The downward adjustment is being attributed to slower home sales in the manufactured division, the impact of higher interest rates, an accounting change for Centex Home Equity Corp. and an earnings decline as a result of lower gypsum wallboard prices. Shareholders' concern should be offset by news that a contract is pending with Gaylord Entertainment Co. for the general contracting award for 1,500-room Opryland Hotel Texas in Grapevine. Overall, the Centex Construction Group is making second quarter 2001 look rosy, with new contracts totaling $416 million, up 60% from second quarter 2000.

Second-quarter contracting and construction services are up 28% from $5.1 million recorded in fiscal 2000 while revenues have jumped 14%, coming in at $330.4 million. As of Sept. 30, the backlog of unfinished projects totals a record $1.47 billion, up 31% from a year ago. A 22% improvement has been recorded in the six-months' earning, with a $13.1 million total in comparison to $10.7 million for fiscal 2000 accounting. Meanwhile, revenues are down 2% to $640.7 million.

While the construction group is going gung-ho, that's not the case overall with all Centex divisions. Second-quarter net earnings are 10% less than last year's second quarter although the $1.6 billion in revenues reflect a 12% jump. Diluted earnings per share are 98 cents, 8% lower than the $1.07 posted for the same quarter in fiscal 2000. In the first six months of fiscal 2001, net earnings are slightly more than $107 million, down 13% for the same period last year. The six months' diluted earning of $1.79 per share are 11% less than last fiscal year's $2.02 per share. However, the six months' revenue total is 8% higher, coming in more than $3 billion in comparison to $2.8 billion in fiscal 2000.

Centex's conventional homes subsidiary is reporting a 28% increase in operating earnings. Second-quarter fiscal 2001 totals $89.6 million in comparison to $70.2 million a year ago. However, Cavco Industries and its manufactured homes affiliates are showing a $1.1 million operating loss for the quarter from last year's $3.2 million tally.

Total home building earnings have reached $88.5 million in the second quarter, reflecting a 21% jump over the comparable quarter in fiscal year 2000. Homebuilding revenues are up, exceeding $1 billion in comparison to $843.7 million in last year's second quarter.

There were 4,901 or 11% more conventional home mortgages closed in the second quarter, with 23% more orders for a total of 5,338. As of Sept. 30, 9,145 homes had been sold, but not closed, 17% more than last year. The average sales price for a conventional home is 9% more, $203,900, over last year's mean price. The slight margin improvement is being attributed to closing increases and the increased average sales price coupled with internal efficiency changes. The six months' operating earnings from conventional homes total $162.1 million in comparison to last year's $129.3 million.

The manufactured homes division, Cavco, has fallen short on production - down 1,024 homes - in the quarter. The manufactured homes division's operating margin is 2.9% versus 14.3% for the same quarter a year ago. A six months' operating loss of $1.2 million is being reported in the manufactured homes arena, which had totaled $4.1 million in second quarter 2000. Overall, homebuilding operating earnings for conventional and manufactured total $160.9 million, 21% higher for the first six months of this fiscal year in comparison to last year. The divisions' combined six-month revenues also are up 17%, totaling nearly $2 billion. Six-month totals on conventional closings have risen 19% to 10,875 homes while manufactured home closings are down 29% to 2,154 units.

On the international level, London-based Fairclough Homes, bought in 1999 by Centex Development Co. LP, has built and closed on 598 homes in the first six months of fiscal 2001. The same period last year had reflected 770 home constructions and closing. Centex says no significant earnings from this division will be reported until April 2001.

Centex's Investment Real Estate operation is reporting operating earnings that are 22% lower than the $9 million reported in the comparable fiscal quarter last year. The six-months' accounting is 13% less, coming in at $13.2 million. Centex says the declines are due to timing of land sales and other transactions.

Also showing a decline is the firm's financial services division, which is reporting operating earnings of $2.2 million in comparison to $12.5 million in second quarter 2000. That decline is being attributed to an accounting change for Centex Home Equity Corp. and higher interest rates. Financial Services' second-quarter revenues total $106.5 million, 12% less than the $120.5 million last year. Operating earnings from CTX Mortgage are down 26% from the $7.6 million for the same quarter last year. The most significant loan drop had occurred in the retail originations sector, 12% less for a total of 11,263 - which Centex blames on fewer refinancings. Builder originations have risen 10% to 2,839 while "A" loans are down 9%, riding at 14,102. All three categories have shown increases in the number of second-quarter loan applications.

CTX's loan volume for the quarter has totaled $2.02 billion, slightly less than $2.07 billion reported for the same quarter a year ago. The profit per loan of $399 for this year's quarter is 19% less than last year's per-loan profit of $495.

Overall, Financial Services operating earnings for this year's six-month period are $2.3 million, 93% less than earnings of $33.2 million last year. For the current six months, Financial Services revenues are riding at $202.4 million -15% less - while operating earnings for CTX and related companies are 56% less than the $24.8 million recorded last year.

Overall loan originations for "A" lending is 16% lower, builders up 5% and retail down 19%. The company's per-loan profit has dipped 48% from a year ago: $383 in comparison to $739.Centex Construction Products Inc. earnings total $21 million for the current quarter, a dip of 35% from last year's comparable period. Current quarter revenues are down 15% while the six- month accounting shows an 18% drop from $53.5 million reported a year ago. This division's revenues are 7% less or $200.1 million in the first six months of this year. The company blames the decline on lower prices for gypsum wallboard.

Instant Insights /

Centex Construction Group Makes Strongest Second-Quarter Showing Among Divisions

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