centex UBS /11 /11/08

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centex UBS /11 /11/08

  1. 1. UBS 6th Annual CEO Conference November 11-12, 2008 © 2008 Centex Corporation
  2. 2. Forward-looking Statements Some of the statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by the fact that they relate only to anticipated or expected events, activities, trends or results, which are inherently subject to risks, uncertainties and other factors. Actual results and outcomes may differ materially from what is expressed or forecast in such statements. Forward-looking statements included in this presentation are made as of its date. We do not undertake any obligation to update or revise any forward-looking statement. Important risks and other factors include, but are not limited to: (1) the effects of recent disruptions in the global credit and securities markets, which have adversely impacted the banking and mortgage finance industries, resulting in tightening of credit and reductions in liquidity; (2) recent adverse changes in national and regional economic or business conditions, including employment levels and interest rates; (3) the effects of the current downturn in the homebuilding industry, including potential adverse market conditions that could result in reduced sales and closings and additional inventory or other impairments; (4) customer cancellations and consumer homebuyer sentiment; (5) competition; (6) price changes in raw materials or other components of our houses; (7) the availability of adequate sources of financing to continue to implement our business strategy; and (8) our ability to generate cash from sales of assets and other sources that supplement our existing cash resources. These and other risks and uncertainties are described in greater detail in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 and subsequent Quarterly Reports on Form 10-Q. All forward-looking statements involving financial or operating projections or estimates contained herein were initially provided on October 29, 2008 and have not been updated for this presentation. The risk that actual results will differ materially from expectations expressed in this presentation will increase with the passage of time. 2
  3. 3. Table of contents Effectively navigating the cycle Making the right strategic choices Preparing to emerge with strength 3
  4. 4. Effectively navigating the cycle Unprecedented economic environment for homebuilding • Centex sales per neighborhood now average 1.7 per month • Could weaken further in December quarter Some elements of a bottom are now in place • Timing and duration difficult to predict • Conditions could get worse before they get better Centex actions based on current market realities • Continuing to take anticipatory actions without compromising preparedness for inevitable opportunities • Strong cash position, consolidated divisions, shortened land supply This cycle will “test the best, eliminate the rest” 4
  5. 5. Elements of a bottom in place High foreclosures Economic recession Housing starts fall precipitously Land prices begin to soften more widely Homebuilders with liquidity begin to reinvest Conditions may worsen further through the winter Source: Experience in previous cycles 5
  6. 6. Foreclosure Inventory Percent of Mortgage Loans in Foreclosure, Seasonally Adjusted Annual Rate 3.1% 2.6% 2.1% 1.6% 20-Year Average 1.1% 0.6% 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Mortgage Bankers Association/Mortgage Delinquency Survey 6
  7. 7. Consumer Confidence Index Consumer Confidence Home Buyer Sentiment 93% (Left Axis) (Right Axis) 150 130 79% 110 66% 90 70 53% 50 30 40% 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Conference Board, University of Michigan 7
  8. 8. Housing Starts Single-Family Housing Starts (Millions), Seasonally Adjusted Annual Rate 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Census Bureau 8
  9. 9. New and Existing Home Inventories Millions of Homes New Homes Existing Homes (Left Axis) (Right Axis) 0.7 4.5 4.0 0.6 3.5 0.5 3.0 0.4 2.5 2.0 0.3 1.5 0.2 1.0 0.1 0.5 0.0 0.0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Census Bureau; National Assocation of Realtors 9
  10. 10. Making the right strategic choices © 2008 Centex Corporation
  11. 11. Recent results show progress Generated positive cash flow from homebuilding operations in each of last 5 quarters Cash balance of $1.3 billion at Sept. 30 • Expecting balance to be higher on 3/31/09 Improving balance sheet strength • Net debt to capital now less than 48% • Paid off $150 million of maturing senior notes in August Improving gross margins in each of last 2 quarters Relentless focus on cost structure • Overhead costs will continue to come down 11
  12. 12. Making the right strategic choices Cash accumulation Pattern of sequentially improving gross margins • In the face of industry price pressure and declining sales • Incentives and discounts trending down Strong cash position expected to continue to grow Can be cash flow positive at substantially lower volumes Cash preservation Reduced homebuilding and corporate SG&A by 39% YOY Land development requirements are low We intend to continue to reduce debt while preserving cash 12
  13. 13. Strategic choices yielding results “Build-to-order” approach increasing gross margins • Home building gross margin up 730 bps in last six months • Incentives and discounts down to 7.9% (half of peak levels) Dramatically reducing land spend budget • Land acquisition/development now expected to be about $100 million for remainder of this fiscal year • About half of lots in Land Under Development are finished Achieving direct construction cost reductions despite higher commodity costs in the period 13
  14. 14. Preparing to emerge with strength © 2008 Centex Corporation
  15. 15. Preparing to emerge with strength Sufficient owned and optioned lots for near-term needs • Supplemented by finished lots coming on the market Opportunities to gain market share • Severity of cycle is driving smaller players from the field • Scale in the most attractive markets will yield benefits/higher returns 15
  16. 16. Centex Business Processes We are defining and standardizing all of our core business processes, and plan to complete this effort by the end of fiscal 2009. Enterprise Management Processes Strategic Directions Human Capital Allocation Strategic Plans Information Systems Development and Deployment Operating Plans Policies Capital Allocation Enterprise Risk Management Governance Process Improvement Core Business Processes Home and Strategic Land Community Procure Sell Build Marketing Management Design Support Processes and Services Human Capital Management Mortgage, Title and Insurance Accounting and Financial Services Facilities Management Information Systems Services Communications Legal Services Operational Marketing 16
  17. 17. Achieving Competitive Excellence Sell to backlog Build to cadence Emphasizing lower cost channels to Predictability/reliability of scheduling generate leads trade partners, tasks, etc. Maximizing the opportunity to convert Sequencing “homes to be built” in a every precious lead geographically optimal order Making good price/volume tradeoff Doing it right the first time decisions, in a dirt sales environment Achieving cost efficiency in distribution and installation Emphasis on maximizing profitability and ROA 17
  18. 18. Key Messages Effectively navigating the cycle Making the right strategic choices Preparing to emerge with strength 18
  19. 19. Questions and Answers © 2008 Centex Corporation

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