Market Overview

D.R. Horton, Inc., America's Builder, Reports Fiscal 2019 First Quarter Earnings and Declares Quarterly Dividend of $0.15 Per Share

Share:

Fiscal 2019 First Quarter Highlights - comparisons to the prior year
quarter

  • Net income attributable to D.R. Horton increased 52% to $287.2 million
    or $0.76 per diluted share
  • Consolidated pre-tax income was $375.7 million compared to $391.2
    million
  • Consolidated pre-tax profit margin was 10.7% compared to 11.7%
  • Homes closed increased 7% to 11,500 homes and 7% in value to $3.4
    billion
  • Net sales orders increased 3% to 11,042 homes and were unchanged in
    value at $3.2 billion
  • Repurchased 4.1 million shares of common stock for $140.6 million

D.R. Horton, Inc. (NYSE:DHI), America's Builder, today reported that net
income attributable to D.R. Horton for its first fiscal quarter ended
December 31, 2018 increased 52% to $287.2 million, or $0.76 per diluted
share, compared to $188.8 million, or $0.49 per diluted share, in the
same quarter of fiscal 2018. The prior year quarter results
include the impact of a higher effective tax rate primarily due to the
remeasurement of the Company's deferred tax assets and liabilities as a
result of the Tax Cuts and Jobs Act.

Homebuilding revenue for the first quarter of fiscal 2019 increased 6%
to $3.4 billion from $3.2 billion in the same quarter of fiscal 2018.
Homes closed in the quarter increased 7% to 11,500 homes compared to
10,788 homes closed in the same quarter of fiscal 2018.

Net sales orders for the first quarter ended December 31, 2018 increased
3% to 11,042 homes compared to 10,753 homes in the same quarter of the
prior year and were unchanged in value at $3.2 billion. The Company's
cancellation rate (cancelled sales orders divided by gross sales orders)
for the first quarter of fiscal 2019 was 24% compared to 22% in the
prior year quarter.

The Company had 33,700 homes in inventory at December 31, 2018, and its
homebuilding land and lot portfolio at December 31, 2018 was 309,400
lots, of which 42% were owned and 58% were controlled through option
contracts.

The Company ended the first quarter with $537.5 million of homebuilding
unrestricted cash and a homebuilding debt to total capital ratio of
23.2%. Homebuilding debt to total capital consists of homebuilding notes
payable divided by stockholders' equity plus homebuilding notes payable.

Donald R. Horton, Chairman of the Board, said, "The D.R. Horton team
delivered solid results for the first fiscal quarter of 2019. Net income
for the quarter increased 52% to $287.2 million on a 6% increase in
consolidated revenues to $3.5 billion. Our pre-tax profit margin for the
first quarter was 10.7%, and our home sales revenues increased 7%. These
results reflect the strength of our experienced operational teams,
industry-leading market share, broad geographic footprint and affordable
product offerings across multiple brands.

"Sales prices for both new and existing homes have increased across most
of our markets over the past several years, which coupled with rising
interest rates has impacted affordability and resulted in some
moderation of demand for homes, particularly at higher price points.
However, we continue to see good demand and a limited supply of homes at
affordable prices across our markets, and economic fundamentals and
financing availability remain solid. We are pleased with our product
offerings and positioning for the upcoming spring selling season, and we
will adjust to future changes in market conditions as necessary.

"Our continued strategic focus is to consolidate market share while
growing our revenues and profits, generating strong cash flows and
returns and maintaining a flexible financial position. With 33,700 homes
in inventory at the end of December and 309,400 lots owned and
controlled, we are well-positioned for fiscal 2019 and future years."

Acquisitions

During the three months ended December 31, 2018, the Company acquired
the homebuilding operations of Westport Homes, Classic Builders and
Terramor Homes for $320.7 million. The assets acquired included
approximately 700 homes in inventory, 4,500 lots and control of
approximately 4,300 additional lots through option contracts. The
Company also acquired a sales order backlog of approximately 700 homes.
Westport Homes operates in Indianapolis and Fort Wayne, Indiana, and
Columbus, Ohio; Classic Builders operates in Des Moines, Iowa; and
Terramor Homes operates in Raleigh, North Carolina.

Dividends

During the first quarter of fiscal 2019, the Company paid cash dividends
of $56.0 million. Subsequent to quarter-end, the Company declared a
quarterly cash dividend of $0.15 per common share that is payable on
February 25, 2019 to stockholders of record on February 11, 2019.

Share Repurchases

The Company repurchased 4.1 million shares of common stock for $140.6
million during the first quarter of fiscal 2019. The Company's remaining
stock repurchase authorization at December 31, 2018 was $234.9 million.

Forestar Segment

Forestar Group Inc. (NYSE:FOR)("Forestar"), a majority-owned subsidiary
of D.R. Horton, is a publicly-traded residential lot development
company, which currently operates in 35 markets and 16 states.
Forestar's results of operations for the three month period ended
December 31, 2018 and from October 5, 2017 (acquisition date) through
December 31, 2017 are fully consolidated in the Company's financial
statements with the 25% interest not owned by the Company reported as
noncontrolling interests.

For the three months ended December 31, 2018, Forestar sold 518 lots and
generated $38.5 million of revenue compared to 255 lots and $30.8
million of revenue in the prior year period. These results are included
in the Company's segment information following the consolidated
financials. On its conference call today, the Company will provide an
update on Forestar's operations, capital structure and future growth
plans.

Conference Call and Webcast Details

The Company will host a conference call today (Friday, January 25) at
8:30 a.m. Eastern Time. The dial-in number is 877-407-8033, and the call
will also be webcast from the Company's website at investor.drhorton.com.

About D.R. Horton, Inc.

D.R. Horton, Inc., America's Builder, has been the largest homebuilder
by volume in the United States since 2002. Founded in 1978 in Fort
Worth, Texas, D.R. Horton has operations in 84 markets in 29 states
across the United States and closed 52,569 homes in the twelve-month
period ended December 31, 2018. The Company is engaged in the
construction and sale of high-quality homes through its diverse brand
portfolio that includes D.R. Horton, Emerald Homes, Express Homes and
Freedom Homes with sales prices ranging from $100,000 to over
$1,000,000. D.R. Horton also provides mortgage financing, title services
and insurance agency services for homebuyers through its mortgage, title
and insurance subsidiaries.

Forward-Looking Statements

Portions of this document may constitute "forward-looking statements" as
defined by the Private Securities Litigation Reform Act of 1995.
Although D.R. Horton believes any such statements are based on
reasonable assumptions, there is no assurance that actual outcomes will
not be materially different. All forward-looking statements are based
upon information available to D.R. Horton on the date this release was
issued. D.R. Horton does not undertake any obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Forward-looking statements in
this release include that we are pleased with our product offerings and
positioning for the upcoming spring selling season, and we will adjust
to future changes in market conditions as necessary. The forward-looking
statements also include that our continued strategic focus is to
consolidate market share while growing our revenues and profits,
generating strong cash flows and returns and maintaining a flexible
financial position and that with 33,700 homes in inventory at the end of
December and 309,400 lots owned and controlled, we are well-positioned
for fiscal 2019 and future years.

Factors that may cause the actual results to be materially different
from the future results expressed by the forward-looking statements
include, but are not limited to: the cyclical nature of the homebuilding
industry and changes in economic, real estate and other conditions;
constriction of the credit and public capital markets, which could limit
our ability to access capital and increase our costs of capital;
reductions in the availability of mortgage financing provided by
government agencies, changes in government financing programs, a
decrease in our ability to sell mortgage loans on attractive terms or an
increase in mortgage interest rates; the risks associated with our land
and lot inventory; our ability to effect our growth strategies,
acquisitions or investments successfully; the impact of an inflationary,
deflationary or higher interest rate environment; home warranty and
construction defect claims; the effects of health and safety incidents;
the effects of negative publicity; supply shortages and other risks of
acquiring land, building materials and skilled labor; reductions in the
availability of performance bonds; increases in the costs of owning a
home; the effects of governmental regulations and environmental matters
on our homebuilding and land development operations; the effects of
governmental regulations on our financial services operations; our
significant debt and our ability to comply with related debt covenants,
restrictions and limitations; competitive conditions within the
homebuilding and financial services industries; the effects of the loss
of key personnel; and information technology failures and data security
breaches. Additional information about issues that could lead to
material changes in performance is contained in D.R. Horton's annual
report on Form 10-K which is filed with the Securities and Exchange
Commission (SEC).

         

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
December 31, September 30,
2018 2018
(In millions)
ASSETS
Cash and cash equivalents $ 737.0 $ 1,473.1
Restricted cash   31.3     32.9  
Total cash, cash equivalents and restricted cash 768.3 1,506.0
Inventories:
Construction in progress and finished homes 5,842.8 5,086.3

Residential land and lots — developed, under development, held for
development and held for sale

  5,752.8     5,308.7  
Total inventory 11,595.6 10,395.0
Mortgage loans held for sale 622.2 796.4
Deferred income taxes, net of valuation allowance of $17.1 million
and
$17.7 million at December 31, 2018 and September 30, 2018,
respectively
181.4 194.0
Property and equipment, net 391.1 401.1
Other assets 818.8 712.9
Goodwill   158.4     109.2  
Total assets $ 14,535.8   $ 14,114.6  
LIABILITIES
Accounts payable $ 697.2 $ 624.7
Accrued expenses and other liabilities 1,198.1 1,127.5
Notes payable   3,342.3     3,203.5  
Total liabilities   5,237.6     4,955.7  
 
EQUITY

Common stock, $.01 par value, 1,000,000,000 shares authorized,

389,200,668 shares issued and 373,242,060 shares outstanding at
December 31, 2018 and

388,120,243 shares issued and 376,261,635 shares outstanding at
September 30, 2018

3.9 3.9
Additional paid-in capital 3,107.6 3,085.0
Retained earnings 6,476.2 6,217.9
Treasury stock, 15,958,608 shares and 11,858,608 shares at
December 31, 2018 and September 30, 2018, respectively, at cost   (463.0 )   (322.4 )
Stockholders' equity 9,124.7 8,984.4
Noncontrolling interests   173.5     174.5  
Total equity   9,298.2     9,158.9  

Total liabilities and equity

$ 14,535.8   $ 14,114.6  
 
     

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 
Three Months Ended
December 31,
2018     2017
(In millions, except per share data)
Revenues $ 3,519.0 $ 3,332.7
Cost of sales 2,751.1 2,580.1
Selling, general and administrative expense 402.8 384.2
Gain on sale of assets (2.0 ) (13.4 )
Other (income) expense   (8.6 )   (9.4 )
Income before income taxes 375.7 391.2
Income tax expense   89.0     202.4  
Net income 286.7 188.8
Net loss attributable to noncontrolling interests   (0.5 )   (0.5 )
Net income attributable to D.R. Horton, Inc. $ 287.2   $ 189.3  
Basic:
Net income per common share attributable to D.R. Horton, Inc. $ 0.77   $ 0.50  
Weighted average number of common shares   375.1     375.8  
Diluted:
Net income per common share attributable to D.R. Horton, Inc. $ 0.76   $ 0.49  
Adjusted weighted average number of common shares   380.1     383.8  
Other Consolidated Financial Data:
Interest charged to cost of sales $ 25.6   $ 28.6  
Depreciation and amortization $ 16.9   $ 16.2  
Interest incurred $ 31.7   $ 31.0  
 
     

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
Three Months Ended
December 31,
2018     2017
(In millions)
OPERATING ACTIVITIES
Net income $ 286.7 $ 188.8
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 16.9 16.2
Amortization of discounts and fees 2.6 1.2
Stock-based compensation expense 18.1 13.6
Equity in earnings of unconsolidated entities (0.6 ) (2.3 )
Distributions of earnings of unconsolidated entities 0.5 0.2
Deferred income taxes 3.9 126.3
Inventory and land option charges 8.0 3.7
Gain on sale of assets (2.0 ) (13.4 )
Changes in operating assets and liabilities:
Increase in construction in progress and finished homes (500.3 ) (302.3 )
Increase in residential land and lots –
developed, under development, held for development and held for sale (435.9 ) (185.2 )
(Increase) decrease in other assets (34.0 ) 4.3
Decrease in mortgage loans held for sale 174.2 49.1
Increase in accounts payable, accrued expenses and other liabilities   88.8     24.8  
Net cash used in operating activities   (373.1 )   (75.0 )
INVESTING ACTIVITIES
Expenditures for property and equipment (20.2 ) (25.3 )
Proceeds from sale of assets 10.4 24.8
Expenditures related to multi-family rental properties (11.4 ) (19.1 )
Return of investment in unconsolidated entities 4.4 14.9
Net principal (increase) decrease of other mortgage loans and real
estate owned
(0.6 ) 0.1
Payments related to business acquisitions, net of cash acquired   (293.0 )   (156.4 )
Net cash used in investing activities   (310.4 )   (161.0 )
FINANCING ACTIVITIES
Proceeds from notes payable 578.3 1,113.9
Repayment of notes payable (276.1 ) (825.8 )
Payments on mortgage repurchase facility, net (163.8 ) (32.6 )
Proceeds from stock associated with certain employee benefit plans 8.6 14.6
Cash paid for shares withheld for taxes (4.1 ) (10.3 )
Cash dividends paid (56.0 ) (47.0 )
Repurchases of common stock (140.6 ) (25.4 )
Distributions to noncontrolling interests, net   (0.5 )   (1.7 )
Net cash (used in) provided by financing activities   (54.2 )   185.7  
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (737.7 ) (50.3 )
Cash, cash equivalents and restricted cash at beginning of period   1,506.0     1,024.3  
Cash, cash equivalents and restricted cash at end of period $ 768.3   $ 974.0  
 
     

D.R. HORTON, INC.

SEGMENT INFORMATION

(UNAUDITED)

 
December 31, 2018
Homebuilding     Forestar (1)    

Financial
Services

    Other (2)     Eliminations (3)    

Other
Adjustments (4)

    Consolidated
(In millions)
Assets
Cash and cash equivalents $ 537.5 $ 154.2 $ 32.8 $ 12.5 $ $ $ 737.0
Restricted cash 8.7 16.1 6.5 31.3

Inventories:

Construction in progress and finished homes

5,840.4 2.4 5,842.8

Residential land and lots — developed, under development, held for
development and held for sale

  5,057.8   693.2       (20.4 )   22.2     5,752.8
10,898.2 693.2 (18.0 ) 22.2 11,595.6
Mortgage loans held for sale 622.2 622.2
Deferred income taxes, net 165.0 25.5 0.3 (9.4 ) 181.4
Property and equipment, net 224.3 1.8 3.6 161.4 391.1
Other assets 713.2 27.9 47.1 81.2 (61.3 ) 10.7 818.8
Goodwill   129.2             29.2     158.4
$ 12,676.1 $ 918.7 $ 712.2 $ 255.1 $ (79.0 ) $ 52.7   $ 14,535.8
Liabilities
Accounts payable $ 674.9 $ 7.4 $ 10.6 $ 4.3 $ $ $ 697.2
Accrued expenses and other liabilities 1,116.3 120.4 35.5 14.4 (73.1 ) (15.4 ) 1,198.1
Notes payable   2,748.7   112.9   473.9         6.8     3,342.3
$ 4,539.9 $ 240.7 $ 520.0 $ 18.7 $ (73.1 ) $ (8.6 ) $ 5,237.6
 
     
September 30, 2018
Homebuilding     Forestar (1)     Financial Services     Other (2)     Eliminations (3)     Other Adjustments (4)     Consolidated
(In millions)
Assets
Cash and cash equivalents $ 1,111.8 $ 318.8 $ 33.7 $ 8.8 $ $ $ 1,473.1
Restricted cash 8.6 16.2 8.1 32.9
Inventories:

Construction in progress and finished homes

5,084.4 1.9 5,086.3

Residential land and lots — developed, under development, held for
development and held for sale

  4,790.7   498.0       (7.2 )   27.2     5,308.7
9,875.1 498.0 (5.3 ) 27.2 10,395.0
Mortgage loans held for sale 796.4 796.4
Deferred income taxes, net 176.5 26.9 1.1 (10.5 ) 194.0
Property and equipment, net 207.1 1.8 3.0 189.2 401.1
Other assets 673.7 31.4 43.6 0.9 (48.6 ) 11.9 712.9
Goodwill   80.0             29.2     109.2
$ 12,132.8 $ 893.1 $ 884.8 $ 198.9 $ (52.8 ) $ 57.8   $ 14,114.6
Liabilities
Accounts payable $ 612.4 $ 11.2 $ 0.2 $ 4.2 $ (3.3 ) $ $ 624.7
Accrued expenses and other liabilities 1,041.3 95.7 41.9 9.9 (46.1 ) (15.2 ) 1,127.5
Notes payable   2,445.9   111.7   637.7         8.2     3,203.5
$ 4,099.6 $ 218.6 $ 679.8 $ 14.1 $ (49.4 ) $ (7.0 ) $ 4,955.7
 

________________________________________________________

(1) Amounts are presented on Forestar's historical cost basis.

(2) Amounts represent the aggregate balances of certain subsidiaries
that are immaterial for separate reporting.

(3) Amounts represent the elimination of intercompany transactions and
the reclassification of Forestar interest expense to inventory.

(4) Amounts represent purchase accounting adjustments related to the
Forestar acquisition.

     
Three Months Ended December 31, 2018
Homebuilding     Forestar (1)     Financial Services     Other (2)     Eliminations (3)     Other Adjustments (4)     Consolidated
(In millions)
Revenues:
Home sales $ 3,410.6 $ $ $ $ $ $ 3,410.6
Land/lot sales and other 6.7 38.5 6.9 (29.0 ) 23.1
Financial services           85.3                 85.3  
  3,417.3     38.5     85.3     6.9     (29.0 )       3,519.0  
Cost of sales:
Home sales (5) 2,729.2 (1.1 ) 2,728.1
Land/lot sales and other 5.1 30.7 (24.4 ) 3.6 15.0
Inventory and land option charges   8.0                         8.0  
  2,742.3     30.7             (25.5 )   3.6     2,751.1  
Selling, general and administrative expense 324.7 5.7 65.6 6.7 0.1 402.8
Gain on sale of assets (2.0 ) (0.9 ) 0.9 (2.0 )
Other (income) expense   (2.0 )   (1.9 )   (3.9 )   (0.8 )           (8.6 )
Income before income taxes $ 354.3   $ 4.9   $ 23.6   $ 1.0   $ (3.5 ) $ (4.6 ) $ 375.7  
Summary Cash Flow Information:
Cash (used in) provided by
operating activities
$ (396.8 ) $ (164.1 ) $ 193.8   $ (1.6 ) $   $ (4.4 ) $ (373.1 )
 
     
Three Months Ended December 31, 2017
Homebuilding     Forestar (1)     Financial Services     Other (2)     Eliminations (3)     Other Adjustments (4)     Consolidated
(In millions)
Revenues:
Home sales $ 3,184.5 $ $ $ $ $ $ 3,184.5
Land/lot sales and other 36.4 30.8 67.2
Financial services           81.0                 81.0  
  3,220.9     30.8     81.0                 3,332.7  
Cost of sales:
Home sales 2,521.5 2,521.5
Land/lot sales and other 31.2 19.3 4.4 54.9
Inventory and land option charges   3.7                         3.7  
  2,556.4     19.3                 4.4     2,580.1  
Selling, general and administrative expense 304.8 13.6 61.7 4.0 0.1 384.2
Gain on sale of assets (13.4 ) (13.4 )
Interest expense 2.1 (2.1 )
Other (income) expense   (0.7 )   (8.2 )   (2.9 )   (2.9 )       5.3     (9.4 )
Income (loss) before income taxes $ 373.8   $ 4.0   $ 22.2   $ (1.1 ) $ 2.1   $ (9.8 ) $ 391.2  
Summary Cash Flow Information:

Cash (used in) provided by operating activities

$ (101.6 ) $ (36.2 ) $ 67.9   $ 3.0   $   $ (8.1 ) $ (75.0 )

________________________________________________________

(1) Results are presented on Forestar's historical cost basis and from
the date of acquisition in the prior year quarter.

(2) Amounts represent the aggregate results of certain subsidiaries that
are immaterial for separate reporting.

(3) Amounts represent the elimination of intercompany transactions and
the reclassification of Forestar interest expense to inventory.

(4) Amounts represent purchase accounting adjustments related to the
Forestar acquisition.

(5) Amount in the Eliminations column represents the profit on lots sold
from Forestar to the homebuilding segment. Intercompany profit is
eliminated in the consolidated financial statements when Forestar sells
lots to the homebuilding segment and is recognized in the consolidated
financial statements when the homebuilding segment closes homes on the
lots to homebuyers.

 
NET SALES ORDERS
 
      Three Months Ended December 31,
2018       2017
Homes     Value Homes     Value
East 1,570 $ 444.9 1,430 $ 398.5
Midwest 532 196.9 377 144.9
Southeast 3,616 963.3 3,632 976.3
South Central 3,395 855.8 3,026 760.8
Southwest 530 134.9 701 165.1
West 1,399   629.4 1,587   777.0
11,042 $ 3,225.2 10,753 $ 3,222.6
 
 
HOMES CLOSED
     
Three Months Ended December 31,
2018       2017
Homes     Value Homes     Value
East 1,558 $445.9 1,388 $393.0
Midwest 671 244.7 408 161.4
Southeast 3,783 1,013.4 3,744 988.6
South Central 3,478 872.4 3,178 808.4
Southwest 561 143.6 692 155.9
West 1,449 690.6 1,378 677.2
11,500 $3,410.6 10,788 $3,184.5
 
 
SALES ORDER BACKLOG
     
As of December 31,
2018       2017
Homes     Value Homes     Value
East 1,915 $ 569.0 1,586 $ 458.3
Midwest 893 302.9 388 156.0
Southeast 4,054 1,122.1 3,945 1,092.6
South Central 4,409 1,135.2 3,804 970.6
Southwest 897 242.9 852 201.9
West 1,397   664.2 1,719   884.7
13,565 $ 4,036.3 12,294 $ 3,764.1
 

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