UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

or

Commission File Number: 1-6776

CENTEX CORPORATION

     Indicate by check mark whether the 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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ü No      

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No ü

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on January 23, 2008: 122,389,169 shares of common stock, par value $ .25 per share.

Centex Corporation and Subsidiaries

Form 10-Q Table of Contents
December 31, 2007

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

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

See Notes to Consolidated Financial Statements.

2

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

See Notes to Consolidated Financial Statements.

3

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

     See Notes to Consolidated Financial Statements.

4

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

5

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

See Notes to Consolidated Financial Statements.

6

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

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Centex Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007
(Unless otherwise indicated, dollars and shares in thousands, except per share data)
(unaudited)

(A) SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The consolidated interim financial statements include the accounts of Centex Corporation and all subsidiaries, partnerships and other entities in which Centex Corporation has a controlling interest (the “Company”). Also, included in the consolidated financial statements are certain variable interest entities, as discussed in Note (D), “Inventories,” and Note (F), “Indebtedness.” All significant intercompany balances and transactions have been eliminated. The unaudited statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

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

     In the opinion of the Company’s management, all adjustments (consisting of normal, recurring adjustments) necessary to present fairly the information in the consolidated financial statements of the Company have been included. The results of operations for such interim periods are not necessarily indicative of results for the full year. The Company suggests that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements included in the Company’s latest Annual Report on Form 10-K.

     Certain operations have been classified as discontinued. For additional information, refer to Note (L), “Discontinued Operations.” Associated results of operations and financial position are separately reported for all periods presented. Information in these Notes to Consolidated Financial Statements, unless otherwise noted, does not include the accounts of discontinued operations.

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Interest Expense

     Interest expense relating to the Financial Services segment is included in Financial Services’ costs and expenses. Home Building capitalizes interest incurred as a component of housing projects’ inventory cost. Capitalized interest is included in Home Building’s costs and expenses as related housing inventories are sold or otherwise charged to costs and expenses.

Income Taxes

     The Company accounts for income taxes on the deferral method whereby deferred tax assets and liabilities are provided for the tax effect of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Statement No. 109, “Accounting for Income Taxes” (“SFAS 109”), the Company assesses, on a quarterly basis, the realizability of its deferred income tax asset. A valuation allowance must be established when, based upon the evaluation of all available evidence, it is more likely than not that all or a portion of the deferred income tax asset will not be realized. Realization of deferred income tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies and reversals of existing taxable temporary differences. For additional information regarding the Company’s valuation allowance, please refer to Note (J), “Income Taxes.”

     On April 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). The cumulative effect of the adoption of FIN 48 was recorded as a $208.3 million reduction to beginning retained earnings in the first quarter of fiscal year 2008. Please refer to Note (J), “Income Taxes,” for additional information relating to the adoption of FIN 48.

     In accordance with the provisions of FIN 48, the Company recognizes in its financial statements the impact of tax return positions or future tax positions if it is more likely than not to prevail (defined as a likelihood of more than fifty percent of being sustained upon audit, based on the technical merits of the tax position). Tax positions that meet the more likely than not threshold are measured (using a probability weighted approach) at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement.

     The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the financial statements as a component of the income tax provision, which is consistent with the Company’s historical accounting policy. The Company’s liability for unrecognized tax benefits, combined with accrued interest and penalties, is reflected as a component of accrued liabilities.

     The Company’s estimated liability for unrecognized tax benefits is periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, certain changes and/or developments with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from the Company’s estimates. As each audit is concluded, adjustments, if any, are appropriately recorded in the Company’s financial statements. Additionally, in future periods, changes in facts, circumstances, and new information may require the Company to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur.

     Prior to the adoption of FIN 48, the Company applied Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies” (“SFAS 5”), to assess and provide for potential income tax exposures. In accordance with SFAS 5, the Company maintained reserves for tax contingencies based on reasonable estimates of the tax liabilities, interest, and penalties (if any) that may result from tax audits. FIN 48 substantially

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changes the applicable accounting model and is likely to cause greater volatility in the income statements and effective tax rates as more items are recognized and/or derecognized discretely within income tax expense.

Stock-Based Employee Compensation Arrangements

     The Company accounts for its stock-based compensation arrangements in accordance with the provisions of SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”), under which the Company recognizes compensation expense of a stock-based award over the vesting period based on the fair value of the award on the grant date, net of forfeitures. The fair value of stock options granted is calculated under the Black-Scholes option-pricing model.

     The following information represents the Company’s grants of stock-based compensation to employees and directors during the nine months ended December 31, 2007 and the year ended March 31, 2007:

     In addition to the stock-based awards in the above table, the Company issued to officers and employees during the first quarter of fiscal year 2008 long-term performance awards that vest after three years with an initial aggregate value of $18.9 million. These awards will be settled in cash and adjusted based on the Company’s performance relative to its peers in earnings per share growth and return on equity, as well as changes in the Company’s stock price between the date of grant and the end of the performance period. In accordance with the provisions of SFAS 123(R), these awards are accounted for as liability awards for which compensation expense will be recognized over the vesting period with a corresponding increase in accrued liabilities.

Statements of Consolidated Cash Flows — Supplemental Disclosures

     In accordance with the provisions of SFAS No. 95, “Statement of Cash Flows,” the Statements of Consolidated Cash Flows have not been restated for discontinued operations. For further information on the sale of the Company’s construction services operations (“Construction Services”) and sub-prime lending operations (“Home Equity”), see Note (L), “Discontinued Operations.” Accordingly, all Construction Services cash flows prior to disposal are included with the Centex cash flows and all Home Equity cash flows prior to disposal are included with the Financial Services cash flows.

     The following table provides supplemental disclosures related to the Statements of Consolidated Cash Flows:

     As explained in Note (D), “Inventories,” pursuant to the provisions of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised (“FIN 46”), as of December 31, 2007 and March 31, 2007, the Company consolidated $71.7 million and $152.9 million, respectively, of land as inventory under the caption “land held under option agreements not owned.” The Company also recorded $68.3 million and $90.5 million as of December 31, 2007 and March 31, 2007, respectively, of lot option agreements for which the Company’s deposits exceeded certain thresholds.

     In addition to the items noted above, the Company’s adoption of FIN 48 was treated as a non-cash item in the Statements of Consolidated Cash Flows. The adoption of FIN 48 resulted in a $116.0 million increase to

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deferred income taxes, a $329.2 million increase in accrued liabilities and a $213.2 million reduction in stockholders’ equity in the first quarter of fiscal year 2008. Transfers of mortgage loans between categories (i.e., loans in foreclosure included in trade and other receivables, real-estate owned included in other inventories, etc.) have been treated as non-cash items.

Recent Accounting Pronouncements

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), that serves to define fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 will be effective for the Company as of April 1, 2008. The Company is currently evaluating the impact, if any, of adopting SFAS 157 on its financial statements.

     The FASB Staff has exposed for comment a FASB Staff Position (“FSP”) that would delay the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Examples of items to which the deferral would apply include, but are not limited to, reporting units measured at fair value in the first step of a goodwill impairment test and long-lived assets (asset groups) measured at fair value for an impairment assessment (e.g. inventory impairment assessments). For the Company, the FSP, as proposed, would defer the application of SFAS 157 to nonfinancial assets and nonfinancial liabilities to April 1, 2009.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). Under the provisions of SFAS 159, companies may elect to measure specified financial instruments, warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings. The election, called the “fair value option,” will enable some companies to reduce the volatility in reported earnings caused by measuring related assets and liabilities differently, and it is simpler than using the complex hedge-accounting requirements in FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to achieve similar results. SFAS 159 will be effective for the Company as of April 1, 2008. The Company expects that the adoption of SFAS 159 will not have a material impact on its results of operations or financial position.

     In November 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 109, “Written Loan Commitments Recorded at Fair Value Through Earnings” (“SAB 109”). SAB 109 requires that the expected net future cash flows related to the associated servicing of a loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. The provisions of SAB 109 are applicable to written loan commitments issued or modified beginning January 1, 2008. The Company expects that the adoption of SAB 109 will not have a material impact on its results of operations or financial position.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51” (“SFAS 160”). Under the provisions of SFAS 160, a noncontrolling interest in a subsidiary, or minority interest, must be classified as equity and the amount of consolidated net income specifically attributable to the minority interest must be clearly identified in the statement of consolidated earnings. SFAS 160 also requires consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling interest retained in a deconsolidation. SFAS 160 will be effective for the Company as of April 1, 2009. The Company is currently evaluating the impact, if any, of adopting SFAS 160 on its financial statements.

Reclassifications

     Certain prior year balances have been reclassified to be consistent with the December 31, 2007 presentation, including reclassification of certain restricted cash balances to cash flows from financing activities, reclassification of construction lending activity to cash flows from investing activities, reclassification of the construction loan allowance against the related mortgage, reclassification of certain inventory amounts from housing projects to other inventory, and reclassifications of discontinued operations.

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(B) STOCKHOLDERS’ EQUITY

     A summary of changes in stockholders’ equity is presented below:

(C) MORTGAGE LOANS

     Mortgage loans receivable consist of the following:

     As of December 31, 2007, Financial Services is committed, under existing construction loan agreements, to fund $74.4 million in addition to the construction loan balance shown above. Financial Services has ceased origination of new construction loans; however, it will fulfill its existing funding commitments.

(D) INVENTORIES

Housing Projects and Land Held for Development and Sale

     A summary of housing projects is provided below:

     For the three and nine months ended December 31, 2007, the Company recorded $502.9 million and $1,492.4 million, respectively, in land-related impairments due to challenging market conditions. For the three and nine months ended December 31, 2006, the Company recorded $205.4 million and $235.4 million, respectively, in land-related impairments. Land-related impairments during the three months ended December 31, 2007 represented 147 neighborhoods and land investments. Land-related impairments during the nine months ended December 31,

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2007 represented 316 neighborhoods and land investments, certain of which have been impaired more than once. At December 31, 2007, the remaining carrying value of neighborhoods and land investments for which an impairment was recorded in the three months ended December 31, 2007 was $683.0 million.

Land Held Under Option Agreements Not Owned and Other Land Deposits

     The Company enters into land option purchase agreements. Under the option agreements, the Company pays a stated deposit or issues a letter of credit in consideration for the right to purchase land at a future time, usually at predetermined prices. These options generally do not contain performance requirements from the Company nor obligate the Company to purchase the land, and expire on various dates. At December 31, 2007, the Company had 161 land option agreements.

     In accordance with the provisions of FIN 46, the Company is the primary beneficiary of $71.7 million and $152.9 million as of December 31, 2007 and March 31, 2007, respectively, of land, which represents the remaining purchase price of the land. Land consolidated under FIN 46 is recorded under the caption “land held under option agreements not owned,” with a corresponding increase to minority interests. At December 31, 2007, 11 land option agreements were consolidated pursuant to FIN 46.

     In addition to land options recorded pursuant to FIN 46, the Company determined that five land option agreements represent financing arrangements pursuant to the provisions of SFAS 49, “Product Financing Arrangements” (“SFAS 49”). As a result, the Company recorded $68.3 million and $90.5 million as of December 31, 2007 and March 31, 2007, respectively, of land, which represents the remaining purchase price of the land. Land consolidated pursuant to SFAS 49 is recorded under the caption “land held under option agreements not owned,” with a corresponding increase to accrued liabilities.

     A summary of the Company’s deposits for land options and the total purchase price of such options is provided below:

     In addition to deposits, the Company capitalizes pre-acquisition development costs related to land held under option agreements. As of December 31, 2007 and March 31, 2007, pre-acquisition costs recorded to “land held for development and sale” were $21.8 million and $48.0 million, respectively. Also included in “land held for development and sale” is owned land that is not currently anticipated to be developed for more than two years and land that the Company intends to sell within one year, which amounted to $395.9 million and $20.5 million as of December 31, 2007 and March 31, 2007, respectively.

     The Company writes off deposits and pre-acquisition costs when it determines that it is probable the property will not be acquired. Write-offs of land deposits and pre-acquisition costs amounted to $26.4 million and $87.6 million for the three and nine months ended December 31, 2007, respectively, as compared to $138.0 million and $263.8 million for the three and nine months ended December 31, 2006, respectively.

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(E) GOODWILL

     A summary of changes in goodwill by segment for the nine months ended December 31, 2007 is presented below:

     Goodwill for the Other segment at December 31, 2007 relates to the Company’s home services operations. Goodwill is tested for impairment at the reporting unit level on an annual basis (January 1) or when management determines that due to certain circumstances the carrying amount of goodwill may not be recoverable. In the quarter ended September 30, 2007, management determined that events and circumstances had occurred that indicated the remaining goodwill balances within the homebuilding reporting units of the segment may not be recoverable. These events included, but were not limited to, the significant land-related impairments and write-offs taken across all homebuilding segments except for Texas and an unprecedented disturbance within the mortgage markets that made it more difficult for certain homebuilding customers to obtain mortgage financing.

     Based on these factors, homebuilding goodwill was evaluated for impairment during the second quarter of fiscal year 2008. As a result of the impairment test, the Company recorded goodwill impairments as outlined in the table above.

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(F) INDEBTEDNESS

     A summary of the balances of short-term and long-term debt (debt instruments with original maturities greater than one year) and weighted-average interest rates at December 31, 2007 and March 31, 2007 is presented below. Due dates are presented in fiscal years.

     As of March 31, 2007, Centex’s short-term debt consisted of land and land-related acquisition notes of $1.8 million.

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     The weighted-average interest rates for short-term and long-term debt during the nine months ended December 31, 2007 and 2006 were:

     Maturities of Centex’s and Financial Services’ long-term debt during the next five years ending March 31 of each year and thereafter are: