and Other Factors

The financial services industry in the United States is highly competitive. CTX Mortgage competes with commercial banks, other mortgage banking companies and other financial institutions to supply mortgage financing at attractive rates to purchasers of our homes, as well as to the general public. Home Equity competes with commercial banks, other sub-prime lenders and other financial institutions to supply sub-prime financing at attractive rates. Our title and insurance operations compete with other providers of title and insurance products to sell their products to purchasers of our homes, as well as to the general public. During fiscal 2002, Financial Services continued to operate in a very competitive environment.

The Financial Services operations are subject to extensive state and federal regulations, as well as the rules and regulations of, and examinations by, FNMA, FHLMC, FHA, VA, Department of Housing and Urban Development, or HUD, GNMA and state regulatory authorities with respect to originating, processing, underwriting, making, selling, securitizing and servicing loans and providing title and other insurance products. In addition, there are other federal and state statutes and regulations affecting such activities. These rules and regulations, among other things, impose licensing obligations on our Financial Services operations, specify standards for origination procedures, establish eligibility criteria for mortgage loans, provide for inspection and appraisals of properties, regulate payment features and, in some cases, fix maximum interest rates, fees, loan amounts and premiums for title and other insurance. Our Financial Services operations are required to maintain specified net worth levels and submit annual audited financial statements to HUD, VA, FNMA, FHLMC, GNMA and some state regulators.

As an approved FHA mortgagee, CTX Mortgage is subject to examination by the Federal Housing Commissioner at all times to ensure compliance with FHA regulations, policies and procedures. Our title and insurance operations are subject to examination by state authorities. Mortgage origination and servicing activities are subject to the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Federal Truth-In-Lending Act, the Real Estate Settlement Procedures Act, that also applies to our insurance operations, the Riegle Community Development and Regulatory Improvement Act, the Home Ownership and Equity Protection Act and the regulations promulgated under such statutes, among other federal and state consumer credit laws. These statutes prohibit discrimination and unlawful kickbacks and referral fees and require the disclosure of certain information to borrowers concerning credit and settlement costs. Many of these regulatory requirements seek to protect the interest of consumers, while others protect the owners or insurers of mortgage loans. Failure to comply with these requirements can lead to loss of approved status, demands for indemnification or loan repurchases from investors, class action lawsuits by borrowers, administrative enforcement actions and, in some cases, rescission or voiding of the loan by the consumer.

CONSTRUCTION PRODUCTS

Construction Products’ operations include the manufacture, production, distribution and sale of cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete. As of March 31, 2002, our ownership in Construction Products was approximately 65.2%.

Cement

Construction Products operates cement plants in or near Buda, Texas; LaSalle, Illinois; Fernley, Nevada; and Laramie, Wyoming. The plants in Buda and LaSalle are owned by separate partnerships in which Construction Products has a 50% interest. Construction Products proportionally consolidates its pro rata interest in the revenues, expenses, assets and liabilities of those extractive industry joint ventures. The kiln start-up dates of the cement plants were as follows: Buda, Texas, 1978 (expanded 1983); LaSalle,

Illinois, 1974; Fernley, Nevada (2 kilns), 1964 and 1969; and Laramie, Wyoming (2 kilns), 1988 and 1996. All four of the cement plants are fuel-efficient dry process plants.

Construction Products’ net cement production, excluding the partners’ 50% interest in the Buda and LaSalle plants, totaled approximately 2.2 million tons in fiscal 2002 and 2.3 million tons in fiscal 2001. Total net cement sales were 2.4 million tons in both fiscal 2002 and fiscal 2001, as all four cement plants sold all of the product they produced. During the past four years, Construction Products purchased cement from others to be resold. In fiscal 2002, 10.5% of the cement sold by Construction Products was acquired from outside sources, compared to 6.6% in fiscal 2001.

Raw Materials and Fuel Supplies

The principal raw material used in the production of portland cement is calcium carbonate in the form of limestone. Construction Products obtains limestone principally through mining and extraction operations at quarries owned or leased by Construction Products or its partnerships that are located in close proximity to the plants. Construction Products’ management believes that the estimated recoverable limestone reserves owned or leased by it or its partnerships will permit each of its plants to operate at its present production capacity for at least 30 years or, in the case of the Fernley plant, at least 15 years. Construction Products’ management expects that additional limestone reserves for the Fernley plant will be available when needed on an economically feasible basis.

The cement plants use coal and coke as their primary fuel but are equipped to burn natural gas as an alternative fuel. Electric power is a major cost component in the manufacture of cement. Construction Products seeks to diminish overall power costs by adopting interruptible power supply agreements, which may expose the plants to some production interruptions during periods of power curtailment. Although power and natural gas costs generally decreased during fiscal 2002, we expect costs to increase in fiscal 2003, which could negatively impact manufacturing costs in fiscal 2003.

Sales and Distribution

Demand for cement is highly cyclical and depends on the demand for concrete products, which, in turn, depends on the demand for construction. According to estimates of the Portland Cement Association, the primary construction sectors that account for the largest shares of cement consumption are public works construction, non-residential construction and residential construction. These sectors comprised 50%, 21% and 21%, respectively, of U.S. cement consumption in calendar year 2001. No single customer of Construction Products accounted for as much as 10% of total cement sales during fiscal 2002. The principal geographic markets for Construction Products’ cement are Texas and western Louisiana, which are serviced by the Buda, Texas plant; Illinois and southern Wisconsin, which are serviced by the LaSalle, Illinois plant; Nevada, except Las Vegas, and northern California, which are serviced by the Fernley, Nevada plant; and Wyoming, Utah, northern Colorado, western Nebraska and eastern Nevada, which are serviced by the Laramie, Wyoming plant.

We generally distribute our cement by common carriers, customer pickup and, to a lesser extent, by trucks owned and operated by Construction Products. In addition, we transport our cement principally by rail to storage and distribution terminals for further distribution, which expands each plant’s selling area.

Competition and Other Factors

The cement business is extremely competitive. In every geographic area in which Construction Products sells cement, one or more other domestic producers compete. In addition, foreign companies compete in most sales areas by importing cement into the United States. The number of principal

competitors operating in the same geographic areas as Construction Products’ cement plants are: six in Buda, six in LaSalle, six in Fernley and four in Laramie. Construction Products competes by operating efficient cement plants, merchandising a high quality product and providing good service and competitive pricing.

Gypsum Wallboard

Construction Products owns and operates four gypsum wallboard manufacturing facilities: two located in Albuquerque and nearby Bernalillo, New Mexico, one located in Gypsum, Colorado (near Vail) and one located in Duke, Oklahoma, acquired in November 2000.

Construction Products’ gypsum wallboard production totaled 1,890 million square feet in fiscal 2002 and 1,649 million square feet in fiscal 2001. Total gypsum wallboard sales were 1,930 million square feet in fiscal 2002 and 1,584 million square feet in fiscal 2001.

Raw Materials and Fuel Supplies

Construction Products mines and extracts natural gypsum rock, the principal raw material used in the manufacture of gypsum wallboard, from mines and quarries owned, leased or subject to claims owned by Construction Products and located near its plants. Construction Products estimates that the New Mexico, Colorado and Oklahoma mines and quarries contain approximately 50 million tons, 21 million tons and 15 million tons of proven and probable gypsum reserves, respectively. Other gypsum deposits are located in the immediate area of the Oklahoma plant and may be obtained at a reasonable cost. Based on its current production capacity, Construction Products’ management estimates that the life of its existing gypsum rock reserves is approximately 80 years in New Mexico, 35 years in Colorado and 15 years in Oklahoma.

Prior to November 2000, Construction Products purchased paper used in manufacturing gypsum wallboard from third-party suppliers. As a result of the acquisition of paperboard manufacturing operations in November 2000, Construction Products now manufactures all of the paper needed for its gypsum wallboard productions.

Construction Products’ wallboard plants use large quantities of natural gas and electrical power. Construction Products currently obtains a portion of its natural gas requirements from three gas producers under gas supply agreements expiring in January 2003 for Colorado, May 2003 for New Mexico and November 2002 for Oklahoma. If the agreements are not renewed, Construction Products’ management expects to be able to obtain its gas supplies from other suppliers at competitive prices. Power for the Gypsum plant is supplied by the cogeneration power facility that was acquired along with the gypsum wallboard plant in 1997. Although power and natural gas costs generally decreased during fiscal 2002, Construction Products expects natural gas costs to increase in fiscal 2003, which could negatively impact manufacturing costs in fiscal 2003.

Sales and Distribution

The principal sources of demand for gypsum wallboard are residential and non-residential construction, repair and remodeling. While the gypsum wallboard industry remains highly cyclical, recent growth in the repair and remodeling segment has partially mitigated the impact of fluctuations on overall levels of new construction. Construction Products sells wallboard to numerous building materials dealers, wallboard specialty distributors, home center chains and other customers located throughout the United States. Although wallboard is distributed principally in regional areas, Construction Products and some other producers have the ability to ship wallboard by rail outside their usual regional distribution areas to take advantage of other regional increases in demand. Construction Products’ rail distribution capabilities

permit it to reach customers in all states west of the Mississippi River and many eastern states. During fiscal 2002, approximately 20% of Construction Products’ sales volume of gypsum wallboard was transported by rail.

Competition and Other Factors

There currently are eight manufacturers of wallboard in the United States operating a total of 79 plants. Construction Products estimates that the three largest producers, of which Construction Products is not one, accounted for approximately 70% of wallboard sales in the United States in calendar year 2001. Competition among wallboard producers is primarily on a regional basis with local producers benefiting from lower transportation costs and, to a lesser extent, on a national basis. Because of the commodity nature of the product, competition is based principally on price and, to a lesser extent, on product quality and customer service.

Recycled Paperboard Operations

Construction Products conducts its recycled paperboard manufacturing operations at a Lawton, Oklahoma mill and a Commerce City, Colorado mill. Construction Products elected to idle the Commerce City mill in April 2001. The Lawton mill commenced commercial operation in March 2000 and was acquired by Construction Products, along with the Colorado mill, in November 2000. Construction Products ultimately expects the Lawton mill to have the capacity to produce approximately 11 billion square feet, or 220,000 tons, of gypsum-grade recycled paperboard annually. In fiscal 2002, it produced approximately 196,000 tons.

Construction Products produces all of the paperboard products manufactured at the paperboard mills from 100% reclaimed paper fiber. These products are classified by the industry as recycled paperboard. Recycled paperboard products include the facing paper used in the manufacture of gypsum wallboard and recycled paperboard used by manufacturers of consumer and industrial paperboard products. The principal raw materials used by the recycled paperboard mills are reclaimed paper fiber, chemicals and water. Construction Products currently purchases reclaimed paper fiber from several sources, including Construction Products’ own paper fiber recycling centers. The recycled paperboard products are sold primarily to gypsum wallboard manufacturers. During fiscal 2002, approximately 34% of the recycled paperboard manufactured and shipped by Construction Products’ recycled paperboard mills was consumed by its own gypsum wallboard manufacturing operations and approximately 58% was shipped to two other gypsum wallboard manufacturers.

The demand for recycled paperboard directly corresponds to the cyclical gypsum wallboard market. Construction Products competes with approximately seven other manufacturers of gypsum-grade paperboard, six of which have gypsum wallboard manufacturing operations. Substantially all of these competitors have greater financial resources. Price, quality, personal relationships and timeliness of deliveries are the principal methods of competition among paperboard producers.

Concrete and Aggregates

Construction Products’ concrete and aggregates operations are located in and around Austin, Texas and northern California. The 10,000-acre aggregates deposit in northern California contains sufficient estimated reserves to meet current mining requirements for aggregates for a period of more than 100 years. Construction Products sells aggregates from this deposit in the Sacramento, California area and in nearby counties. No single customer accounted for as much as 10% of Construction Products’ concrete and aggregates sales during fiscal 2002. Competition among concrete producers within Construction Products’ northern California and Austin markets is strong.

Environmental Matters

The construction products industry, including the operations of Construction Products, is subject to federal, state and local laws and regulations pertaining to several areas, including human health and safety and environmental compliance. The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, as well as similar laws in certain states, create joint and several liability for the cost of cleaning up or correcting releases to the environment of designated hazardous substances. None of Construction Products’ sites are listed as a “Superfund site.”

Construction Products’ operations are also potentially affected by the Resource Conservation and Recovery Act, or RCRA, which is the primary federal statute governing the management of solid waste and which includes stringent regulation of solid waste that is considered hazardous waste. These operations generate non-hazardous solid waste, which may include cement kiln dust, or CKD. Because of a RCRA exemption, known as the Bevill Amendment, CKD generated in Construction Products’ operations is currently not considered a hazardous waste under RCRA. Nevertheless, CKD is still considered a solid waste and is regulated primarily under state environmental laws and regulations. The U. S. Environmental Protection Agency completed its review of CKD and has proposed regulations to govern the handling and disposal of CKD, which will supersede the Bevill Amendment. The Bevill Amendment will remain in effect until the final regulations are adopted.

In the past, Construction Products collected and stored CKD on-site at its cement plants. Construction Products continues to store CKD at its Illinois, Nevada and Wyoming cement plants and at a former plant site in Corpus Christi, Texas, that is no longer in operation. Currently, substantially all CKD related to present operations at all cement facilities is recycled. When the U. S. Environmental Protection Agency removes the CKD exemption and develops particular CKD management standards in the future, Construction Products may be required to incur significant costs in connection with its CKD. CKD that comes in contact with water might produce a leachate with an alkalinity high enough to be classified as hazardous and might also leach certain hazardous trace metals therein.

Another issue of potential significance is the possible imposition of government requirements of greenhouse gas reduction measures for cement producers. This is potentially significant because carbon dioxide is generated from combustion of fuels such as coal and coke in order to generate the high temperatures necessary to manufacture cement clinker, which is then ground with gypsum to make cement. Any imposition of raw material or production limitations or fuel-use or carbon taxes could have a significant impact on the cement manufacturing industry. It will not be possible to determine the impact on Construction Products until governmental requirements are defined.

The Clean Air Act Amendments of 1990 provided comprehensive federal regulation of all sources of air pollution and established a new federal operating permit and fee program for virtually all manufacturing operations. These amendments will likely result in increased capital and operational expenses for Construction Products in the future, the amounts of which are not presently determinable. We have no reason to believe, however, the increased capital and operational expenses would place Construction Products at a competitive disadvantage.

We believe that Construction Products’ current procedures and practices in its operations, including those for handling and managing materials, are consistent with industry standards. Nevertheless, because of the complexity of operations and compliance with environmental laws, there can be no assurance that past or future operations will not result in operational errors, violations, remediation or other liabilities or claims. Moreover, we cannot predict what environmental laws will be enacted, adopted or amended in the future or

how they will be administered or interpreted. Compliance with more stringent environmental laws or stricter interpretation of existing environmental laws could necessitate significant capital outlays.

CONSTRUCTION SERVICES

Our Construction Services subsidiaries together rank as one of the largest building contractors in the country, as well as one of the largest U. S.-owned construction groups based on construction revenues. Construction Services is made up of four principal operating companies with various geographic locations and project niches. Healthcare facility construction has represented nearly one-fourth of Construction Services’ business mix during recent years. New contracts for the group for fiscal 2002 totaled $1.5 billion versus $1.9 billion for fiscal 2001. The backlog of uncompleted contracts at March 31, 2002 was $2.2 billion compared to $2.0 billion at March 31, 2001. Construction Services’ principal subsidiaries are as follows:


	*Centex Construction Company, Inc.* — This subsidiary has operational offices in Dallas, Houston and San Antonio, Texas; Fairfax, Virginia; Charlotte, North Carolina; and Atlanta, Georgia. This company pursues negotiated work in its regional market areas.


	*Centex Rodgers, Inc. —* This subsidiary is a nationwide healthcare construction specialist and is headquartered in Nashville, Tennessee with operational offices in Pasadena, California; Detroit, Michigan; West Palm Beach, Florida; Rochester, Minnesota; and Indianapolis, Indiana.


	*Centex-Rooney Construction Co., Inc. —* This subsidiary, based in Plantation, Florida, performs all types of work, principally within the state of Florida, and has operational offices in Miami, Orlando, Tampa, Tallahassee, Jacksonville, Ft. Myers and West Palm Beach.

Centex Forcum Lannom, Inc. d/b/a Centex Engineering & Construction, Inc. — This subsidiary, that focuses on industrial client construction projects, is located in Dyersburg, Tennessee and operates principally within the state of Tennessee. The company has additional marketing offices in Memphis, Tennessee; Lexington, Kentucky; and Dallas, Texas. We are in the process of changing the name under which this company does business in all jurisdictions to Centex Engineering and Construction, Inc.

As a general contractor or construction manager, Construction Services provides supervisory personnel for the construction of facilities. In addition, Construction Services may perform varying amounts of the actual construction work on a project but will generally hire subcontractors to perform the majority of the work.

Construction contracts primarily fit into one of two formats: negotiated or competitive bid. In a negotiated format, the contractor bids a fee (fixed or percentage) over the cost of the project and, in many instances, agrees that the final cost will not exceed a designated amount. These contracts may include a provision whereby the owner will pay a part of any savings from the guaranteed amount to the contractor. In a competitive bid format, Construction Services will bid a fixed amount to construct the project based on an evaluation of detailed plans and specifications. At March 31, 2002, approximately 86% of the outstanding projects were negotiated. Construction Services’ projects include hospitals, hotels, office buildings, correctional facilities, schools, shopping centers, airports, parking garages, sport stadiums, post offices and convention and performing arts centers.

Competition and Other Factors

The construction industry is very competitive, and Construction Services competes with numerous other companies. With respect to competitively bid projects and negotiated healthcare work, Construction Services generally competes throughout the United States with local, regional and national contractors, depending upon the nature of the project. For negotiated projects other than healthcare, Construction Services generally competes in the subsidiary’s primary geographical area with other local, regional and national contractors. Construction Services solicits new projects by attending project bid meetings, by meeting with builders and owners and through existing customers. Construction Services competes successfully on the basis of its reputation, financial strength, knowledge and understanding of its clients’ needs.

Construction Services’ operations are affected by federal, state and local laws and regulations relating to worker health and safety, as well as environmental laws. With respect to health and safety matters, we believe that Construction Services has taken appropriate precautions to protect employees and others from workplace hazards. Current environmental laws may require Construction Services’ operating subsidiaries to work in concert with project owners to acquire the necessary permits or other authorizations for certain activities, including the construction of projects located in or near wetland areas. Construction Services’ operations are also affected by environmental laws regulating the use and disposal of hazardous materials encountered during demolition operations.

We believe that Construction Services’ current procedures and practices are consistent with industry standards and that compliance with the health and safety laws and environmental laws does not constitute a material burden or expense.

Construction Services’ operations obtain materials and services from numerous sources. We believe that our construction companies can deal effectively with any problems they may experience in the supply of materials and services.

INVESTMENT REAL ESTATE

Investment Real Estate conducts its operations directly and through our investment in Centex Development Company. As noted in Note (J) on pages 78-79 of this Report, our investment in Centex Development Company is not consolidated and is accounted for on the equity method of accounting because Investment Real Estate and Centex Corporation do not control Centex Development Company. 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.

As of March 31, 2002, Investment Real Estate’s property portfolio consisted of land located in four states. We have major conventional homebuilding operations in most markets where Investment Real Estate owns substantial property.

Investment Real Estate’s land portfolio, by state, at March 31, 2002 is shown in the following table:


State	Acres		Zoning

Texas		316	Industrial, Office, Retail & Residential
California		351	Industrial, Office, & Residential
Florida		138	Industrial, Office & Retail
Georgia		22	Retail

At March 31, 2002, Investment Real Estate also owned, either directly or through interests in joint ventures, approximately 231,000 square feet of office and retail buildings located in Arizona and Texas and three assisted-living facilities, which are licensed for 96 beds, located in Texas.

In addition, Investment Real Estate owns a limited partnership interest in Centex Development Company. At March 31, 2002, Centex Development Company owned or controlled: 4,720 plots in 112 residential developments located throughout England; 201 homes in 53 residential developments located throughout England; 665 acres of land located in California, Florida, Hawaii, Michigan, Nevada, South Carolina and Texas; and 2.6 million square feet of industrial, medical, office and retail buildings in Arizona, California, Florida, Massachusetts, North Carolina and Texas. At March 31, 2002, Centex Development Company had projects under development totaling approximately 542,000 square feet of office, industrial and retail projects in California and Texas and 984 multi-family units in Florida and Texas.

EMPLOYEES

The following table presents the breakdown of employees in each line of business as of March 31, 2002:


Line of Business	Employees
Home Building		5,075
Financial Services		4,931
Construction Products		1,552
Construction Services		1,679
Investment Real Estate		41
Other Operations		2,827
Corporate		144

		16,249

The 144 corporate employees are employed by Centex Corporation; all others are employees of our various subsidiaries. The 2,827 Other Operations employees are employed by our manufactured homes and home services operations.

ITEM 2. PROPERTIES

Centex Homes owns property in Dallas, Texas. This property consists of office and warehouse buildings situated on approximately 18 acres. Centex Homes also owns smaller parcels of land in rural areas of Ohio, Indiana, Pennsylvania and Florida. Situated on this land are sales offices for its “build-on-owner’s” lot market segment.

Financial Services owns a 20-acre parcel of land in Edmond, Oklahoma. Financial Services occupies an office building located on approximately six acres and is constructing a second office building on an additional six acres of the parcel. The remaining eight acres are being held for future development or sale. Financial Services also owns two low-rise office buildings situated on approximately 10 acres of land in Dallas, Texas in which Home Equity conducts certain operations.

Construction Products operates cement plants, quarries and related facilities at Buda, Texas; LaSalle, Illinois; Fernley, Nevada; and Laramie, Wyoming. Construction Products owns the Fernley and Laramie facilities, and the Buda and LaSalle plants are each owned by separate joint ventures or partnerships in which Construction Products has a 50% interest. Construction Products owns its principal aggregate plants and quarries, which are located near Austin, Texas and Marysville, California. In addition, Construction Products owns gypsum wallboard plants in Albuquerque and nearby Bernalillo, New Mexico; Gypsum,

Colorado; and Duke, Oklahoma. Construction Products owns two paperboard mills in Commerce City, Colorado and Lawton, Oklahoma. The Commerce City, Colorado paperboard mill was idled on April 23, 2001.

Our wholly-owned subsidiaries also own property in Round Rock, Texas; League City, Texas; and Amarillo, Texas. All of these properties are assisted-living care facilities. Other property owned includes an office building and land located in Ocala, Florida.

See “Item 1. Business” on pages 6-22 of this Report for additional information relating to the Company’s properties.

ITEM 3. LEGAL PROCEEDINGS

In the normal course of our business, we and/or our subsidiaries are named as defendants in suits filed in various state and federal courts. We believe that none of the litigation matters in which we, or any of our subsidiaries, are involved would have a material adverse effect on our consolidated financial condition or operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

EXECUTIVE OFFICERS OF CENTEX (See Item 10 of Part III of this Report)

The following is an alphabetical listing of the Company’s executive officers, as such term is defined under the rules and regulations of the Securities and Exchange Commission. All of these executive officers were elected by the Board of Directors of the Company at its Annual Meeting on July 19, 2001 to serve until the next Annual Meeting of Directors or until the respective successors are duly elected and qualified. There is no family relationship between any of these officers.


Name	Age		Positions with Centex or Business Experience

Leldon E. Echols		46	Executive Vice President and Chief Financial Officer of Centex Corporation since June 2000; Partner and employee at Arthur Andersen LLP from December 1978 to May 2000
Timothy R. Eller		53	President and Chief Operating Officer of Centex Corporation since April 2002; Executive Vice President of Centex Corporation since August 1998; Chairman of the Board and Chief Executive Officer of Centex Real Estate Corporation (Chairman of the Board since April 1998; Chief Executive Officer of Centex Real Estate Corporation since July 1991; President and Chief Operating Officer of Centex Real Estate Corporation from January 1990 to March 1998; Executive Vice President from July 1985 to January 1990)
Laurence E. Hirsch		56	Chairman of the Board and Chief Executive Officer of Centex Corporation (Chairman of the Board since July 1991; Chief Executive Officer since July 1988; President from March 1985 until July 1991)
Raymond G. Smerge		58	Executive Vice President, Chief Legal Officer, General Counsel and Secretary of Centex Corporation (Executive Vice President since July 1997; Chief Legal Officer since September 1985; General Counsel and Secretary since April 1993; Vice President from September 1985 to July 1997)

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Stock Prices and Dividends


	*Year Ended March 31, 2002*							Year Ended March 31, 2001

	*Price*							Price

	*High*		*Low*		*Dividends*			High		Low		Dividends

Quarter
First	$	45.98	$	34.00		$	.04	$	25.81	$	20.63		$	.04
Second	$	50.00	$	28.03		$	.04	$	33.00	$	22.38		$	.04
Third	$	58.80	$	32.56		$	.04	$	40.00	$	30.63		$	.04
Fourth	$	63.09	$	51.25		$	.04	$	46.20	$	35.38		$	.04

Our common stock is traded on the New York Stock Exchange (ticker symbol CTX) and the London Stock Exchange. The approximate number of record holders of our common stock at May 31, 2002 was 3,344.

On November 30, 1987, we distributed as a dividend to our stockholders securities relating to Centex Development Company, L.P. (see Note (J) on pages 78-79 of this Report). Since this distribution, these securities have traded in tandem with, and as a part of, our common stock.

Amounts represent cash dividends per share paid by us on our common stock. 3333 Holding Corporation has paid no dividends on its common stock since its incorporation.

ITEM 6. SELECTED FINANCIAL DATA

Summary of Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)


		For the Years Ended March 31,

		2002			2001			2000			1999			1998

Revenues		$	7,748,430		$	6,710,735		$	6,008,136		$	5,200,666		$	4,022,392
Net Earnings		$	382,226		$	281,977		$	257,132		$	231,962		$	144,806
Total Assets		$	8,985,455		$	6,649,043		$	3,987,903		$	4,267,909		$	3,333,382
Total Long-term Debt, Consolidated		$	4,943,524		$	3,040,861		$	751,160		$	284,299		$	237,715
Total Debt, Consolidated		$	5,276,779		$	3,519,891		$	1,313,395		$	1,910,899		$	1,390,588
Total Debt (with Financial Services reflected on the equity method)⁽¹⁾		$	1,791,752		$	1,464,993		$	898,068		$	587,955		$	311,538
Deferred Income Tax Asset		$	76,167		$	58,454		$	49,907		$	49,107		$	147,607
Debt as a Percentage of Capitalization⁽²⁾
	Total Debt, Consolidated		69.9	%		65.5	%		45.1	%		57.6	%		53.1	%
	Total Debt (with Financial Services reflected on the equity method)⁽¹⁾		44.1	%		44.1	%		36.0	%		29.5	%		20.3	%
	Total Debt, Adjusted (with Financial Services reflected on the equity method)⁽³⁾		41.4	%		43.3	%		32.8	%		26.9	%		15.5	%
Stockholders’ Equity		$	2,116,773		$	1,714,064		$	1,419,349		$	1,197,639		$	991,172
Net Earnings as a Percentage of Beginning Stockholders’ Equity			22.3	%		19.9	%		21.5	%		23.4	%		17.3	%
Per Common Share
	Earnings Per Share — Basic	$	6.31		$	4.77		$	4.34		$	3.90		$	2.45
	Earnings Per Share — Diluted	$	6.11		$	4.65		$	4.22		$	3.75		$	2.36
	Cash Dividends	$	.16		$	.16		$	.16		$	.16		$	.135
	Book Value Based on Shares Outstanding at Year End	$	34.60		$	28.60		$	24.14		$	20.17		$	16.65
Stock Prices
	High	$	63.09		$	46.20		$	42.88		$	45.75		$	40.75
	Low	$	28.03		$	20.63		$	17.50		$	26.00		$	16.75

On November 30, 1987, we distributed as a dividend to our stockholders securities relating to 3333 Holding Corporation and 3333 Development Corporation (See Note (J) on pages 78-79 of this Report). Since this distribution, those securities have traded in tandem with, and as a part of, our common stock.

(1)		Represents a supplemental presentation that reflects the financial services segment as if accounted for under the equity method, which we describe as the traditional business basis.

(2)		Capitalization is composed of Total Debt, Deferred Income Tax Liability, Negative Goodwill, Minority Interest and Stockholders’ Equity.

(3)		Represents supplemental information showing debt as a percentage of capitalization on a traditional business basis, assuming traditional unrestricted cash had been used to pay down debt.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001

We reported consolidated revenues of $7.75 billion for fiscal 2002, 15% above the $6.71 billion reported for fiscal 2001. Earnings before income taxes were $618.8 million, 42% more than the $436.3 million of earnings before income taxes reported last year. Net earnings for fiscal 2002 reached $382.2 million, a historical high and a 36% improvement over net earnings of $282.0 million in fiscal 2001. Earnings per share for fiscal 2002 were $6.31 and $6.11 for basic and diluted, respectively, compared to $4.77 and $4.65 for the prior year.

HOME BUILDING

The following summarizes the results of our Home Building operations for the two-year period ended March 31, 2002 (dollars in millions, except per unit data):


		For the Years Ended March 31,

		2002					2001

Revenues		$	4,984.8		100.0	%	$	4,356.2		100.0	%
Cost of Sales			(3,713.4	)	(74.5	%)		(3,304.9	)	(75.9	%)
Selling, General & Administrative Expenses			(743.9	)	(14.9	%)		(625.9	)	(14.3	%)

Operating Earnings		$	527.5		10.6	%	$	425.4		9.8	%

Units Closed			22,960					20,659
	% Change		11.1	%				9.3	%
Units Sales Price		$	213,738				$	205,913
	% Change		3.8	%				7.5	%
Operating Earnings per Unit		$	22,973				$	20,594
	% Change		11.6	%				20.4	%
Backlog Units			9,371					9,265
	% Change		1.1	%				22.2	%

Revenues increased 14.4% versus prior year, primarily due to the 11% increase in units closed, from 20,659 units to 22,960 units, and the 4% increase in average unit sales price, from $205,913 to $213,738.

Selling, general and administrative expenses increased 19% to $743.9 million in fiscal 2002 compared to $625.9 million in fiscal 2001. The increase primarily relates to higher compensation resulting from growth in Home Building’s business and profitability.

Operating earnings for fiscal 2002 increased as a percentage of revenues and on a per-unit basis in comparison to fiscal 2001 as a result of several factors. Home Building continued to focus on reducing costs and improving operating margins through the reduction of direct construction costs. Moderate interest rates and softness in the prices of several key building materials, including lumber, cement, and gypsum wallboard are some of the factors that influenced the improved performance of the Home Building operation. Additional factors that contributed to an improved operating margin include purchasing efficiencies through regional and national programs, higher realized sales prices for our homes and more efficient house designs.

Centex Homes responded to the events of September 11, 2001 through increased marketing efforts, purchase incentives and price discounting. These activities helped stimulate demand, increase traffic to our

neighborhoods and minimize unsold housing inventory. After a brief slowdown, the business has recovered and no long term impacts are anticipated.

FINANCIAL SERVICES

The Financial Services segment consists primarily of home financing, sub-prime home equity lending and the sale of title and other insurance coverages. The following summarizes Financial Services’ results for the two-year period ended March 31, 2002 (dollars in millions):


			For the Years Ended March 31,

			2002		2001

Revenues			$	699.8	$	463.6

Interest Margin			$	107.7	$	31.2

Operating Earnings			$	114.7	$	19.7

Origination Volume			$	14,537.9	$	10,598.5

Number of Loans Originated
	CTX Mortgage Company, L.L.C. —
		Centex-built Homes		15,435		12,506
		Non-Centex-built Homes		64,949		48,244

				80,384		60,750
	Centex Home Equity Company, L.L.C.			26,955		26,418

				107,339		87,168

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

Conforming Mortgage Banking

The operating earnings of CTX Mortgage are derived primarily from the sale of mortgage loans, inclusive of all service rights and, to a lesser extent, net interest income and other fees. CTX Mortgage originates mortgage loans, holds them for a short period and sells them to investors and HSF-I. HSF-I is an unaffiliated entity that is not consolidated with Financial Services or Centex Corporation. HSF-I purchases mortgage loans, at closing, from CTX Mortgage with the proceeds from the issuance of securitized term debt, secured liquidity notes and five-year extendable subordinated certificates. The debt, interest income and interest expense of HSF-I are not reflected in the financial statements of Financial Services or Centex Corporation. For additional information regarding HSF-I, see “Certain Off-Balance-Sheet and Other Obligations” on pages 43-45 of this Report.

CTX Mortgage’s operating earnings were $91.4 million for fiscal 2002, 169% higher than earnings of $34.0 million for fiscal 2001. The increase in CTX Mortgage’s operating earnings is primarily due to a significant increase in mortgage origination volume, including substantial mortgage refinancing activity, that was the result of lower mortgage rates in the first, second and third quarters of fiscal 2002 compared to the same periods last year. For the year ended March 31, 2002, originations totaled 80,384 compared to 60,750 originations last fiscal year; loan volume was $12.45 billion compared to $8.88 billion for last fiscal year; the per-loan profit was $1,137, an increase of 103% compared to $560 for last fiscal year; and total mortgage applications increased 8% to 76,532 from 70,642 applications for last fiscal year. The results of operations of CTX Mortgage depend to a significant extent on the level of interest rates. Any significant increases in mortgage rates above currently prevailing levels could adversely affect the volume of loan originations. There can be no assurance that mortgage rates will remain at the current level in the future.

In the normal course of its activities, CTX Mortgage carries inventories of loans pending sale to investors other than HSF-I and earns an interest margin, that we define as the difference between interest revenue on mortgage loans held for sale or investment and interest expense on debt used to fund the mortgage loans. CTX Mortgage uses short-term mortgage warehouse facilities to finance these inventories of loans. CTX Mortgage’s interest income increased 9% in fiscal 2002 to $20.6 million from $18.9 million for last fiscal year. CTX Mortgage’s interest expense for fiscal 2002 was $14.2 million, a 22% decrease from $18.1 million for last year. The increase in CTX Mortgage’s interest margin from $0.8 million to $6.4 million was primarily due to increased origination volume resulting from an increase in refinancing activities and lower interest rates on borrowings.

Sub-Prime Home Equity Lending

Home Equity returned to profitability after having begun to account for its securitizations completed subsequent to March 31, 2000 as borrowings rather than as sales, as discussed further below. Home Equity reported operating earnings of $25.1 million for fiscal 2002, as compared to an operating loss of $14.3 million for fiscal 2001. The increase in Home Equity’s operating earnings is primarily the result of an increase in interest margin to $101.3 million in fiscal 2002 from $30.3 million in fiscal 2001. Interest margin increased primarily as a result of an increase in the portfolio of mortgage loans held for investment.

From October 1997 through March 2000, a majority of Home Equity’s loans originated were included in securitizations that utilized a structure that caused them to be accounted for as sales. The estimated gain on the sale of these loans was included in earnings during the period in which the securitization transaction closed. We changed the structure of securitizations beginning April 1, 2000. Securitizations since that time have been accounted for as borrowings. Under this structure, we record interest over the life of the loans using the interest, or actuarial, method. At March 31, 2002, the average life of these loans was 8 years. The mortgage loans receivable and the securitization debt remain on Home Equity’s balance sheet and the related interest margin is reflected in our income statement. Although the change in structure of the securitizations has no effect on the cash flow and profit recognized over the life of the mortgages, the change does affect the timing of profit recognition. Interest margin, rather than gain on sale of loans, is now Home Equity’s primary source of operating income. As the balance of securitizations accounted for as borrowings increases, the operating earnings should continue to increase. For the fiscal year ended March 31, 2002, originations totaled 26,955 compared to 26,418 originations for last fiscal year; loan volume was $2.09 billion compared to $1.72 billion for last fiscal year; and total applications increased 16% to 172,498 from 148,702 applications for last fiscal year.

At March 31, 2002, Home Equity’s total servicing portfolio consisted of 62,833 loans totaling $4.37 billion compared to 49,717 loans totaling $3.27 billion at March 31, 2001. For fiscal 2002, service fee income related to this long-term servicing, which is not included in interest income, was $38.2 million compared to $25.9 million for fiscal 2001.

Allowance for Losses

Home Equity maintains an allowance for losses at an amount that it believes is sufficient to provide for losses in the existing residential mortgage loans held for investment. 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.

We establish an allowance for losses when we believe the event causing the loss has occurred by charging the provision for losses in the statement of consolidated earnings. When we determine that a residential mortgage loan held for investment is uncollectible, it 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.

Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet at March 31, 2002 to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

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


		For the Years Ended March 31,

		2002			2001

Balance at Beginning of Period		$	2,814		$	—
	Provision for Losses		17,415			4,453
	Recoveries on Loans Charged Off		259			11
	Losses Sustained		(6,382	)		(1,650	)

Balance at End of Period		$	14,106		$	2,814

Allowance for Losses to Residential Mortgage Loans
	Held for Investment		0.4	%		0.2	%
90+ Days Contractual Delinquency
	Total Dollars Delinquent	$	83,490		$	28,013
	% Delinquent		2.55	%		1.58	%

The allowance for losses on residential mortgage loans held for investment has increased to $14.1 million at March 31, 2002 from $2.8 million at March 31, 2001. In addition, the ratio of allowance for losses to residential mortgage loans held for investment, or the allowance ratio, increased to 0.4% at March 31, 2002 from 0.2% at March 31, 2001. Prior to April 2000, the residential mortgage loans were recorded as sales and anticipated future credit losses were considered in valuing the MSRI. As a result, no allowance for losses was necessary. After April 2000, we began recording residential mortgage loans held for investment on the balance sheet, as previously discussed, and, accordingly, began recording an allowance for losses based on management’s judgment of loss exposure. The increase in the allowance for losses 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 and the allowance ratio to continue to increase.

CONSTRUCTION PRODUCTS

The following summarizes Construction Products’ results for the two-year period ended March 31, 2002 (dollars in millions):


	For the Years Ended March 31,

	2002			2001

Revenues	$	471.1		$	441.1
Interest Income		2.5			6.7
Cost of Sales and Expenses		(392.2	)		(341.8	)
Selling, General & Administrative Expenses		(5.5	)		(6.6	)

Operating Earnings *	$	75.9		$	99.4

* Before Minority Interest of $20.8 million and $32.4 million for fiscal 2002 and 2001, respectively.

Construction Products’ revenues were 7% higher than the same period last year. This increase was primarily the result of an increase in cement and paperboard revenues and from a full year of sales at the Oklahoma wallboard plant that was acquired in November 2000 as discussed below. Sales volume improved for every product except concrete. However, pricing for gypsum wallboard fell 20% compared to the prior year. For the current year, Construction Products’ operating earnings, net of minority interest, represented a 24% decrease from results for the same period a year ago. Operating earnings declined primarily as a result of an 83% decrease in gypsum wallboard earnings resulting from the previously discussed decline in gypsum wallboard prices. During the first two quarters of fiscal 2002, gypsum wallboard pricing declined primarily as a result of excess supply. However, gypsum wallboard prices rebounded in the third and fourth quarters of fiscal 2002, softening the negative impact on earnings.

During November 2000, Construction Products purchased selected strategic assets summarized below, and assumed certain liabilities. The purchase price, including the assumption of debt, was approximately $442 million. Funding came from cash on hand and borrowings under Construction Products’ $325 million senior credit facility. The acquisition was accounted for as a purchase, and accordingly, the purchase price was allocated to the underlying assets acquired and liabilities assumed based on their fair market values at the date of the acquisition. The results of operations of the asset purchase since November 10, 2000 are included in Construction Products’ financial information.

The principal assets Construction Products acquired in November 2000 were: a gypsum wallboard plant located in Duke, Oklahoma with a production capacity of 1.1 billion square feet of wallboard; a short line railroad and railcars linking the Duke plant to adjacent railroads; a recently completed 220,000 ton-per-year lightweight recycled paper mill in Lawton, Oklahoma; a 50,000 ton-per-year Commerce City (Denver), Colorado recycled paper mill; and three recycled paper fiber collection sites. The Commerce City, Colorado paperboard mill was idled on April 23, 2001. The idled facility was recorded at its estimated net realizable value of $5.0 million at the purchase date, which approximates current fair market value. The paper operations are headquartered in Lawton, Oklahoma and focus primarily on the gypsum wallboard paper business.

CONSTRUCTION SERVICES

The following summarizes Construction Services’ results for the two-year period ended March 31, 2002 (dollars in millions):


	For the Years Ended March 31,

	2002		2001

Revenues	$	1,296.0	$	1,290.4

Operating Earnings	$	36.2	$	30.9

New Contracts Executed	$	1,455.0	$	1,930.1

Backlog of Uncompleted Contracts	$	2,180.3	$	2,021.7

Construction Services’ revenues for fiscal 2002 were 0.4% higher than last year’s revenues. Operating earnings for the group improved in fiscal 2002 as a result of a continuing shift in recent years to higher-margin negotiated projects from lower-margin bid work. New Contracts Executed decreased 25% from prior year and Backlog of Uncompleted Contracts increased 8% in fiscal 2002, primarily due to uncertainties in the marketplace following the events of September 11, 2001. We do not anticipate any long term impact from these events.

The Construction Services segment provided a positive average annual net cash flow in excess of our investment in the segment of $121.5 million in fiscal 2002 and $97.8 million in fiscal 2001.

INVESTMENT REAL ESTATE

The following summarizes Investment Real Estate’s results for the two-year period ended March 31, 2002 (dollars in millions):


	For the Years Ended March 31,

	2002		2001

Revenues	$	72.4	$	33.0

Operating Earnings	$	48.1	$	50.9

Included in Investment Real Estate’s fiscal 2002 revenues and operating earnings was $18.7 million derived from its investment in Centex Development Company compared to $4.6 million in fiscal 2001. As noted in Note (J) on pages 78-79 of this Report, the investment in Centex Development Company is not consolidated and is accounted for on the equity method of accounting because we do not control Centex Development Company. Property sales related to Investment Real Estate’s nominally-valued assets contributed revenues and operating earnings of $47.9 million and $35.8 million, respectively, in fiscal 2002 and $24.6 million and $13.6 million, respectively, in fiscal 2001. These nominally-valued assets resulted from the acquisition of Vista Properties, Inc., or Vista, and subsequent combination with Centex Real Estate Corporation. The Vista portfolio of properties was reduced to a nominal “book basis” after recording certain deferred tax benefits related to the combination. The timing of land sales is uncertain and can vary significantly from period to period.

Fiscal 2002 operating earnings from Investment Real Estate totaled $48.1 million compared to $50.9 million in the prior year. During fiscal 2001, we disposed of virtually all of the remaining Vista portfolio. As a result, the remaining negative goodwill was fully accreted in fiscal 2001.

The largest component of Centex Development Company is its International Home Building segment, which operates through Fairclough Homes Group Limited, or Fairclough, a London, England-based homebuilder. Investment Real Estate’s investment in Fairclough, through Centex Development Company, resulted in revenues and operating earnings of $12.3 million in fiscal 2002 and an operating loss of $34,000 in fiscal 2001. The increase in Fairclough’s operating earnings was primarily due to the fact that the obligation to pay a preferred distribution on certain preference shares, issued when Centex Development Company acquired Fairclough, ended at the end of fiscal 2001. For fiscal 2002 and 2001, Fairclough closed 1,387 units at an average sales price per unit of $204,251 and 1,243 units at an average sales price per unit of $203,587, respectively. Operating earnings per unit, before interest, were $10,358 and $6,339 for fiscal 2002 and 2001, respectively.

OTHER

Our manufactured homes operations and our home services operations are not material for purposes of segment reporting and have therefore been included in Other for reporting purposes.

Our manufactured homes operations had an operating loss of $0.9 million for fiscal 2002 versus a loss of $26.1 million for fiscal 2001. The fiscal 2001 loss is primarily due to a noncash charge of $19.2 million. This charge primarily was comprised of $9.5 million for the impairment of goodwill related to the manufactured homes’ retail operations and $6.5 million related to the idling of two manufacturing facilities. The charge for impairment was the result of continued losses in the retail division which are consistent with trends of losses recognized throughout this industry. We plan to keep these plants idled until the return of more favorable market conditions.

Our home services operations reported operating earnings of $4.0 million for fiscal 2002 compared to operating earnings of $1.1 million for fiscal 2001. The increase in operating earnings primarily relates to growth in the pest and lawn operations.

Corporate general and administrative expense increased 36% to $50.2 million in fiscal 2002 compared to $36.9 million in fiscal 2001. The increase primarily relates to higher compensation resulting from growth in our profitability. Corporate general and administrative expenses represent compensation and other costs not identifiable with a specific segment.

Interest expense increased 17% to $115.8 million in fiscal 2002 compared to $99.1 million in fiscal 2001. Higher average debt levels, partially offset by lower interest rates, caused most of the increase in interest expense.

Our effective tax rate increased to 38% in fiscal 2002 from 35% in fiscal 2001. The increase in state income taxes and the absence of negative goodwill accretion in fiscal 2002 primarily caused this increase.

FISCAL YEAR 2001 COMPARED TO FISCAL YEAR 2000

We reported consolidated revenues of $6.7 billion for fiscal 2001, 12% above the $6.0 billion for fiscal 2000. Earnings before income taxes were $436.3 million, 5% more than the $416.9 million of earnings before income taxes reported last year. Net earnings for fiscal 2001 reached $282.0 million, a historical high and a 10% improvement over net earnings of $257.1 million in fiscal 2000. Earnings per share for fiscal year 2001 were $4.77 and $4.65 for basic and diluted, respectively, compared to $4.34 and $4.22 for the prior year.

HOME BUILDING

The following summarizes Home Building’s results for the two-year period ended March 31, 2001 (dollars in millions, except per unit data):


		For the Years Ended March 31,

		2001					2000

Revenues		$	4,356.2		100.0	%	$	3,686.8		100.0	%
Cost of Sales			(3,304.9	)	(75.9	%)		(2,852.3	)	(77.3	%)
Selling, General & Administrative Expenses			(625.9	)	(14.3	%)		(511.3	)	(13.9	%)

Operating Earnings		$	425.4		9.8	%	$	323.2		8.8	%

Units Closed			20,659					18,904
	% Change		9.3	%				27.8	%
Unit Sales Price		$	205,913				$	191,568
	% Change		7.5	%				3.2	%
Operating Earnings per Unit		$	20,594				$	17,098
	% Change		20.4	%				4.4	%
Backlog Units			9,265					7,579
	% Change		22.2	%				12.0	%

Revenues increased 18.2% versus prior year, primarily due to the 9% increase in units closed, from 18,904 units to 20,659 units, and the 7% increase in average unit sales price, from $191,568 to $205,913.

Selling, general and administrative expense increased 22% to $625.9 million in fiscal 2001 compared to $511.3 million in fiscal 2000. The increase primarily relates to higher compensation resulting from growth in Home Building’s business and profitability.

Operating earnings for fiscal 2001 increased as a percentage of revenues and on a per-unit basis in comparison to fiscal 2000 as a result of the division’s continued focus on improving operating margins. Moderate interest rates and softness in the prices of several key building materials, including lumber, cement, and gypsum wallboard are some of the major factors that influenced the improved performance of the Home Building operation. Additional factors that contributed to an improved operating margin include purchasing efficiencies, higher organizational and operating productivity, higher realized sales prices for our homes and more efficient house designs.

The increase in average unit sales price of $14,345 to $205,913 was due primarily to a higher proportion of sales in California, Colorado and South Carolina.

FINANCIAL SERVICES

The following summarizes Financial Services’ results for the two-year period ended March 31, 2001 (dollars in millions):


		For the Years Ended March 31,

		2001		2000

Revenues		$	463.6	$	430.6

Interest Margin		$	31.2	$	21.7

Operating Earnings		$	19.7	$	32.5

Origination Volume		$	10,598.5	$	9,459.7

Number of Loans Originated
	CTX Mortgage Company, L.L.C. —
	Centex-built Homes		12,506		10,958
	Non-Centex-built Homes		48,244		48,301

			60,750		59,259
	Centex Home Equity Company, L.L.C.		26,418		20,568
	Centex Finance Company (closed during fiscal 2000)		—		681

			87,168		80,508

Financial Services’ revenues for fiscal 2001 increased $33.0 million from the prior year. Gains on sales of mortgage loans receivable, a component of Financial Services’ revenues, decreased to $180.8 million, or 28%, for fiscal 2001 from $249.6 million for fiscal 2000. This decline is primarily due to the change in the structure of securitizations completed by Home Equity.

Conforming Mortgage Banking

CTX Mortgage’s operating earnings totaled $34.0 million for fiscal 2001, slightly higher than the $33.9 million reported for fiscal 2000. Operating earnings were unchanged primarily as a result of increased mortgage originations in the fourth quarter, which offset lower origination volume earlier in the year. CTX Mortgage generally will experience increased mortgage origination volume with decreased prevailing mortgage rates. Mortgage originations for fiscal 2001 totaled 60,750 compared to 59,259 originations for fiscal 2000. The per-loan profit for fiscal 2001 was $560, slightly lower than $573 for fiscal 2000. CTX Mortgage’s total mortgage applications for fiscal 2001 increased 20% to 70,642 from 59,094 applications for fiscal 2000.

Until the third quarter of fiscal 2000, substantially all of the mortgage loans generated by CTX Mortgage were sold forward upon closing and subsequently delivered to third-party purchasers within approximately 60 days thereafter. In mid-March 2000, CTX Mortgage began to sell the majority of its mortgage loans to HSF-I. This arrangement is discussed in more detail in the Financial Condition and Liquidity section below.

In the normal course of its activities, CTX Mortgage carries inventories of loans pending sale and earns an interest margin on those loans. CTX Mortgage’s interest income decreased 65% in fiscal 2001 to $18.9 million from $54.7 million for fiscal 2000. CTX Mortgage’s interest expense for fiscal 2001 was $18.1 million, a 58% decrease from $43.5 million for fiscal 2000. The decrease in CTX Mortgage’s net interest income was primarily due to the reduction in its inventory of loans because of the sales arrangement with HSF-I.

Sub-Prime Home Equity Lending

Home Equity reported an operating loss of $14.3 million for fiscal 2001, compared to operating earnings of $2.7 million for fiscal 2000. As discussed below, this decline primarily resulted from accounting for the $1.6 billion in securitizations in fiscal 2001 as borrowings rather than as sales.

Home Equity’s mortgage originations for fiscal 2001 were 26,418, a 28% increase over 20,568 originations for fiscal 2000. Loan volume for fiscal 2001 was $1.72 billion, a 30% improvement over fiscal 2000’s volume of $1.32 billion. Loan volume for fiscal 2001 was favorably impacted by the opening of new operating locations during the last quarters of fiscal 2000, the addition of the correspondent channel, and increased efficiency and overall activity. Home Equity’s mortgage applications totaled 148,702 for fiscal 2001, an increase of 17% over the 127,450 applications for fiscal 2000.

Substantially all of the mortgage loans produced by Home Equity are securitized, generally on a quarterly basis. During fiscal 2001, Home Equity completed securitizations totaling $1.6 billion, compared to $1.3 billion for the prior year. Home Equity retains the servicing rights associated with these securitized loans and is the long-term servicer of these loans. For fiscal 2001, servicing fee revenue was $25.9 million, an increase of $11.4 million, or 79%, over fiscal 2000’s service fee revenue of $14.5 million. At March 31, 2001, Home Equity’s servicing portfolio was $3.3 billion.

From October 1997 through March 2000, a majority of Home Equity’s loans originated were included in securitizations that utilized a structure that caused them to be accounted for as sales. The estimated gain on the sale of these loans was included in earnings during the period in which the securitization transaction closed. We changed the structure of securitizations beginning April 1, 2000. Securitizations since that time have been accounted for as borrowings. Under this structure, we record interest over the life of the loans using the interest, or actuarial, method. The mortgage loans receivable and the securitization debt remain on Home Equity’s balance sheet and the related interest margin is reflected in our income statement. Although the change in structure of the securitizations resulting in the transaction being accounted for as borrowings will have no effect on the profit recognized over the life of the mortgages, the change does affect the timing of profit recognition. The impact was to reduce Home Equity’s fiscal 2001 pretax earnings by $45.6 million from the amount it would have reported if the securitizations had been accounted for as sales. Home Equity intends to continue to utilize transaction structures that require that its future loan originations be reflected as loans receivable on our balance sheet and the interest income and interest expense associated with this loan portfolio be reflected on our income statement. Consequently, net interest income, rather than gain on sale of loans, as in past years, will be Home Equity’s primary source of operating income. Primarily as a result of this change, Home Equity’s interest income increased 266% in fiscal 2001 to $104.9 million from $28.7 million for fiscal 2000, and interest expense for fiscal 2001 was $74.5 million, a 312% increase from $18.1 million for fiscal 2000. Therefore, Home Equity’s net interest income increased 187% in fiscal 2001 to $30.4 million from $10.6 million for the prior year.

Allowance for Losses

We establish an allowance for losses when we believe the event causing the loss has occurred by charging the provision for losses in the statement of consolidated earnings. When we determine that a

residential mortgage loan held for investment is uncollectible, it 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.

Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet at March 31, 2001 to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

Prior to April 1, 2000, Home Equity’s residential mortgage loans were recorded as sales and anticipated future credit losses were included in the securitization transaction. As a result, no allowance for loss was necessary. After April 2000, we began originating residential mortgage loans held for investment and, accordingly, began recording an allowance for losses based on management’s judgment of loss exposure. During fiscal 2001 we recorded a provision for losses of $4.5 million, recoveries on loans charged off of $11,000 and losses sustained of $1.7 million. The allowance for losses on mortgage loans held for investment at March 31, 2001 was $2.8 million.

CONSTRUCTION PRODUCTS

The following summarizes Construction Products’ results for the two-year period ended March 31, 2001 (dollars in millions):


	For the Years Ended March 31,

	2001			2000

Revenues	$	441.1		$	470.5
Interest Income		6.7			3.7
Cost of Sales and Expenses		(341.8	)		(299.3	)
Selling, General & Administrative Expenses		(6.6	)		(6.2	)

Operating Earnings *	$	99.4		$	168.7

* Before Minority Interest of $32.4 million and $63.8 million in fiscal 2001 and 2000, respectively.

Construction Products’ revenues were 6% lower than the same period last year. This decline is primarily the result of a decrease in wallboard prices, which was somewhat offset by the acquisition discussed below. For the current year, Construction Products’ operating earnings, excluding minority interest, represented a 41% decrease from results for the same period a year ago. Operating earnings declined as a result of a 75% decrease in gypsum wallboard earnings. Sales volume improved for every product; however, pricing for gypsum wallboard fell 41% compared to the prior year. During fiscal 2001, pricing continued to decline primarily as a result of excess supply. If these market conditions persist, management expects it would negatively impact future results.

During November 2000, Construction Products purchased selected strategic assets summarized below, and assumed certain liabilities. The purchase price, including the assumption of debt, was approximately $442 million. Funding came from cash on hand and borrowings under Construction Products’ new $325 million senior credit facility. The acquisition has been accounted for as a purchase, and accordingly, the purchase price was allocated to the underlying assets acquired and liabilities assumed based on their fair market values at the date of the acquisition. The results of operations of the asset purchase since November 10, 2000 are included in Construction Products’ financial information.

The principal assets Construction Products acquired in November 2000 were: a gypsum wallboard plant located in Duke, Oklahoma with a production capacity of 1.1 billion square feet of wallboard; a short line railroad and railcars linking the Duke plant to adjacent railroads; a recently completed 220,000 ton-per-year lightweight recycled paper mill in Lawton, Oklahoma; a 50,000 ton-per-year Commerce City (Denver), Colorado recycled paper mill; and three recycled paper fiber collection sites. The Commerce City, Colorado paperboard mill was idled on April 23, 2001. The idled facility was recorded at its estimated net realizable value of $5.0 million at the purchase date. The paper operations are headquartered in Lawton, Oklahoma and focus primarily on the gypsum wallboard paper business.

CONSTRUCTION SERVICES

The following summarizes Construction Services’ results for the two-year period ended March 31, 2001 (dollars in millions):


	For the Years Ended March 31,

	2001		2000

Revenues	$	1,290.4	$	1,205.8

Operating Earnings	$	30.9	$	23.5

New Contracts Executed	$	1,930.1	$	1,650.9

Backlog of Uncompleted Contracts	$	2,021.7	$	1,382.0

Construction Services’ revenues for fiscal 2001 were 7% higher than last year’s revenues. Operating earnings for the group improved in fiscal 2001 as a result of a continuing shift in recent years to higher-margin negotiated projects from lower-margin bid work. The increase in New Contracts Executed and Backlog of Uncompleted Contracts was primarily the result of a $320 million contract awarded in the fourth quarter of fiscal 2001.

The Construction Services segment provided a positive average annual net cash flow in excess of our investment in the segment of $97.8 million in fiscal 2001 and $102.2 million in fiscal 2000.

INVESTMENT REAL ESTATE

The following summarizes Investment Real Estate’s results for the two-year period ended March 31, 2001 (dollars in millions):


	For the Years Ended March 31,

	2001		2000

Revenues	$	33.0	$	30.9

Operating Earnings	$	50.9	$	30.1

Fiscal 2001 operating earnings from Investment Real Estate totaled $50.9 million compared to $30.1 million in the prior year. Property sales related to Investment Real Estate’s nominally-valued assets contributed operating margins of $13.6 million in fiscal 2001 and $19.6 million in fiscal 2000. The timing of land sales is uncertain and can vary significantly from period to period.

During fiscal 2001, we disposed of virtually all the remaining Vista portfolio. As a result, negative goodwill was fully accreted. For fiscal 2001 and 2000, we recorded total negative goodwill accretion of $50.8 million and $16 million, respectively.

Included in Investment Real Estate’s fiscal 2001 revenues and operating earnings was $4.6 million derived from its investment in Centex Development Company. Fiscal 2000 revenues and operating earnings included $456,000 derived from its investment in Centex Development Company. Investment Real Estate’s investment in Fairclough, through Centex Development Company, resulted in an operating loss of $34,000 in fiscal 2001 compared to operating earnings of $3.7 million in fiscal 2000. The decrease in operating earnings occurred primarily because of a decline in unit completions resulting principally from the repositioning of Fairclough’s land inventory and the buildout of communities that were developed under previous ownership, offset slightly by higher sales prices. For fiscal 2001 and 2000, Fairclough closed 1,243 units at an average sales price per unit of $203,587 and 1,707 units at an average sales price per unit of $192,763, respectively. Operating earnings per unit (before interest) were $6,339 and $12,910 for fiscal 2001 and 2000, respectively.

OTHER

Our manufactured homes operations and our home services operations are not material for the purposes of segment reporting and have therefore been included in Other for reporting purposes.

The operating earnings of our manufactured homes operations decreased $33.4 million, primarily due to a $19.2 million noncash charge recorded in fiscal 2001. This charge primarily was comprised of $9.5 million for the impairment of goodwill related to the retail operations and $6.5 million related to the idling of two manufacturing facilities. The charge for the impairment of goodwill was the result of continued losses in the retail division that are consistent with trends of losses recognized throughout this industry.

Our home services operations reported operating earnings of $1.1 million for fiscal 2001 compared to an operating loss of $2.3 million in fiscal 2000. The increase in operating earnings from fiscal 2000 to fiscal 2001 primarily relates to growth in the pest division.

Corporate general and administrative expense increased 12% to $36.9 million in fiscal 2001 compared to $33.0 million in fiscal 2000. This increase primarily relates to higher compensation resulting from growth in our profitability. Corporate general and administrative expenses represent compensation and other costs not identifiable with a specific segment.

Interest expense increased 48% to $99.1 million in fiscal 2001 compared to $66.8 million in fiscal 2000. Higher average debt levels primarily caused the increase in interest expense.

Our effective tax rate decreased to 35% in fiscal 2001 from 38% in fiscal 2000. The increase in negative goodwill accretion primarily caused this decrease.

FINANCIAL CONDITION AND LIQUIDITY

At March 31, 2002 we had cash and cash equivalents of $219.7 million, including $27.1 million in Financial Services and $8.6 million belonging to our 65.2%-owned Construction Products subsidiary. The net cash used in or provided by the operating, investing and financing activities for the fiscal years ended March 31, 2002, 2001 and 2000 is summarized below (dollars in thousands):


			For the Years Ended March 31,

			2002			2001			2000

Net cash provided by (used in):
	Non-Financial Services *
		Operating activities	$	(104,692	)	$	116,365		$	13,644
		Investing activities		(129,725	)		(623,591	)		(164,894	)
		Financing activities		381,021			433,512			204,260

				146,604			(73,714	)		53,010

	Financial Services
		Operating activities		185,678			107,320			847,987
		Investing activities		(1,506,994	)		(1,801,278	)		(27,730	)
		Financing activities		1,336,676			1,689,571			(843,094	)

				15,360			(4,387	)		(22,837	)

Net increase (decrease) in cash			$	161,964		$	(78,101	)	$	30,173

*	Non-Financial Services is the combination of all subsidiaries other than those included in the Financial Services business segment.

We generally fund our Non-Financial Services operating and other short-term needs through cash from operations, borrowings from commercial paper and other short-term credit arrangements and the issuance of medium-term notes and other debt securities. During fiscal 2002 cash was primarily used in Non-Financial Services-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 for development. The funds provided by Non-Financial Services-Financing Activities included new debt used to fund the increased homebuilding activity.

We generally fund our Financial Services operating and other short-term needs through cash flows from operations, credit facilities, securitizations and proceeds from the sale of mortgage loans to HSF-I, as described below. During fiscal 2002 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 included 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 rating. We attempt to manage our debt levels in order to maintain an investment-grade rating. If, however, our debt rating were downgraded to below investment grade, we would not have access to the commercial paper markets and might need to draw on existing committed backup facilities, which exceed our commercial paper program size.

Our existing credit facilities and available capacity as of March 31, 2002 are summarized below (dollars in thousands):


		Existing Credit		Available
		Facilities		Capacity

Non-Financial Services
	Centex Corporation
	Multi-Bank Revolving Credit Facility	$	600,000	$	600,000	⁽¹⁾
	Uncommitted Bank Lines		60,000		60,000
	Construction Products
	Senior Revolving Credit Facility		275,000		112,000	⁽²⁾
	Annually Renewable Commercial Paper Conduit		50,000		31,370	⁽²⁾

			985,000		803,370

Financial Services
	Unsecured Credit Facilities		145,000		125,000	⁽³⁾
	Secured Credit Facilities		547,000		364,312	⁽⁴⁾
	Harwood Street Funding II, L.L.C. Facility		1,000,000		897,417
	Line of Credit		14,250		4,896	⁽⁵⁾

			1,706,250		1,391,625

		$	2,691,250	$	2,194,995	⁽⁶⁾

(1)		This is a committed, multi-bank revolving credit facility, maturing in August 2005, which serves as backup for commercial paper borrowings. As of March 31, 2002, there were no borrowings under this facility, and our $500 million commercial paper program had no outstanding borrowings. Beginning May 31, 2002, this facility increased to $700 million. We have not borrowed under this facility since its inception.

(2)		These committed facilities were entered into by Construction Products and have no recourse to Centex Corporation. The Senior Revolving Credit Facility matures in November 2003 and the Annually Renewable Commercial Paper Conduit matures in June 2002.

(3)		Financial Services maintains a $20 million uncommitted facility, which is allocated evenly between CTX Mortgage and Home Equity. All borrowings under this facility are guaranteed by Centex Corporation. Centex Corporation, CTX Mortgage and Home Equity on a joint and several basis share in a $125 million uncommitted, unsecured credit facility.

(4)		CTX Mortgage and Home Equity share in $200 million of committed and $242 million of uncommitted secured credit facilities to finance mortgage inventory. CTX Mortgage maintains $105 million of committed secured mortgage warehouse facilities maturing in October 2002 to finance mortgages not sold to HSF-I. Centex Corporation has guaranteed $11.5 million of these facilities.

(5)		The United Kingdom mortgage operation maintains a £10 million uncommitted unsecured line of credit guaranteed by Centex Corporation.

(6)		The amount of available capacity includes $342 million of uncommitted borrowings. Although we believe that this capacity is currently available, there can be no assurance that the lenders under the applicable facilities would elect to make advances to Centex Corporation or its subsidiaries if and when requested to do so.

CTX Mortgage finances its inventory of mortgage loans principally through sales of Jumbo “A” and Conforming loans to HSF-I. These mortgage loans are sold pursuant to a mortgage loan purchase agreement that expires in November 2004, subject to certain renewal options. HSF-I acquires mortgage loans from CTX Mortgage, holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing investment grade senior debt obligations and subordinated certificates. The purpose of this arrangement is to allow CTX Mortgage to reduce the cost of financing the mortgage loans originated by

it and to improve its liquidity. For additional information regarding HSF-I, see “Certain Off-Balance-Sheet and Other Obligations” on pages 43-45 of this Report.

Home Equity finances its inventory of mortgage loans through HSF-II, a wholly-owned, consolidated entity, under a revolving sales agreement that expires February 2006 with certain renewal options. This arrangement, where HSF-II has committed to finance all eligible loans, gives Home Equity daily access to HSF-II’s capacity of $1.0 billion. HSF-II obtains funds through the sale of five-year subordinated notes, that are rated BBB by Standard & Poor’s, or S&P, Baa2 by Moody’s Investors Service, or Moody’s, and BBB by Fitch Ratings, or Fitch, and short-term secured liquidity notes, that are 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 on the financial statements of Financial Services and Centex Corporation.

Under our debt covenants, we are required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At March 31, 2002, we were in compliance with all of these covenants.

As of March 31, 2002 our short-term debt was $333.2 million, approximately $314.6 million of which was applicable to Financial Services and $18.6 million of which was applicable to Construction Products. Excluding Financial Services and Construction Products, our short-term borrowings are generally financed at prevailing market interest rates from our commercial paper programs and from uncommitted bank facilities.

Our outstanding debt as of March 31, 2002 was as follows (dollars in thousands) ⁽¹⁾:


Non-Financial Services:
	Short-Term Notes Payable		$	18,630
	Senior Debt:
		Medium-Term Note Programs, 2.45% to 7.95%, due through 2007		418,000
		Long-Term Notes, 6.40% to 9.75%, due through 2012		962,892
		Other Indebtedness, weighted-average 3.98%, due through 2027		192,753
	Subordinated Debt:
		Subordinated Debentures, 7.38%, due in 2006		99,845
		Subordinated Debentures, 8.75%, due in 2007		99,632

				1,791,752

Financial Services:
	Short-Term Debt:
		Short-Term Bank Notes Payable		92,109
		Harwood Street Funding II, L.L.C. Secured Liquidity Notes		102,583
		Other Short-Term Debt		119,933
	Home Equity Loans Asset-Backed Certificates, 2.91% to 8.48%, due through 2033			3,120,402
	Harwood Street Funding II, L.L.C. Variable Rate Subordinated Notes, due through 2007			50,000

				3,485,027

Total			$	5,276,779

(1)

Our principal business segments, especially homebuilding operations, are cyclical and are particularly affected by changes in local economic conditions and in long-term and short-term interest rates. As a result, certain of the borrowings described in the table above vary on a seasonal basis and depend on the working capital needs of our operations.

Financial Services debt related to securitized residential mortgage loans structured as collateralized borrowings (Home Equity Loans Asset-Backed Certificates) was $3.1 billion at March 31, 2002. The principal and interest on these notes are paid using the cash flow from the underlying residential mortgage loans, which serve as collateral for the debt. Accordingly, the timing of the principal payments on these notes is dependent upon the payment received on the underlying residential mortgage loans. The expected maturities of this component of long-term debt are based on contractual maturities adjusted for projected repayments and prepayments of principal. Maturities of Non-Financial Services and Financial Services long-term debt (in thousands) during the next five fiscal years are:


		Non-Financial		Financial
		Services		Services		Total

	2003	$	179,831	$	747,361	$	927,192
	2004		193,605		636,472		830,077
	2005		30,474		452,745		483,219
	2006		325,249		407,717		732,966
	2007		290,541		379,622		670,163
Thereafter			753,422		546,485		1,299,907

		$	1,773,122	$	3,170,402	$	4,943,524

We lease certain office facilities and other equipment under operating leases. Future minimum payments under the noncancelable leases are as follows: 2003 — $50.2 million; 2004 — $42.3 million; 2005 — $34.0 million; 2006 — $25.5 million; 2007 — $20.3 million and thereafter — $68.6 million.

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.

Harwood Street Funding I, L.L.C.

HSF-I is an entity established in July 1999 that is not one of our affiliates and is not consolidated with Financial Services or Centex Corporation. Since December 1999 CTX Mortgage has sold substantially all of the Jumbo “A” and Conforming mortgage loans that it originates to HSF-I in accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans, it typically holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing (1) securitized term debt that is currently rated “AAA” by S&P and “Aaa” by Moody’s, (2) short-term secured liquidity notes that are currently rated “A1+” by S&P and “P1” by Moody’s and (3) five year extendable subordinated certificates maturing in November 2004 that are rated “BBB” by S&P and “Baa2” by Moody’s. This arrangement provides CTX Mortgage with reduced financing cost for eligible mortgage loans it originates and improves its liquidity.

Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage loans that satisfy certain eligibility criteria and portfolio requirements. 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 $2.0 billion.

The HSF-I Purchase Agreement currently has a term expiring in November 2004, subject to certain renewal options. In addition, HSF-I’s commitment to purchase eligible mortgage loans is subject to

termination upon the occurrence of certain events of default and other termination events described in the HSF-I Purchase Agreement, including a downgrade in Centex Corporation’s credit ratings below “BB+” by S&P or “Ba1” by Moody’s. In the event CTX Mortgage was unable to sell loans to HSF-I, it would draw on existing credit facilities currently held in addition to HSF-I and might need to make other customary financing arrangements to fund its mortgage loan origination activities. Although we believe that CTX Mortgage could arrange for alternative financing that is common for non-investment grade mortgage companies, there can be no assurance that such financing would be available on satisfactory terms, and any delay in obtaining such financing could adversely affect the results of operations of CTX Mortgage.

In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as servicer of the loans owned by HSF-I and arranges for the sale of the eligible mortgage loans into the secondary market. In its capacity as servicer, CTX Mortgage must act in the best interests of HSF-I so as to maximize the proceeds of sales of eligible mortgage loans. The performance and payment of obligations of CTX Mortgage, in its capacity as servicer, are guaranteed by Centex Corporation. These servicer obligations include the obligation of the servicer to repurchase a mortgage loan from HSF-I in the event of a breach of the servicer’s representations and warranties, which materially and adversely affects the value of the mortgage loan and is not cured within 60 days.

HSF-I has entered into a swap arrangement with a bank, that we refer to as 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, we have entered into a separate swap arrangement with the bank pursuant to which we have 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 us all amounts that the bank receives from HSF-I pursuant to the Harwood Swap. Accordingly, we effectively bear all interest rate risks, non-credit related market risks and prepayment risks that are the subject of the Harwood Swap. We are also required to reimburse the bank for certain expenses, costs and damages that it may incur.

As of March 31, 2002 HSF-I owned $1.34 billion in securitized residential mortgage loans sold to it by CTX Mortgage and had $1.25 billion of outstanding securitized term debt and $93.0 million of outstanding subordinated certificates. We do not guarantee the payment of any debt or subordinated certificates of HSF-I, and we are not liable for credit losses relating to securitized residential mortgage loans sold to HSF-I. However, we do retain certain risks related to the portfolio of mortgage loans held by HSF-I. In particular, CTX Mortgage makes representations and warranties to HSF-I to the effect that each mortgage loan sold to HSF-I satisfies the eligibility criteria and portfolio requirements discussed above. CTX Mortgage may be required to repurchase mortgage loans sold to HSF-I if such mortgage loans are determined to be ineligible loans or there occur certain other breaches of representations and warranties of CTX Mortgage, as seller or servicer. During fiscal 2002, CTX Mortgage sold $10.2 billion of mortgage loans to HSF-I.

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

3333 Holding Corporation, 3333 Development Corporation and Centex Development Company are entities that are not affiliates of and are not consolidated with Centex Corporation. These entities were established in 1987 in order 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. Because the real estate development business generally requires a longer time horizon to maximize value than our core homebuilding operations and typically involves substantial acquisition and development indebtedness, we concluded that this new line of business could best be conducted through Centex Development Company, an independent, publicly-traded entity that is not consolidated with us. Centex Development Company is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of 3333 Holding Corporation. We generally are not liable for the obligations of 3333 Holding Corporation, 3333 Development Corporation or Centex Development Company. However, as of March 31, 2002, we guaranteed approximately $1.1 million of indebtedness of Centex Development Company. In addition, we enter into certain land purchase and other transactions with Centex Development Company. For additional information regarding these entities, see the Joint Explanatory Note at the beginning of this Report and Part B of this Report. In addition, for information regarding these entities and Centex Corporation, on an aggregate basis, see Note (J) of the Notes to Consolidated Financial Statements of Centex Corporation.

Joint Ventures

We conduct a portion of our land acquisition, development and other activities through joint ventures in which we hold less than a majority interest. Our investment in these non-consolidated joint ventures was $94.6 million and $72.0 million at March 31, 2002 and 2001, respectively. These joint ventures had total outstanding secured construction debt of approximately $144.6 million at March 31, 2002 and $137.5 million at March 31, 2001. Our pro rata limited liability with respect to this debt is limited to approximately $27.9 million and $33.0 million at March 31, 2002 and 2001, 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 March 31, 2002 and 2001, we were not liable for any of this debt.

Letters of Credit and Guarantees

At March 31, 2002 we had outstanding letters of credit of $98.6 million that primarily relate to projects undertaken by Construction Services and 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. Although our accounting policies are in compliance with generally accepted accounting principles, a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. Listed below are those policies that we believe are critical and require the use of complex judgment in their application.

Impairment of Long-Lived Assets

Housing projects and land held for development and sale are stated at the lower of cost (including direct construction costs, capitalized interest and real estate taxes) or fair value less cost to sell. Property and equipment is carried at cost less accumulated depreciation. We assess these assets for recoverability in accordance with the provisions of Statement of Financial Accounting Standards No. 121, “Accounting for

the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” or SFAS No. 121. SFAS No. 121 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

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 will be subject to at least an annual assessment for impairment by applying a fair value-based test. If the carrying amount exceeds the fair value, an impairment would occur. We continually evaluate whether events and circumstances have occurred that indicate the remaining balance of goodwill may not be recoverable. In evaluating impairment, we estimate the sum of the expected future cash flows derived from such goodwill. 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.

Valuation of Residential Mortgage Loans Held for Investment

We maintain an allowance for losses on residential mortgage loans held for investment at an amount that we believe is sufficient to provide for losses in our existing portfolio of residential mortgage loans held for investment. 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.

Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet at March 31, 2002 to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses in connection with our residential mortgage loans held for investment. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

Mortgage Securitization Residual Interest

We use mortgage securitizations to finance our mortgage loan portfolio. For securitizations prior to April 2000, which we accounted for as sales, we retained a mortgage securitization residual interest, or MSRI. The MSRI represents the present value of our 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. We estimate the fair value of MSRI through the application of discounted cash flow analysis. This analysis requires the use of various assumptions, which may significantly impact the fair value of the MSRI. See Note (A) of the Notes to Consolidated Financial Statements of Centex Corporation for a discussion of the sensitivity of the MSRI to changes in the assumptions.

STOCK REPURCHASE PROGRAM

During fiscal 2002, we repurchased a total of 225,000 shares of common stock under our stock option-related repurchase program, which we retained as treasury stock. At March 31, 2002, we had repurchased a total of 1.6 million shares out of 2.0 million shares authorized for repurchase by our Board of Directors and retired approximately 1.4 million shares.

FORWARD LOOKING STATEMENTS

Various sections of this Report, including Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Other Developments and Outlook sections, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities 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 residential Home Building and Construction Services operations are cyclical and highly 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 residential Home Building and Construction Services 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.

•		Virtually all of our homebuyers finance their home acquisitions through our Financial Services operation or third party lenders. In general, our Home Building and mortgage lending operations are adversely affected by increases in interest rates. Our mortgage loan operations are also dependent upon the securitization market for mortgage-backed securities and the availability of mortgage warehouse financing.

•		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.

•		Our businesses may be affected by the impact and uncertainties created by the events of September 11, 2001 and the consequences of any future attacks as well as other events affecting national and international economic and other conditions.

•		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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks related to fluctuations in interest rates on our direct debt obligations, mortgage loans receivable and residual interest in mortgage securitizations. The following analysis provides a framework to understand our sensitivity to hypothetical changes in interest rates as of March 31, 2002.

We have utilized derivative instruments, including interest rate swaps and interest rate caps, in conjunction with our overall strategy to manage the amount of debt outstanding that is subject to changes in interest rates. We recognize amounts paid or received under interest rate swap or cap agreements as adjustments to interest expense. As of March 31, 2002, we had interest rate swap agreements that converted $160 million of our variable-rate senior debt outstanding into fixed-rate debt.

Financial Services originates, sells and securitizes conforming and nonconforming “A” mortgages, sub-prime first and second mortgages and home equity loans. Since December 1999 substantially all conforming, Jumbo “A” and GNMA-eligible mortgages have been sold to HSF-I at or near the date on which the loans were funded. As a result of the Harwood Swap and related swap agreements, as previously described in “Certain Off-Balance Sheet and Other Obligations,” we effectively bear all interest rate risk, non-credit related market risk and prepayment risk related to the Harwood Swap. Financial Services executes the forward sales of CTX Mortgage’s loans to hedge the risk of reductions in value of mortgages sold to HSF-I or maintained under secured financing agreements. This offsets most of our risk as the counterparty to the swap supporting the payment requirements of HSF-I. CTX Mortgage, acting as manager of HSF-I, delivers mortgages held by HSF-I to third party purchasers generally within 60 days of origination. Due to the high degree of liquidity in the “A” mortgage market and the frequency of loan sales and securitizations, the use of forward sales is an effective hedge against changes in market value that result from changes in interest rates.

Home Equity uses interest rate swaps to hedge the market risk associated with the carrying of mortgages in anticipation of issuance of securitization debt to finance sub-prime mortgages. Home Equity will generally hold mortgages in anticipation of securitization for up to 120 days.

Prior to fiscal 2001, Home Equity retained the MSRI from its securitized pools of mortgages. As of March 31, 2002, the MSRI was $125.3 million. We continually monitor the fair value of the MSRI and review the factors expected to influence the future constant prepayment rate, or CPR, discount rates and credit losses. In developing assumptions regarding expected future CPR, we consider a variety of factors, many of which are interrelated. These factors include historical performance, origination channels, characteristics of borrowers, such as credit quality and loan-to-value relationships, and market factors that influence competition. If changes in assumptions regarding future CPR, discount rates or credit losses are necessary, the MSRI fair value is adjusted accordingly.

We utilize both short-term and long-term debt in our financing strategy. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument but not our earnings or cash flows. Conversely, for variable-rate debt, changes in interest rates generally do not impact the fair market value of the debt instrument but do affect our future earnings and cash flows. We do not have an obligation to prepay any of our fixed-rate debt prior to maturity, and as a result, interest rate risk and changes in fair

market value should not have a significant impact on the fixed-rate debt until we are required to refinance such debt.

As of March 31, 2002 short-term debt was $333.2 million, approximately $314.6 million of which was applicable to Financial Services and $18.6 million of which was applicable to Construction Products. The majority of Financial Services’ debt is collateralized by residential mortgage loans. We borrow on a short-term basis in the commercial paper market under a $500 million program size supported by a $600 million revolving credit facility due in 2005 and from banks under uncommitted lines that bear interest at prevailing market rates. The weighted-average interest rate on borrowings outstanding at March 31, 2002 was 2.4%.

The maturities of non-financial services long-term debt outstanding at March 31, 2002 were as follows (in thousands):


			Maturities through March 31,

			2003			2004			2005			2006			2007			Thereafter			Total			Fair Value

Non-Financial Services
	Fixed Rate Debt		$	27,716		$	16,480		$	339		$	300,099		$	202,376		$	748,437		$	1,295,447		$	1,335,275
		Average Interest Rate		6.13	%		7.03	%		5.86	%		8.96	%		8.01	%		7.70	%		8.00	%
	Variable Rated Hedged
		Debt⁽¹⁾	$	35,000		$	100,000		$	—		$	25,000		$	—		$	—		$	160,000		$	157,667
		Average Interest Rate		7.60	%		5.24	%		—	%		7.99	%		—	%		—	%		6.19	%
	Variable Rate Debt		$	117,115		$	77,125		$	30,135		$	150		$	88,165		$	4,985		$	317,675		$	317,177
		Average Interest Rate		3.45	%		3.56	%		3.89	%		1.49	%		4.60	%		1.49	%		3.80	%

(1)

These variable rate notes are fixed rate instruments as a result of a hedge using interest rate swaps.

The maturities of non-financial services long-term debt outstanding at March 31, 2001 were as follows (in thousands):


			Maturities through March 31,

			2002			2003			2004			2005			2006			Thereafter			Total			Fair Value

Non-Financial Services
	Fixed Rate Debt		$	30,853		$	28,567		$	9,135		$	80		$	299,793		$	359,582		$	728,010		$	759,218
		Average Interest Rate		7.67	%		6.19	%		7.93	%		7.00	%		8.96	%		8.16	%		8.39	%
	Variable Rated Hedged
		Debt⁽¹⁾	$	377,995		$	35,000		$	—		$	—		$	25,000		$	—		$	437,995		$	437,449
		Average Interest Rate		7.37	%		7.60	%		—	%		—	%		7.99	%		—	%		7.42	%
	Variable Rate Debt		$	19,813		$	5,115		$	268,625		$	135		$	150		$	5,150		$	298,988		$	298,858
		Average Interest Rate		6.69	%		6.08	%		6.56	%		4.62	%		4.62	%		5.41	%		6.44	%

(1)

These variable rate notes are fixed rate instruments as a result of a hedge using interest rate swaps.

The following table sets forth the estimated maturity or repricing of borrowings collateralized by securitized residential mortgage loans structured as borrowings outstanding at March 31, 2002. The principal and interest on this debt is paid using the cash flows from the underlying mortgage receivables, which serve as collateral for this debt. Accordingly, the timing of the principal payments on this debt is dependent on the payments received on the underlying mortgage receivables. The amounts shown within a particular period were determined in accordance with the contractual terms of the debt, except (1) fixed-rate mortgage securities reflect estimated prepayments, that were estimated based on the results of a prepayment model we utilize, and empirical data, and (2) adjustable-rate debt is included in the period in which it is first scheduled to adjust and not in the period in which it matures. We believe that these assumptions approximate actual experience and consider them reasonable. However, the interest rate sensitivity could vary substantially if different assumptions were used or actual experience differs from the historical experience on which we base the assumptions.


			Maturities through March 31,

			2003			2004			2005			2006			2007			Thereafter			Total			Fair Value

Financial Services
	Fixed Rate Debt		$	489,230		$	408,526		$	307,484		$	281,425		$	292,611		$	438,505		$	2,217,781		$	2,246,446
		Average Interest Rate		4.41	%		5.29	%		5.99	%		6.70	%		6.85	%		6.34	%		5.67	%
	Variable Rate Debt		$	258,131		$	227,946		$	145,261		$	126,292		$	87,011		$	107,980		$	952,621		$	952,704
		Average Interest Rate		2.39	%		2.49	%		2.63	%		2.54	%		2.42	%		2.42	%		2.47	%

The following table sets forth the estimated maturity or repricing of borrowings collateralized by securitized residual mortgage loans structured as borrowings outstanding at March 31, 2001.


			Maturities through March 31,

			2002			2003			2004			2005			2006			Thereafter			Total			Fair Value

Financial Services
	Fixed Rate Debt		$	243,537		$	227,777		$	178,133		$	137,892		$	105,823		$	353,278		$	1,246,440		$	1,269,501
		Average Interest Rate		6.99	%		6.80	%		6.77	%		6.92	%		7.12	%		7.13	%		6.97	%
	Variable Rate Debt		$	301,928		$	—		$	—		$	—		$	27,500		$	—		$	329,428		$	329,449
		Average Interest Rate		5.77	%		—	%		—	%		—	%		6.75	%		—	%		5.85	%

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Information

Centex Corporation and Subsidiaries


Consolidated Revenues and Operating Earnings by Line of Business			52

Statements of Consolidated Earnings			53

Consolidated Balance Sheets with Consolidating Details			54

Statements of Consolidated Cash Flows with Consolidating Details			56

Statements of Consolidated Stockholders’ Equity			58

Notes to Consolidated Financial Statements			60

Report of Independent Auditors			85

Quarterly Results			86

Centex Corporation and Subsidiaries
Consolidated Revenues and Operating Earnings by Line of Business
(Dollars in thousands)


						For the Years Ended March 31,

			2002			2001			2000			1999			1998

Revenues
	Home Building		$	4,984,817		$	4,356,172		$	3,686,844		$	2,819,442		$	2,312,045
				64	%		65	%		61	%		54	%		57	%
	Financial Services			699,760			463,646			430,611			436,299			246,278
				9	%		7	%		7	%		8	%		6	%
	Construction Products			471,083			441,127			470,465			381,899			344,264
				6	%		7	%		8	%		7	%		8	%
	Construction Services			1,296,024			1,290,382			1,205,762			1,350,776			953,781
				17	%		19	%		20	%		26	%		24	%
	Investment Real Estate			72,416			33,042			30,928			33,694			25,403
				1	%		—	%		1	%		1	%		1	%
	Other			224,330			126,366			183,526			178,556			140,621
				3	%		2	%		3	%		4	%		4	%

			$	7,748,430		$	6,710,735		$	6,008,136		$	5,200,666		$	4,022,392

				100	%		100	%		100	%		100	%		100	%
Operating Earnings
	Home Building		$	527,462		$	425,450		$	323,220		$	242,223		$	170,531
				66	%		70	%		56	%		49	%		52	%
	Financial Services			114,733			19,667			32,474			92,309			31,371
				14	%		3	%		6	%		19	%		9	%
	Construction Products			75,868			99,441			168,611			120,310			88,333
				9	%		17	%		29	%		24	%		27	%
	Construction Services			36,225			30,886			23,471			15,209			7,152
				5	%		5	%		4	%		3	%		2	%
	Investment Real Estate			48,068			50,908			30,122			29,420			28,231
				6	%		8	%		5	%		6	%		9	%
	Other			3,140			(21,613	)		2,580			(5,371	)		1,120
				—	%		(3	%)		—	%		(1	%)		1	%

		Operating Earnings (1)		805,496			604,739			580,478			494,100			326,738
				100	%		100	%		100	%		100	%		100	%
	Corporate General and Administrative			50,189			36,924			33,015			28,104			21,261
	Interest			115,766			99,069			66,844			41,581			33,256
	Minority Interest in Construction Products			20,776			32,415			63,758			51,121			40,587

		Earnings Before Income Taxes	$	618,765		$	436,331		$	416,861		$	373,294		$	231,634

Applicable segment operating expenses have been deducted from lines of business operating earnings.

(1)

Operating Earnings excludes corporate general and administrative expenses and non-financial services interest expense.

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


			For the Years Ended March 31,

			2002		2001			2000

Revenues
	Home Building		$	4,984,817	$	4,356,172		$	3,686,844
	Financial Services			699,760		463,646			430,611
	Construction Products			471,083		441,127			470,465
	Construction Services			1,296,024		1,290,382			1,205,762
	Investment Real Estate			72,416		33,042			30,928
	Other			224,330		126,366			183,526

				7,748,430		6,710,735			6,008,136

Costs and Expenses
	Home Building			4,457,355		3,930,722			3,363,624
	Financial Services			585,027		443,979			398,137
	Construction Products			395,215		341,686			301,854
	Construction Services			1,259,799		1,259,496			1,182,291
	Investment Real Estate			24,348		(17,866	)		806
	Other			221,190		147,979			179,932
	Corporate General and Administrative			50,189		36,924			33,015
	Interest			115,766		99,069			66,844
	Minority Interest			20,776		32,415			64,772

				7,129,665		6,274,404			5,591,275

Earnings Before Income Tax				618,765		436,331			416,861
	Income Taxes			236,539		154,354			159,729

Net Earnings			$	382,226	$	281,977		$	257,132

Earnings Per Share
	Basic		$	6.31	$	4.77		$	4.34

	Diluted		$	6.11	$	4.65		$	4.22

Average Shares Outstanding
	Basic			60,560,788		59,095,403			59,308,158
	Dilutive Securities:
		Options		1,554,501		1,165,482			1,220,822
		Convertible Debenture and Restricted Stock		413,858		400,000			400,000

	Diluted			62,529,147		60,660,885			60,928,980

See Notes to Consolidated Financial Statements.

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


			Centex Corporation and Subsidiaries

			March 31,

			2002			2001

Assets
	Cash and Cash Equivalents		$	219,716		$	57,752
	Restricted Cash			106,270			57,428
	Receivables—
		Residential Mortgage Loans Held for Investment		3,254,017			1,771,831
		Residential Mortgage Loans Held for Sale		241,793			224,915
		Construction Contracts		221,705			212,904
		Trade, including Notes of $30,908 and $67,085		345,311			393,165
	Inventories—
		Housing Projects		2,513,168			2,047,619
		Land Held for Development and Sale		85,997			72,610
		Construction Products		54,220			56,008
		Other		51,059			26,058
	Investments—
		Centex Development Company, L.P.		269,178			210,807
		Joint Ventures and Other		94,609			72,035
		Unconsolidated Subsidiaries		—			—
	Property and Equipment, net			720,285			729,099
	Other Assets—
		Deferred Income Taxes		76,167			58,454
		Goodwill		349,712			310,738
		Mortgage Securitization Residual Interest		125,272			146,394
		Deferred Charges and Other		256,976			201,226

			$	8,985,455		$	6,649,043

Liabilities and Stockholders’ Equity
	Accounts Payable and Accrued Liabilities		$	1,438,613		$	1,271,464
	Debt—
		Non-Financial Services		1,791,752			1,464,993
		Financial Services		3,485,027			2,054,898
	Payables to Affiliates			—			—
	Minority Stockholders’ Interest			153,290			143,624
	Stockholders’ Equity—
		Preferred Stock, Authorized 5,000,000 Shares, None Issued		—			—
		Common Stock, $.25 Par Value; Authorized 100,000,000 Shares; Outstanding 61,171,149 and 59,929,344 Shares		15,348			14,982
		Capital in Excess of Par Value		72,446			25,779
		Unamortized Value of Restricted Stock		(2,408	)		—
		Retained Earnings		2,050,902			1,678,400
		Treasury Stock, at cost; 221,854 and 0 Shares		(6,559	)		—
		Accumulated Other Comprehensive Loss		(12,956	)		(5,097	)

	Total Stockholders’ Equity			2,116,773			1,714,064

			$	8,985,455		$	6,649,043

See Notes to Consolidated Financial Statements.

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


Centex Corporation						Financial Services

March 31,						March 31,

2002			2001			2002			2001


$	192,591		$	45,987		$	27,125		$	11,765
	4,760			5,442			101,510			51,986

	—			—			3,254,017			1,771,831
	—			—			241,793			224,915
	221,705			212,904			—			—
	197,613			273,912			147,698			119,253

	2,513,168			2,047,619			—			—
	85,997			72,610			—			—
	54,220			56,008			—			—
	22,186			17,601			28,873			8,457

	269,178			210,807			—			—
	94,609			72,035			—			—
	498,117			314,868			—			—
	672,165			673,846			48,120			55,253

	(3,456	)		28,176			79,623			30,278
	332,897			294,136			16,815			16,602
	—			—			125,272			146,394
	179,810			147,812			77,166			53,414

$	5,335,560		$	4,473,763		$	4,148,012		$	2,490,148


$	1,275,720		$	1,153,215		$	162,893		$	118,249

	1,791,752			1,464,993			—			—
	—			—			3,485,027			2,054,898
	—			—			187,764			50,072
	151,315			141,491			1,975			2,133

	—			—			—			—

	15,348			14,982			1			1
	72,446			25,779			202,671			200,467
	(2,408	)		—			—			—
	2,050,902			1,678,400			116,748			64,328
	(6,559	)		—			—			—
	(12,956	)		(5,097	)		(9,067	)		—

	2,116,773			1,714,064			310,353			264,796

$	5,335,560		$	4,473,763		$	4,148,012		$	2,490,148

In the supplemental data presented above, "Centex Corporation" represents the consolidation of all subsidiaries other than those included in Financial Services as described in Note (A). Transactions between Centex Corporation and Financial Services have been eliminated from the Centex Corporation and Subsidiaries balance sheets.

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


			Centex Corporation and Subsidiaries

			For the Years Ended March 31,

			2002			2001			2000

Cash Flows — Operating Activities
	Net Earnings		$	382,226		$	281,977		$	257,132
	Adjustments, net of Acquisitions Depreciation, Depletion and Amortization			90,659			40,509			48,971
		Provision for Losses on Residential Mortgage Loans Held for Investment		17,415			4,453			—
		Deferred Income Taxes (Benefit) Provision		(16,307	)		8,019			(5,600	)
		Equity in Earnings of Centex Development Company, L.P. and Joint Ventures		(29,918	)		(4,958	)		(946	)
		Minority Interest, Net of Taxes		13,818			20,881			41,564
	(Increase) Decrease in Restricted Cash			(44,618	)		(53,718	)		1,878
	Decrease (Increase) in Receivables			39,561			(61,116	)		(21,236	)
	Decrease in Residential Mortgage Loans Held for Sale			40,197			184,782			984,687
	Increase in Housing Projects and Land Held for Development and Sale Inventories			(484,157	)		(159,858	)		(324,014	)
	Increase in Construction Products and Other Inventories			(23,213	)		(978	)		(19,416	)
	Increase (Decrease) in Payables and Accruals			151,677			119,291			96,609
	(Increase) Decrease in Other Assets, net			(52,202	)		(151,490	)		(145,065	)
	Increase in Payables to Affiliates			—			—			—
	Other, net			(4,152	)		(4,109	)		(52,933	)

				80,986			223,685			861,631

Cash Flows — Investing Activities
	Increase in Residential Mortgage Loans Held for Investment			(1,499,601	)		(1,776,284	)		—
	Increase in Investment and Advances to Centex Development Company, L.P. and Joint Ventures			(37,327	)		(153,846	)		(15,578	)
	Acquisitions, net of Cash Acquired Construction Products Operations			—			(342,200	)		—
		Home Building Operations		—			(100,097	)		(74,119	)
		Other		(39,411	)		—			(15,161	)
	Property and Equipment Additions, net			(60,380	)		(52,442	)		(87,766	)

				(1,636,719	)		(2,424,869	)		(192,624	)

Cash Flows — Financing Activities
	(Decrease) Increase in Short-Term Debt, net			(213,308	)		(83,205	)		(1,071,521	)
	Non-Financial Services Issuance of Long-Term Debt			1,007,699			943,491			470,107
		Repayment of Long-Term Debt		(699,570	)		(329,658	)		(3,246	)
	Financial Services Issuance of Long-Term Debt			2,053,238			1,652,500			—
		Repayment of Long-Term Debt		(458,704	)		(76,632	)		—
	Retirement of Common Stock			—			(784	)		(44,301	)
	Proceeds from Stock Option Exercises and Restricted Stock Activity			44,625			26,843			19,613
	Purchase of Treasury Stock			(6,559	)		—			—
	Dividends Paid			(9,724	)		(9,472	)		(9,486	)

				1,717,697			2,123,083			(638,834	)

Net Increase (Decrease) in Cash and Cash Equivalents				161,964			(78,101	)		30,173
Cash and Cash Equivalents at Beginning of Year				57,752			135,853			105,680

Cash and Cash Equivalents at End of Year			$	219,716		$	57,752		$	135,853

See Notes to Consolidated Financial Statements.

Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details

(Dollars in thousands)


Centex Corporation								Financial Services

For Years Ended March 31,								For Years Ended March 31,

2002		2001			2000			2002			2001			2000


$	301,714	$	270,112		$	237,816		$	80,512		$	11,865		$	19,316

	74,816		25,220			34,886			15,843			15,289			14,085

	—		—			—			17,415			4,453			—
	24,986		11,877			7,922			(41,293	)		(3,858	)		(13,522	)

	(29,918)		(4,958	)		(946	)		—			—			—
	13,818		20,881			41,564			—			—			—
	682		(1,732	)		1,878			(45,300	)		(51,986	)		—
	67,482		(7,002	)		(13,128	)		(27,921	)		(54,114	)		(8,108	)
	—		—			—			40,197			184,782			984,687

	(484,157)		(159,858	)		(324,014	)		—			—			—
	(2,797)		(659	)		(11,278	)		(20,416	)		(319	)		(8,138	)
	120,709		82,972			110,432			30,968			36,319			(13,823	)
	(52,341)		(119,614	)		(67,079	)		139			(31,876	)		(77,986	)
	(135,692)		3,546			48,492			135,692			(3,546	)		(48,492	)
	(3,994)		(4,420	)		(52,901	)		(158	)		311			(32	)

	(104,692)		116,365			13,644			185,678			107,320			847,987


	—		—			—			(1,499,601	)		(1,776,284	)		—

	(37,327)		(153,846	)		(15,578	)		—			—			—
	—		(342,200	)		—			—			—			—
	—		(100,097	)		(74,119	)		—			—			—
	(38,904)		—			(9,349	)		(507	)		—			(5,812	)
	(53,494)		(27,448	)		(65,848	)		(6,886	)		(24,994	)		(21,918	)

	(129,725)		(623,591	)		(164,894	)		(1,506,994	)		(1,801,278	)		(27,730	)


	18,630		(146,908	)		(163,904	)		(231,938	)		63,703			(907,617	)
	1,007,699		943,491			470,107			—			—			—
	(699,570)		(329,658	)		(3,246	)		—			—			—
	—		—			—			2,053,238			1,652,500			—
	—		—			—			(458,704	)		(76,632	)		—
	—		(784	)		(44,301	)		—			—			—
	42,545		(23,157	)		(54,910	)		2,080			50,000			74,523
	(6,559)		—			—			—			—			—
	18,276		(9,472	)		514			(28,000	)		—			(10,000	)

	381,021		433,512			204,260			1,336,676			1,689,571			(843,094	)

	146,604		(73,714	)		53,010			15,360			(4,387	)		(22,837	)
	45,987		119,701			66,691			11,765			16,152			38,989

$	192,591	$	45,987		$	119,701		$	27,125		$	11,765		$	16,152

In the supplemental data presented above, “Centex Corporation” represents the consolidation of all subsidiaries other than those included in Financial Services as described in Note (A). Transactions between Centex Corporation and Financial Services have been eliminated from the Centex Corporation and Subsidiaries statements of cash flows.

Centex Corporation and Subsidiaries
Statements of Consolidated Stockholders’ Equity
(in thousands)


											Unamortized
								Capital in			Value of
		Common Stock						Excess of			Restricted
		Shares			Amount			Par Value			Stock

Balance, March 31, 1999			59,388		$	14,847		$	20,822		$	—
	Exercise of Stock Options		1,250			313			19,300			—
	Retirement of Shares		(1,832	)		(458	)		(40,122	)		—
	Cash Dividends		—			—			—			—
	Net Earnings		—			—			—			—
	Unrealized Loss on Investments		—			—			—			—
	Foreign Currency Translation Adjustments		—			—			—			—

	Comprehensive Income

Balance, March 31, 2000			58,806			14,702			—			—
	Exercise of Stock Options		1,158			289			26,554			—
	Retirement of Shares		(35	)		(9	)		(775	)		—
	Cash Dividends		—			—			—			—
	Net Earnings		—			—			—			—
	Unrealized Gain on Investments		—			—			—			—
	Foreign Currency Translation Adjustments		—			—			—			—

	Comprehensive Income

Balance, March 31, 2001			59,929			14,982			25,779			—

	Issuance of Restricted Stock		78			19			3,133			(3,152	)
	Amortization of Restricted Stock		—			—			—			744
	Exercise of Stock Options		1,386			347			43,534			—
	Cash Dividends		—			—			—			—
	Purchases of Common Stock for Treasury		(222	)		—			—			—
	Net Earnings		—			—			—			—
	Unrealized Loss on Hedging Instruments		—			—			—			—
	Foreign Currency Translation Adjustments		—			—			—			—
	Unrealized Gain on Investments		—			—			—			—

	Comprehensive Income

Balance, March 31, 2002			61,171		$	15,348		$	72,446		$	(2,408	)

See Notes to Consolidated Financial Statements.

Centex Corporation and Subsidiaries
Statements of Consolidated Stockholders’ Equity
(in thousands)


				Accumulated
	Treasury			Other
Retained	Stock			Comprehensive
Earnings	at Cost			Income (Loss)			Total

$1,161,970	$	—		$	—		$	1,197,639
—		—			—			19,613
(3,721)		—			—			(44,301	)
(9,486)		—			—			(9,486	)
257,132		—			—			257,132
—		—			(1,152	)		(1,152	)
—		—			(96	)		(96	)

								255,884

1,405,895		—			(1,248	)		1,419,349
—		—			—			26,843
—		—			—			(784	)
(9,472)		—			—			(9,472	)
281,977		—			—			281,977
—		—			1,152			1,152
—		—			(5,001	)		(5,001	)

								278,128

1,678,400		—			(5,097	)		1,714,064

—		—			—			—
—		—			—			744
—		—			—			43,881
(9,724)		—			—			(9,724	)
—		(6,559	)		—			(6,559	)
382,226		—			—			382,226
—		—			(11,033	)		(11,033	)
—		—			2,622			2,622
—		—			552			552

								374,367

$2,050,902	$	(6,559	)	$	(12,956	)	$	2,116,773

Centex Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

(A) SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Centex Corporation and subsidiaries (“Centex” or the “Company”) after the elimination of all significant intercompany balances and transactions.

Balance sheet and cash flows data is presented in the following categories:

	•		Centex Corporation and Subsidiaries. This represents the consolidation of Centex Corporation, Financial Services and all of their consolidated subsidiaries. The effects of transactions among related companies within the consolidated group have been eliminated.

	•		Centex Corporation. This information is presented as supplemental information and represents the consolidation of all subsidiaries other than those included in Financial Services, which are presented on an equity basis of accounting.

	•		Financial Services. This information is presented as supplemental information and represents Centex Financial Services and its subsidiaries.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Revenues from Home Building projects and Investment Real Estate are recognized when homes and properties are sold and title passes.

Revenues from the sale of mortgage loans, mortgage servicing rights and loan origination fees are recognized when the related loan is sold and delivered to a third-party purchaser.

Interest revenues on residential mortgage loans receivable are recognized as revenue using the interest (actuarial) method. Revenue accruals are generally suspended when the residential mortgage loan becomes contractually delinquent for 90 days or more. The accrual is resumed when the residential mortgage loan becomes less than 90 days contractually delinquent. At March 31, 2002 and 2001, residential mortgage loans, on which revenue was not being accrued, were approximately $83.5 million and $28.0 million, respectively.

Long-term construction contract revenues are recognized on the percentage-of-completion method based on the costs incurred relative to total estimated costs. Full provision is made for any anticipated losses. Billings for long-term construction contracts are rendered monthly, including the amount of retainage withheld by the customer until contract completion. As a general contractor, the Company withholds similar retainages from each subcontractor. Retainages of $72.9 million included in construction

contracts receivable and $76.1 million included in accounts payable at March 31, 2002 are generally receivable and payable within one year.

Claims related to long-term construction contracts are recognized as revenue only after management has determined that the collection is probable and the amount can be reliably estimated. Claims of $1.8 million, $0 and $3.7 million are included in revenues for the fiscal years ended March 31, 2002, 2001 and 2000 (“fiscal 2002,” “fiscal 2001” and “fiscal 2000”), respectively.

Earnings Per Share

Basic earnings per share are computed based on the weighted-average number of shares of common stock, par value $.25 per share (“Common Stock”), outstanding. Diluted earnings per share are computed based upon the basic weighted-average number of shares plus the dilution of the stock options and the convertible debenture.

The computation of diluted earnings per share excludes anti-dilutive options to purchase 1,700 shares of Common Stock at an average price of $46.07 for the year ended March 31, 2002. The computation of diluted earnings per share excludes anti-dilutive options to purchase 3,312,000 shares of Common Stock at an average price of $35.24 for the year ended March 31, 2001. The computation of diluted earnings per share excludes anti-dilutive options to purchase 3,843,000 shares of Common Stock at an average price of $37.25 for the year ended March 31, 2000. All anti-dilutive options at March 31, 2002, have an expiration date of July 2011.

Cash and Cash Equivalents

Cash equivalents represent highly liquid investments with an original maturity of three months or less.

Restricted Cash

Restricted cash primarily represents cash in principal and interest accounts pending remittance into the securitization trusts related to securitizations by Centex Home Equity Company, L.L.C. (“Home Equity”).

Residential Mortgage Loans

Residential mortgage loans held for investment represent mortgage loans originated by Home Equity, which have been securitized and recorded as secured borrowings in the financial statements using the portfolio method. These mortgage loans are stated at cost less an allowance for losses. Residential mortgage loans held for sale represent mortgage loans originated by CTX Mortgage Company, L.L.C. (“CTX Mortgage”), which will be sold to third parties and recorded as sales. These mortgage loans are stated at the lower of cost or market. Market is determined by forward sale commitments, current investor yield requirements and current market conditions. Substantially all of the mortgage loans are delivered to third-party purchasers and/or subjected to securitization within three months after origination. These loans are subject to hedge instruments during the time they are held in inventory. Substantially all of the mortgage loans are pledged as collateral for secured financings.

The Company maintains an allowance for losses at an amount that it believes is sufficient to provide for losses in its existing portfolio of residential mortgage loans held for investment. The Company evaluates 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 management’s judgment of the present loss exposure at the end of the reporting period.

The Company establishes an allowance for losses when it believes the event causing the loss has occurred by charging the provision for losses in the Statements of Consolidated Earnings. When we determine that a residential mortgage loan held for investment is uncollectible, it is charged to the allowance for losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

Although the Company considers the allowance for losses on residential mortgage loans held for investment reflected in the consolidated balance sheet at March 31, 2002 to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

Notes Receivable

Notes receivable at March 31, 2002 are collectible primarily over 3 years with $15.9 million being due within one year. The weighted-average interest rate at March 31, 2002 was 4.35%.

Inventory, Capitalization and Segment Expenses

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. The capitalized costs, other than interest, are included in the Home Building and Investment Real Estate costs and expenses in the Statement of Consolidated Earnings when related revenues are recognized. Interest costs relieved from inventories are included as interest expense. The Company reviews the recoverability of its Home Building inventories on an individual project basis in accordance with the provisions of Statement of Financial Accounting Standards No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (“SFAS No. 121”).

Construction Products inventories are stated at the lower of average cost (including applicable material, labor and plant overhead) or market.

General operating expenses associated with each segment of business are expensed when incurred and are included in the appropriate business segment.

Investments

The Company maintains an investment in Centex Development Company, L.P. and subsidiaries (the “Partnership”). The investment is not consolidated and is accounted for on the equity method of accounting because the Company does not control the Partnership. See Note (J) for additional information regarding the Partnership.

The Company is a participant in certain joint ventures with interests ranging from 20% to 50%. The investments in these joint ventures are carried on the equity method in the consolidated financial statements, except for Construction Products’ 50% joint venture interests in its cement operations in Illinois and Texas. Construction Products has proportionately consolidated its pro rata interest in the revenues, expenses, assets and liabilities of those extractive industry ventures. The earnings or losses of the Company’s other joint ventures are not significant and are included in the appropriate business segment.

Property and Equipment, net

Property and equipment is carried at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Depreciable lives for Buildings and Improvements typically range from 7 to 40 years; depreciable lives for Machinery, Equipment and Other typically range from 2 to 10 years; and depreciable lives for Plants typically range from 20 to 30 years. Major renewals and improvements are capitalized and depreciated. Repairs and maintenance are expensed as incurred. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the accounts and any resulting gains or losses are recognized at such time. The Company monitors its property and equipment carrying values for recoverability and, where appropriate, provides for write-downs to estimated fair values.

Goodwill

Goodwill represents the excess of purchase price over net assets of businesses acquired. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), goodwill and certain identifiable intangible assets are no longer amortized over their expected lives. Instead, these assets are tested for impairment annually at the reporting unit level using a two step impairment assessment. See further discussion of goodwill at Note (E).

Negative goodwill arose in conjunction with the combination of Centex Real Estate Corporation with Vista Properties, Inc. (“Vista”) in the fiscal year ended March 31, 1997. The Vista portfolio of properties was reduced to a nominal “book basis” after recording certain deferred tax benefits related to the combination. Negative goodwill was accreted to earnings as a reduction of costs and expenses over the estimated period during which Vista’s land was developed and/or sold. During fiscal 2001, the Company disposed of virtually all of the remaining Vista portfolio and negative goodwill was fully accreted.

Mortgage Securitization Residual Interest

Home Equity uses mortgage securitizations to finance its mortgage loan portfolio. Securitizations entered into prior to March 31, 2000 were accounted for as sales, and the resulting gains on such sales were reported in operating results during the period in which the securitizations closed. Home Equity changed the legal and economic structure of securitizations subsequent to March 31, 2000, causing securitizations after that date to be accounted for as secured borrowings.

For securitizations accounted for as sales, Home Equity retained a residual interest (the “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.

The Company classifies MSRI as trading securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and accordingly, carries MSRI at fair value on the Company’s balance sheet.

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. Home Equity continuously monitors the fair value of MSRI and the reasonableness of the underlying assumptions in light of current market conditions.

Home Equity uses the following assumptions in monitoring the fair value of the MSRI: cumulative credit losses of 3.75% to 4.50%; Constant Prepayment Rate (“CPR”) for fixed rate loans of 19% to 21% per annum (life to date); a CPR of 29% to 31% per annum (life to date) for variable rate loans; and a discount rate of 15% simple interest.

At March 31, 2002, the sensitivity of the current fair value of the MSRI to an immediate 10 percent and 20 percent unfavorable change in assumptions is presented in the table below. These sensitivities are based on assumptions used to value our MSRI at March 31, 2002.


	Impact on fair value of an adverse change

Assumption	10%		20%

Credit Losses	$	5,334	$	10,705
Constant Prepayment Rate	$	4,412	$	8,120
Discount Rate	$	4,682	$	9,100

These sensitivities are hypothetical and should not be considered to be predictive of future performance. As the figures indicate, the change in fair value based on a 10 percent variation in assumptions cannot necessarily be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the residual cash flow is calculated independently from any change in another assumption. In reality, changes in one factor may contribute to changes in another (for example, increases in market interest rates may result in lower prepayments), which might magnify or counteract the sensitivities. Furthermore, the estimated fair values as disclosed should not be considered indicative of future earnings on these assets.

Deferred Charges and Other

Deferred charges and other are primarily composed of deferred home security system installation costs, loan fees, securitization costs and other financing costs, prepaid expenses, deposits and investments.

Advertising Costs

Advertising costs are expensed as incurred. The advertising costs for fiscal 2002, 2001 and 2000 were $78.9 million, $67.0 million and $57.1 million, respectively.

Off-Balance-Sheet Risk

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 in Notes (F) and (N).

Statements of Consolidated Cash Flows — Supplemental Disclosures

Interest expense relating to the Financial Services segment is included in its operating costs and expenses. Interest related to segments other than Financial Services is shown as interest expense. During fiscal 2002, $60.9 million of interest costs were capitalized to qualifying assets, principally within the Home Building segment, and $48.2 million of previously capitalized interest was charged to interest expense. During fiscal 2001, $52.6 million of interest costs were capitalized to qualifying assets, principally within

the Home Building segment, and $46.6 million of previously capitalized interest was charged to interest expense.


	For the Years Ended March 31,

	2002			2001			2000

Total Interest Incurred	$	287,628		$	197,679		$	128,520
Capitalized Interest, net		(12,717	)		(6,038	)		—
Less — Financial Services		(159,145	)		(92,572	)		(61,676	)

Interest Expense	$	115,766		$	99,069		$	66,844

Cash payments made for interest, excluding financial services, were $118.9 million, $100.5 million and $59.0 million for fiscal 2002, 2001 and 2000, respectively. Net payments made for federal, state and foreign income taxes during fiscal 2002, 2001 and 2000 were $199.4 million, $172.1 million and $98.9 million, respectively.

Statements of Financial Accounting Standards

The Company adopted the provisions of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), on April 1, 2001. The effect of the adoption of SFAS No. 133 on the Company’s operating earnings was not significant.

Statement of Financial Accounting Standards No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS No. 140”), was issued in September 2000 to replace Statement of Financial Accounting Standards No. 125 (“SFAS No. 125”). SFAS No. 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries forward most of SFAS No. 125’s provisions without reconsideration. The implementation of SFAS No. 140 on April 1, 2001 did not have a material impact on the Company’s results of operations or financial position.

The Company adopted, effective April 1, 2001, Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”). This statement had no material impact on the Company.

The Company has adopted, effective April 1, 2001, SFAS No. 142 that provides that intangible assets, including goodwill, that are not subject to amortization must be tested for impairment as of the beginning of the fiscal year in which this statement is initially applied and annually thereafter at the reporting unit level using a two-step impairment assessment. Impairment testing must be performed more frequently if events or changes in circumstances indicate that the asset might be impaired. See Note (E) for additional information on the impact of SFAS No. 142 on the Company’s results of operations and financial position.

In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” that addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The statement is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. Management does not believe that adoption of this statement in fiscal 2003 will have a material effect on the interim or annual financial statements. However, the financial statement presentation will be modified in fiscal 2003 to report the results of operations and financial position of certain Investment Real Estate operations that either have been disposed of or classified as held for sale as discontinued operations. As a result, beginning in fiscal 2003 the Company will reclassify certain amounts in prior period financial statements to conform to the new presentation requirements.

Reclassifications

Certain prior year balances have been reclassified to conform to the fiscal 2002 presentation.

(B) RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT

Residential mortgage loans held for investment consisted of the following:


	March 31,

	2002			2001

Residential Mortgage Loans Held for Investment	$	3,268,123		$	1,774,645
Allowance for Losses on Residential Mortgage Loans Held for Investment		(14,106	)		(2,814	)

Residential Mortgage Loans Receivable Held for Investment, net of Allowance for Losses	$	3,254,017		$	1,771,831

At March 31, 2002, contractual maturities of residential mortgage loans held for investment were as follows:


2003	$	35,949
2004		39,217
2005		42,486
2006		45,754
2007 and thereafter		3,104,717

	$	3,268,123

It is the Company’s experience that a substantial portion of the loan portfolio generally is renewed or repaid prior to contractual maturity dates. The above maturity schedule should not be regarded as a forecast of future cash collections.

(C) ALLOWANCE FOR LOSSES ON RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT

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


		For the Years Ended March 31,

		2002			2001

Balance at Beginning of Period		$	2,814		$	—
	Provision for Losses		17,415			4,453
	Recoveries on Loans Charged Off		259			11
	Losses Sustained		(6,382	)		(1,650	)

Balance at End of Period		$	14,106		$	2,814

Prior to April 1, 2000, residential mortgage loans were securitized as sales and anticipated future credit losses were included in the securitization transaction. As a result, no allowance for losses was necessary.

(D) PROPERTY AND EQUIPMENT

Property and equipment cost by major category and accumulated depreciation are summarized below:


	March 31,

	2002			2001

Land, Buildings and Improvements	$	144,515		$	85,039
Machinery, Equipment and Other		239,064			267,950
Plants		701,514			688,873

		1,085,093			1,041,862
Accumulated Depreciation		(364,808	)		(312,763	)

	$	720,285		$	729,099

(E) GOODWILL — ADOPTION OF STATEMENT 142

The Company adopted SFAS No. 142 effective April 1, 2001. SFAS No. 142 provides guidance on accounting for intangible assets and eliminates the amortization of goodwill and certain identifiable intangible assets. Under the provisions of SFAS No. 142, intangible assets, including goodwill, that are not subject to amortization will be tested for impairment annually at the reporting unit level using a two-step impairment assessment. Impairment testing must be performed more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company tested for potential impairment, both upon adoption of SFAS No. 142 and annually as of January 1, 2002, by determining whether the carrying amount of a reporting unit exceeds its fair value. The Company had no impairment of goodwill in fiscal 2002. Identifiable intangible assets, other than goodwill, are immaterial. The changes in the carrying amount of goodwill by segment for the year ended March 31, 2002 are as follows:


	Home		Financial		Construction			Construction
	Building		Services		Products			Services		Other			Total

Balance as of March 31, 2001	$	80,958	$	16,602	$	41,792		$	1,007	$	170,379		$	310,738
Goodwill Acquired During Year		—		—		—			—		39,429			39,429
Adjustment to Purchase Allocation		3,193		—		—			—		—			3,193
Other		—		213		(704	)		—		(3,157	)		(3,648	)

Balance as of March 31, 2002	$	84,151	$	16,815	$	41,088		$	1,007	$	206,651		$	349,712

The Company made several acquisitions during fiscal 2002 that resulted in an increase to goodwill. However, Centex pro-forma financial information was not presented as the impact of the acquisitions on the results of operations was not significant.

Net income and basic and diluted earnings per share excluding goodwill amortization for the years ended March 31, 2001 and 2000 are as follows:


		For the Years Ended March 31,

		2001			2000

Reported Net Earnings		$	281,977		$	257,132
Goodwill Amortization			26,799			14,159
Negative Goodwill Accretion			(50,837	)		(16,000	)

Adjusted Net Earnings		$	257,939		$	255,291

Basic Earnings Per Share:
	Reported Net Earnings	$	4.77		$	4.34
	Net Goodwill Accretion		(0.41	)		(0.03	)

	Adjusted Net Earnings	$	4.36		$	4.31

Diluted Earnings Per Share:
	Reported Net Earnings	$	4.65		$	4.22
	Net Goodwill Accretion		(0.40	)		(0.03	)

	Adjusted Net Earnings	$	4.25		$	4.19

(F) INDEBTEDNESS

Short-term Debt

Balances of short-term debt were:


					March 31,

	2002						2001

	Centex				Financial		Centex				Financial
	Corporation				Services		Corporation				Services

Banks	$	18,630	*		$	92,109	$	—			$	192,380
Commercial Paper		—				—		—				—
Secured Liquidity Notes		—				102,583		—				117,950
Other Financial Institutions		—				119,933		—				168,700

	$	18,630			$	314,625	$	—			$	479,030

Consolidated Short-term Debt			$	333,255					$	479,030

* Debt relates entirely to Construction Products.

The Company borrows on a short-term basis from banks under uncommitted lines that bear interest at prevailing market rates. The weighted-average interest rates of the short-term borrowings during fiscal 2002 and 2001 were 3.6% and 6.9%, respectively. The weighted-average interest rates of balances at fiscal year end 2002 and 2001 were 2.4% and 5.8%, respectively.

Long-term Debt

Balances of long-term debt were:


			March 31,

			2002		2001

Non-Financial Services:
	Medium-Term Note Programs, 2.45% to 7.95%, due through 2007		$	418,000	$	486,995
	Long-Term Notes, 6.40% to 9.75%, due through 2012			962,892		464,970
	Other Indebtedness, weighted-average 3.98% due through 2027			192,753		313,658
	Subordinated Debt:
		Subordinated Debentures, 7.38%, due in 2006		99,845		99,796
		Subordinated Debentures, 8.75%, due in 2007		99,632		99,574

				1,773,122		1,464,993

Financial Services:
	Home Equity Loans Asset-Backed Certificates, 2.91% to 8.48%, due through 2033			3,120,402		1,548,368
	Harwood Street Funding II, L.L.C. Variable Rate Subordinated Notes, due through 2007			50,000		27,500

				3,170,402		1,575,868

Total			$	4,943,524	$	3,040,861


	Non-Financial		Financial
	Services		Services		Total

2003	$	179,831	$	747,361	$	927,192
2004		193,605		636,472		830,077
2005		30,474		452,745		483,219
2006		325,249		407,717		732,966
2007		290,541		379,622		670,163
Thereafter		753,422		546,485		1,299,907

	$	1,773,122	$	3,170,402	$	4,943,524

Included in other long-term debt is a $2.1 million convertible subordinated debenture sold at par in 1985 to a corporate officer. The indebtedness, which matures in 2010, bears interest at LIBOR plus 1.5% and is convertible into 400,000 shares of the Company’s common stock. In connection with this transaction, the Company has guaranteed the payment of a $2.1 million note payable to a bank by the officer.

Credit Facilities

The Company’s existing credit facilities and available capacity as of March 31, 2002 are summarized below:


		Existing Credit		Available
		Facilities		Capacity

Non-Financial Services
	Centex Corporation
	Multi-Bank Revolving Credit Facility	$	600,000	$	600,000	⁽¹⁾
	Uncommitted Bank Lines		60,000		60,000
	Construction Products
	Senior Revolving Credit Facility		275,000		112,000	⁽²⁾
	Annually Renewable Commercial Paper Conduit		50,000		31,370	⁽²⁾

			985,000		803,370

Financial Services
	Unsecured Credit Facilities		145,000		125,000	⁽³⁾
	Secured Credit Facilities		547,000		364,312	⁽⁴⁾
	Harwood Street Funding II, L.L.C. Facility		1,000,000		897,417
	Line of Credit		14,250		4,896	⁽⁵⁾

			1,706,250		1,391,625

		$	2,691,250	$	2,194,995	⁽⁶⁾

(1)		This is a committed, multi-bank revolving credit facility, maturing in August 2005, which serves as backup for commercial paper borrowings. As of March 31, 2002, there were no borrowings under this facility, and the company’s $500 million commercial paper program had no outstanding borrowings. Beginning May 31, 2002, this facility increased to $700 million. There have been no borrowings under this facility since inception.

(2)		These committed facilities were entered into by Construction Products and have no recourse to Centex Corporation. The Senior Revolving Credit Facility matures in November 2003 and the Annually Renewable Commercial Paper Conduit matures in June 2002.

(3)		Financial Services maintains a $20 million uncommitted facility, which is allocated evenly between CTX Mortgage and Home Equity. All borrowings under this facility are guaranteed by Centex Corporation. Centex Corporation, CTX Mortgage and Home Equity on a joint and several basis share in a $125 million uncommitted, unsecured credit facility.

(4)		CTX Mortgage and Home Equity share in $200 million of committed and $242 million of uncommitted secured credit facilities to finance mortgage inventory. CTX Mortgage maintains $105 million of committed secured mortgage warehouse facilities maturing in October 2002 to finance mortgages not sold to HSF-I. Centex Corporation has guaranteed $11.5 million of these facilities.

(5)		The United Kingdom mortgage operation maintains a £10 million uncommitted unsecured line of credit guaranteed by Centex Corporation.

(6)		The amount of available capacity includes $342 million of uncommitted borrowings. Although the Company believes that this capacity is currently available, there can be no assurance that the lenders under the applicable facilities would elect to make advances to the Company or its subsidiaries if and when requested to do so.

Home Equity finances its inventory of mortgage loans through Harwood Street Funding II, L.L.C. (“HSF-II”), a wholly-owned, consolidated entity, under a revolving sales agreement that expires February 2006 with certain renewal options. This arrangement, where HSF-II has committed to finance all eligible loans, gives Home Equity daily access to HSF-II’s capacity of $1.0 billion. HSF-II obtains funds through the sale of five-year subordinated notes that are rated BBB by Standard & Poor’s (“S&P”), Baa2 by

Moody’s Investors Service (“Moody’s”), and BBB by Fitch Ratings (“Fitch”) and short-term secured liquidity notes, that are rated A1+ by S&P’s, 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 on the financial statements of Financial Services and the Company.

Harwood Street Funding I, L.L.C.

CTX Mortgage finances its inventory of mortgage loans principally through sales of Conforming, Jumbo A and GNMA loans to Harwood Street Funding I, L.L.C. (“HSF-I”), an unaffiliated entity established in 1999 that is not consolidated with Financial Services or Centex. These mortgage loans are sold pursuant to a mortgage loan purchase agreement that expires in November 2004, subject to certain renewal options, that we refer to as the “HSF-I Purchase Agreement.” Since 1999, CTX Mortgage has sold substantially all of the Conforming, Jumbo A and GNMA mortgage loans that it originates to HSF-I in accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans, it typically holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing (i) securitized term debt that is currently rated AAA by S&P and Aaa by Moody’s, (ii) short-term secured liquidity notes that are currently rated A1+ by S&P and P1 by Moody’s and (iii) five year extendable subordinated certificates maturing in November 2004 that are rated BBB by S&P and Baa2 by Moody’s. The purpose of this arrangement is to allow CTX Mortgage to reduce the cost of financing eligible mortgage loans originated by it and to improve its liquidity.

The HSF-I Purchase Agreement currently has a term expiring in November 2004, subject to certain renewal options. In addition, HSF-I’s commitment to purchase eligible mortgage loans is subject to termination upon the occurrence of certain events of default and other termination events described in the HSF-I Purchase Agreement, including a downgrade in Centex’s credit ratings below BB+ by S&P or Ba1 by Moody’s. In the event CTX Mortgage was unable to sell loans to HSF-I, it would need to make other arrangements to finance its mortgage loan origination activities. Although we believe that CTX Mortgage could arrange for alternative financing that is common for non-investment grade mortgage companies, there can be no assurance that such financing would be available on satisfactory terms, and any delay in obtaining such financing could adversely affect the results of operations of CTX Mortgage.

In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as servicer of the loans owned by HSF-I and arranges for the sale of the eligible mortgage loans into the secondary market. In its capacity as servicer, CTX Mortgage must act in the best interest of HSF-I so as to maximize the proceeds of sales of eligible mortgage loans. The performance and payment of obligations of CTX Mortgage, in its capacity as servicer, are guaranteed by Centex. These servicer obligations include the obligation of the servicer to repurchase a mortgage loan from HSF-I in the event of a breach of the servicer’s representations and warranties, which materially and adversely affects the value of the mortgage loan and is not cured within 60 days.

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, Centex has entered into a separate swap arrangement with the bank pursuant to which Centex 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 Centex all amounts that bank receives from HSF-I pursuant to the Harwood Swap. Accordingly, Centex effectively bears all interest rate risks, non-credit related market risks and prepayment risks that are the subject of the Harwood Swap. Centex is also required to reimburse the bank for certain expenses, costs and damages that it may incur.

As of March 31, 2002, HSF-I owned $1.34 billion in securitized residential mortgage loans sold to it by CTX Mortgage and had $1.25 billion of outstanding securitized term debt and $93.0 million of outstanding subordinated certificates. The Company does not guarantee the payment of any debt or subordinated certificates of HSF-I and is not liable for credit losses relating to securitized residential mortgage loans sold to HSF-I. However, the Company retains certain risks related to the portfolio of mortgage loans held by HSF-I. In particular, CTX Mortgage makes representations and warranties to HSF-I to the effect that each mortgage loan sold to HSF-I satisfies the eligibility criteria and portfolio requirements discussed above. CTX Mortgage may be required to repurchase mortgage loans sold to HSF-I if such mortgage loans are determined to be ineligible loans or there occur certain other breaches of representations and warranties of CTX Mortgage, as seller or servicer. During fiscal 2002, CTX Mortgage sold $10.2 billion of mortgage loans to HSF-I.

(G) CAPITAL STOCK AND EMPLOYEE BENEFIT PLANS

Stockholder Rights Plan

On October 2, 1996, the Board of Directors of the Company (the “Board”) adopted a new stockholder rights plan (“Plan”) to replace the original rights plan, which expired on October 1, 1996. In connection with the Plan, the Board authorized and declared a dividend of one right (“Right”) for each share of Common Stock of the Company to all stockholders of record at the close of business on October 15, 1996. After giving effect to the Company’s two-for-one stock split effective March 2, 1998, and the April 2002 amendment to the Plan increasing the exercise price, each Right entitles its holder to purchase one two-hundredths of a share of a new series of preferred stock designated Junior Participating Preferred Stock, Series D, at an exercise price of $210.00. The Rights will become exercisable upon the earlier of ten days after the first public announcement that a person or group has acquired beneficial ownership of 15% or more of the Common Stock or ten business days after a person or group announces an offer, the consummation of which would result in such person or group beneficially owning 15% or more of the Common Stock (even if no purchases actually occur), unless such time periods are deferred by appropriate Board action. The Plan excludes FMR Corp. from causing the rights to become exercisable until such time as FMR Corp., together with certain affiliated and associated persons, collectively own 20% or more of the Common Stock.

If any person or group acquires beneficial ownership of 15% or more (or 20% or more in the case of FMR Corp.) of the Common Stock, the Rights will entitle a holder (other than such person or any member of such group) to buy, at the exercise price, a number of additional shares of Common Stock having a market value of twice the exercise price of each Right. Alternatively, if a person or group has acquired 15% or more (or 20% or more in the case of FMR Corp.) of the Common Stock, but less than 50% of the Common Stock, the Company may at its option exchange each Right of a holder (other than such person or any member of such group) for one share of Common Stock. If the Company is involved in a merger or other business combination at any time after a person or group has acquired beneficial ownership of 15% or more (or 20% or more in the case of FMR Corp.) of the Common Stock or if, after reaching such 15% threshold, the Company were to sell 50% or more of its assets or earning power, the Rights will entitle a holder to buy, at the exercise price, a number of shares of common stock of the acquiring Company having a market value of twice the exercise price of each Right. In general, the Rights are redeemable at $.01 per

Right until 15 days after the Rights become exercisable as described above. Unless earlier redeemed, the Rights will expire on October 12, 2006.

Stock Options

Stock options granted under the Centex 2001 Director and Officer Stock Option Plan (the “2001 Plan”) and the Fourth Amended and Restated 1998 Centex Corporation Employee Non-Qualified Stock Option Plan (the “1998 Plan”) may not be granted at less than fair market value. Although the Centex Corporation Amended and Restated 1987 Stock Option Plan (the “1987 Plan”) provides that stock options may be granted at less than fair market value, the Company has consistently followed the practice of issuing options at or above fair market value. The 1987 Plan expired in fiscal 2002. Stock options granted under the Centex Corporation Stock Option Plan (the “Centex Plan”) were not granted at less than fair market value. The Centex Plan expired in fiscal 1999. Under all four plans, the option periods and the dates that the shares covered by the options may first become exercisable may vary within a maximum period of ten years at which time these options expire.

The Company records proceeds from the exercise of stock options as additions to common stock and capital in excess of par value. The federal tax benefit, if any, is considered additional capital in excess of par value. The Company accounts for stock options using the intrinsic value method of accounting as prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees.” In general, no expense is recognized related to the Company’s stock options because the stock options are granted at or above fair market value.

A summary of the activity of the stock option plans is presented below:


							For the Years Ended March 31,

		2002					2001					2000

					Weighted-					Weighted-					Weighted-
					Average					Average					Average
		Number			Exercise		Number			Exercise		Number			Exercise
		of Shares			Price		of Shares			Price		of Shares			Price

Options Outstanding, Beginning of Year			6,872,169		$	27.52		7,370,571		$	28.23		6,763,748		$	22.46
Options Granted At Fair Market Value			1,702,710		$	39.42		2,108,300		$	24.01		42,500		$	27.53
	Above Fair Market Value		—		$	—		—		$	—		2,337,590		$	36.06
Options Exercised			(1,385,659	)	$	22.19		(1,159,166	)	$	15.30		(1,336,568	)	$	11.40
Options Cancelled			(50,315	)	$	32.12		(1,447,536	)	$	35.82		(436,699	)	$	32.24

Options Outstanding, End of Year			7,138,905		$	31.36		6,872,169		$	27.52		7,370,571		$	28.23

Options Exercisable, End of Year			3,776,873					3,418,766					3,546,606

Shares Available for Future Stock Option Grants, End of Year			2,467,738					2,461,813					3,121,938

Weighted-Average Fair Value of Options Granted During the Year		$	21.32				$	13.14				$	14.80

Using the treasury stock method, which assumes that any proceeds together with the related tax benefits from the exercise of options would be used to purchase Common Stock at current prices, the dilutive effect of the options on outstanding shares as of March 31, 2002 would have been 3.3%. This is significantly less than appears on a gross basis when compared to the 61,171,149 shares of Common Stock outstanding as of March 31, 2002.

The following table summarizes information about stock options outstanding at March 31, 2002:


			Options Outstanding				Options Exercisable

			Weighted-
			Average		Weighted-				Weighted-
	Number		Remaining		Average		Number		Average
	of Shares		Contractual		Exercise		of Shares		Exercise
Range of Exercise Prices	Outstanding		Life (Years)		Price		Outstanding		Price

$12.56 - $23.81		2,826,600		6.79	$	21.22		1,553,490	$	19.75
$25.06 - $38.69		2,648,426		6.49	$	37.09		1,806,186	$	37.39
$39.36 - $49.63		1,658,179		6.06	$	39.39		415,772	$	39.42
$54.75		5,700		6.77	$	54.75		1,425	$	54.75

		7,138,905		6.51	$	31.36		3,776,873	$	30.37

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation” (SFAS No. 123”). Accordingly, no compensation cost has been recognized for the stock options. Had compensation cost for the Company’s stock option plans been determined based on the fair value at the grant date for awards in fiscal 2002, 2001 and 2000 consistent with the provisions of SFAS No. 123, the Company’s net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:


		For the Years Ended March 31,

		2002		2001		2000

Net Earnings — as Reported		$	382,226	$	281,977	$	257,132
Net Earnings — Pro Forma		$	357,753	$	257,504	$	231,399
Earnings Per Share — as Reported Basic		$	6.31	$	4.77	$	4.34
	Diluted	$	6.11	$	4.65	$	4.22
Earnings Per Share — Pro Forma Basic		$	5.91	$	4.36	$	3.90
	Diluted	$	5.72	$	4.24	$	3.80

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


	For the Years Ended March 31,

	2002			2001			2000

Expected Volatility		47.0	%		43.5	%		35.0	%
Risk-Free Interest Rate		5.4	%		6.3	%		5.5	%
Dividend Yield		0.4	%		0.7	%		0.5	%
Expected Life (Years)		7			8			8

The following table summarizes information about equity compensation plans as of March 31, 2002:


Plan Category			Plan		(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans [excluding securities reflected in column (a)]

Equity compensation
	plans approved by			1987		4,140,525	$	30.14		—
	stockholders			2001		19,790	$	40.11		1,722,210
Equity compensation
		plans not approved by stockholders		1998		2,978,590	$	32.99		745,528

Total						7,138,905	$	34.41		2,467,738

Subsequent to year end, the Board amended the 1998 Plan to allow for the issuance of an additional 1.5 million shares.

Employee Benefit Plans

Benefits are provided to eligible employees of the Company and certain subsidiaries under the Company’s profit sharing plans. The plans operate on a calendar year. The aggregate cost of these plans to the Company was $25.2 million in fiscal 2001, $21.6 million in fiscal 2000 and $17.8 million in fiscal 1999.

(H) COMPREHENSIVE INCOME

Comprehensive income is summarized below:


	For the Years Ended March 31,

	2002		2001		2000

Net Earnings	$	382,226	$	281,977	$	257,132
Other Comprehensive Income (Loss):

3333 HOLDING CORP 10-K