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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From              To             
Commission File Number: 1-14122
D.R. Horton, Inc.
(Exact name of registrant as specified in its charter)
Delaware75-2386963
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1341 Horton Circle
Arlington, Texas 76011
(Address of principal executive offices) (Zip code)
(817) 390-8200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $.01 per shareDHINew York Stock Exchange
5.750% Senior Notes due 2023DHI 23ANew York Stock Exchange

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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  ý
As of April 22, 2020, there were 363,537,810 shares of the registrant’s common stock, par value $.01 per share, outstanding.





D.R. HORTON, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
 
 Page


2

Table of Contents
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

March 31,
2020
September 30,
2019
(In millions)
(Unaudited)
ASSETS
Cash and cash equivalents$1,522.8  $1,494.3  
Restricted cash14.5  19.7  
Total cash, cash equivalents and restricted cash1,537.3  1,514.0  
Inventories:
Construction in progress and finished homes5,969.4  5,245.0  
Residential land and lots — developed and under development6,151.9  5,939.4  
Land held for development77.1  77.8  
Land held for sale26.1  19.8  
Total inventory12,224.5  11,282.0  
Mortgage loans held for sale1,379.4  1,072.0  
Deferred income taxes, net of valuation allowance of $17.8 million and $18.7 million
at March 31, 2020 and September 30, 2019, respectively
149.5  163.1  
Property and equipment, net589.7  499.2  
Other assets1,086.1  912.8  
Goodwill163.5  163.5  
Total assets$17,130.0  $15,606.6  
LIABILITIES
Accounts payable$707.0  $634.0  
Accrued expenses and other liabilities1,381.6  1,278.1  
Notes payable4,306.6  3,399.4  
Total liabilities6,395.2  5,311.5  
Commitments and contingencies (Note L)
EQUITY
Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued    
Common stock, $.01 par value, 1,000,000,000 shares authorized, 394,279,177 shares issued
and 363,537,810 shares outstanding at March 31, 2020 and 392,172,821 shares issued
and 368,431,454 shares outstanding at September 30, 2019
3.9  3.9  
Additional paid-in capital3,191.3  3,179.1  
Retained earnings8,425.4  7,640.1  
Treasury stock, 30,741,367 shares and 23,741,367 shares at March 31, 2020
and September 30, 2019, respectively, at cost
(1,162.6) (802.2) 
Stockholders’ equity10,458.0  10,020.9  
Noncontrolling interests276.8  274.2  
Total equity10,734.8  10,295.1  
Total liabilities and equity$17,130.0  $15,606.6  




See accompanying notes to consolidated financial statements.

3

Table of Contents


D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended
March 31,
Six Months Ended
March 31,
 2020201920202019
(In millions, except per share data)
(Unaudited)
Revenues$4,500.0  $4,128.7  $8,520.7  $7,647.7  
Cost of sales3,450.8  3,256.7  6,535.0  6,007.8  
Selling, general and administrative expense466.8  444.2  922.6  847.0  
Gain on sale of assets(28.5) (29.3) (59.5) (31.3) 
Other (income) expense(10.4) (5.7) (21.9) (14.3) 
Income before income taxes621.3  462.8  1,144.5  838.5  
Income tax expense137.3  108.4  228.1  197.4  
Net income484.0  354.4  916.4  641.1  
Net income attributable to noncontrolling interests1.3  3.1  2.4  2.7  
Net income attributable to D.R. Horton, Inc.$482.7  $351.3  $914.0  $638.4  
Basic net income per common share attributable to D.R. Horton, Inc.$1.32  $0.94  $2.49  $1.71  
Weighted average number of common shares365.8  373.3  367.1  374.2  
Diluted net income per common share attributable to D.R. Horton, Inc.$1.30  $0.93  $2.46  $1.68  
Adjusted weighted average number of common shares370.1  377.7  371.8  378.9  



























See accompanying notes to consolidated financial statements.

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D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF TOTAL EQUITY

Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Non-controlling
Interests
Total
Equity
 (In millions, except common stock share data)
(Unaudited)
Balances at September 30, 2019 (368,431,454 shares)$3.9  $3,179.1  $7,640.1  $(802.2) $274.2  $10,295.1  
Net income    431.3    1.2  432.5  
Exercise of stock options (258,800 shares)  4.1  —  —  —  4.1  
Stock issued under employee benefit plans (582,936 shares)—    —  —  —  —  
Cash paid for shares withheld for taxes  (17.3)       (17.3) 
Stock-based compensation expense—  16.6  —  —  —  16.6  
Cash dividends declared ($0.175 per share)—  —  (64.6) —  —  (64.6) 
Repurchases of common stock (3,000,000 shares)—  —  —  (163.1) —  (163.1) 
Distributions to noncontrolling interests—  —  —  —  (0.4) (0.4) 
Change of ownership interest in Forestar
—  (0.5) —  —  0.5    
Balances at December 31, 2019 (366,273,190 shares)$3.9  $3,182.0  $8,006.8  $(965.3) $275.5  $10,502.9  
Net income    482.7    1.3  484.0  
Exercise of stock options (310,032 shares)  6.2  —  —  —  6.2  
Stock issued under employee benefit plans (954,588 shares)—  2.6  —  —  —  2.6  
Cash paid for shares withheld for taxes  (20.8)       (20.8) 
Stock-based compensation expense—  21.3  —  —  —  21.3  
Cash dividends declared ($0.175 per share)—  —  (64.1) —  —  (64.1) 
Repurchases of common stock (4,000,000 shares)—  —  —  (197.3) —  (197.3) 
Balances at March 31, 2020 (363,537,810 shares)$3.9  $3,191.3  $8,425.4  $(1,162.6) $276.8  $10,734.8  





















See accompanying notes to consolidated financial statements.

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D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF TOTAL EQUITY (Continued)

Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Non-controlling
Interests
Total
Equity
 (In millions, except common stock share data)
(Unaudited)
Balances at September 30, 2018 (376,261,635 shares)$3.9  $3,085.0  $6,217.9  $(322.4) $174.5  $9,158.9  
Cumulative effect of adoption of ASC 606—  —  27.1  —  —  27.1  
Net income (loss)    287.2    (0.5) 286.7  
Exercise of stock options (806,817 shares)  8.6  —  —  —  8.6  
Stock issued under employee benefit plans (273,608 shares)—    —  —  —  —  
Cash paid for shares withheld for taxes  (4.1)       (4.1) 
Stock-based compensation expense—  18.1  —  —  —  18.1  
Cash dividends declared ($0.15 per share)—  —  (56.0) —  —  (56.0) 
Repurchases of common stock (4,100,000 shares)—  —  —  (140.6) —  (140.6) 
Distributions to noncontrolling interests—  —  —  —  (0.5) (0.5) 
Balances at December 31, 2018 (373,242,060 shares)$3.9  $3,107.6  $6,476.2  $(463.0) $173.5  $9,298.2  
Net income    351.3    3.1  354.4  
Exercise of stock options (831,489 shares)  11.4  —  —  —  11.4  
Stock issued under employee benefit plans (1,059,415 shares)—  2.0  —  —  0.3  2.3  
Cash paid for shares withheld for taxes  (15.4)       (15.4) 
Stock-based compensation expense—  17.8  —  —  —  17.8  
Cash dividends declared ($0.15 per share)—  —  (55.9) —  —  (55.9) 
Repurchases of common stock (2,000,000 shares)—  —  —  (75.6) —  (75.6) 
Distributions to noncontrolling interests—  —  —  —  (3.2) (3.2) 
Balances at March 31, 2019 (373,132,964 shares)$3.9  $3,123.4  $6,771.6  $(538.6) $173.7  $9,534.0  





















See accompanying notes to consolidated financial statements.

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D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

 Six Months Ended
March 31,
 20202019
(In millions)
(Unaudited)
OPERATING ACTIVITIES
Net income$916.4  $641.1  
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization38.8  34.1  
Amortization of discounts and fees5.8  5.1  
Stock-based compensation expense37.9  35.9  
Equity in earnings of unconsolidated entities(0.9) (0.5) 
Distributions of earnings of unconsolidated entities  0.5  
Deferred income taxes10.0  12.6  
Inventory and land option charges12.8  21.8  
Gain on sale of assets(59.5) (31.3) 
Changes in operating assets and liabilities:
Increase in construction in progress and finished homes(724.4) (755.2) 
Increase in residential land and lots –
developed, under development, held for development and held for sale
(324.2) (445.6) 
Increase in other assets(153.1) (39.9) 
Net increase in mortgage loans held for sale(307.4)   
Increase in accounts payable, accrued expenses and other liabilities152.7  59.7  
Net cash used in operating activities(395.1) (461.7) 
INVESTING ACTIVITIES
Expenditures for property and equipment(47.6) (69.8) 
Proceeds from sale of assets129.8  83.8  
Expenditures related to rental properties(113.0) (28.3) 
Return of investment in unconsolidated entities2.4  4.4  
Net principal increase of other mortgage loans and real estate owned(0.6) (1.6) 
Payments related to business acquisitions(5.6) (309.6) 
Net cash used in investing activities(34.6) (321.1) 
FINANCING ACTIVITIES
Proceeds from notes payable1,591.3  1,815.0  
Repayment of notes payable(918.9) (1,531.0) 
Advances on mortgage repurchase facility, net297.6  53.0  
Proceeds from stock associated with certain employee benefit plans12.9  22.3  
Cash paid for shares withheld for taxes(38.1) (19.5) 
Cash dividends paid(128.7) (111.9) 
Repurchases of common stock
(360.4) (216.2) 
Distributions to noncontrolling interests, net
(0.4) (3.7) 
Other financing activities
(2.3)   
Net cash provided by financing activities453.0  8.0  
Net increase (decrease) in cash, cash equivalents and restricted cash23.3  (774.8) 
Cash, cash equivalents and restricted cash at beginning of period1,514.0  1,506.0  
Cash, cash equivalents and restricted cash at end of period$1,537.3  $731.2  
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Notes payable issued for inventory$  $80.8  
Stock issued under employee incentive plans$84.3  $49.0  
Accrued expenditures for property and equipment$8.6  $10.9  
Accrual for holdback payment related to acquisition$3.9  $16.3  

See accompanying notes to consolidated financial statements.

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D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2020

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited, consolidated financial statements include the accounts of D.R. Horton, Inc. and all of its 100% owned, majority-owned and controlled subsidiaries, which are collectively referred to as the Company, unless the context otherwise requires. Noncontrolling interests represent the proportionate equity interests in consolidated entities that are not 100% owned by the Company. The Company owns a 65% controlling interest in Forestar Group Inc. (Forestar) and therefore is required to consolidate 100% of Forestar within its consolidated financial statements, and the 35% interest the Company does not own is accounted for as noncontrolling interests. All intercompany accounts, transactions and balances have been eliminated in consolidation.

The financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments considered necessary to fairly state the results for the interim periods shown, including normal recurring accruals and other items. These financial statements, including the consolidated balance sheet as of September 30, 2019, which was derived from audited financial statements, do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2019.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current year presentation. At the beginning of fiscal 2020, the Company reclassified its single-family rental properties from other assets to property and equipment in its homebuilding segment. Reclassification of the prior period amount resulted in a $37.0 million decrease in other assets with a corresponding increase in property and equipment at September 30, 2019. This reclassification had no effect on the Company’s consolidated financial position or results of operations.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Seasonality

Historically, the homebuilding industry has experienced seasonal fluctuations; therefore, the operating results for the three and six months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020 or subsequent periods.

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases,” which requires that lease assets and liabilities be recognized on the balance sheet and that key information about leasing arrangements be disclosed. The guidance was effective for the Company beginning October 1, 2019 and did not have a material impact on its consolidated financial position, results of operations or cash flows. As a result of the adoption of this standard on October 1, 2019, the Company recorded right of use assets of $39.0 million and lease liabilities of $40.3 million. Lease right of use assets are included in other assets and lease liabilities are included in accrued expenses and other liabilities in the consolidated balance sheet.


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D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)
March 31, 2020



In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X. The amended rule focuses on providing material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain prescriptive requirements. The rule is effective January 4, 2021 but earlier compliance is permitted. The Company adopted these amendments on March 31, 2020. Accordingly, summarized financial information has been presented only for the issuers and guarantors of the Company's registered securities for the most recent fiscal year and the year-to-date interim period, and the location of the required disclosures has been moved from Notes to Consolidated Financial Statements to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Pending Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses,” which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information in determining credit loss estimates. The guidance is effective for the Company beginning October 1, 2020 and is not expected to have a material impact on its consolidated financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other,” which simplifies the measurement of goodwill impairment by removing the second step of the goodwill impairment test and requires the determination of the fair value of individual assets and liabilities of a reporting unit. Under the new guidance, goodwill impairment is measured as the amount by which a reporting unit’s carrying amount exceeds its fair value with the loss recognized limited to the total amount of goodwill allocated to the reporting unit. The guidance is effective for the Company beginning October 1, 2020 and is not expected to have a material impact on its consolidated financial position, results of operations or cash flows.

In December 2019, the FASB issued ASU 2019-12 related to simplifying the accounting for income taxes. The guidance is effective for the Company beginning October 1, 2021, although early adoption is permitted. The Company is currently evaluating the impact of this guidance, and it is not expected to have a material impact on its consolidated financial position, results of operations and cash flows.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The guidance was effective beginning March 12, 2020 and the Company may elect to apply the amendments prospectively through December 31, 2022. This guidance has not and is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.


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D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)
March 31, 2020



NOTE B – SEGMENT INFORMATION

The Company is a national homebuilder that is primarily engaged in the acquisition and development of land and the construction and sale of residential homes, with operations in 89 markets across 29 states. The Company’s operating segments are its 52 homebuilding divisions, its majority-owned Forestar residential lot development operations, its financial services operations and its other business activities. The Company’s reporting segments are its homebuilding reporting segments, its Forestar lot development segment and its financial services segment. The homebuilding operating segments are aggregated into the following six reporting segments: East, Midwest, Southeast, South Central, Southwest and West. These reporting segments have homebuilding operations located in the following states:
East:Delaware, Georgia (Savannah only), Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina and Virginia
Midwest:Colorado, Illinois, Indiana, Iowa, Minnesota and Ohio
Southeast:Alabama, Florida, Georgia, Mississippi and Tennessee
South Central:Louisiana, Oklahoma and Texas
Southwest:Arizona and New Mexico
West:California, Hawaii, Nevada, Oregon, Utah and Washington

The Company’s homebuilding divisions design, build and sell single-family detached homes on lots they develop and on fully developed lots purchased ready for home construction. To a lesser extent, the homebuilding divisions also build and sell attached homes, such as townhomes, duplexes and triplexes. Most of the revenue generated by the Company’s homebuilding operations is from the sale of completed homes and to a lesser extent from the sale of land and lots.

The Forestar segment is a residential lot development company with operations in 50 markets across 21 states. Forestar has made significant investments in land acquisition and development to expand its business across the United States. The homebuilding divisions acquire finished lots from Forestar in accordance with the master supply agreement between the two companies. Forestar’s segment results are presented on their historical cost basis, consistent with the manner in which management evaluates segment performance.

The Company’s financial services segment provides mortgage financing and title agency services to homebuyers in many of the Company’s homebuilding markets. The segment generates the substantial majority of its revenues from originating and selling mortgages and collecting fees for title insurance agency and closing services. The Company sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers.

In addition to its homebuilding, Forestar and financial services operations, the Company has subsidiaries that engage in other business activities. These subsidiaries conduct insurance-related operations, construct and own income-producing multi-family rental properties, own non-residential real estate including ranch land and improvements and own and operate oil and gas related assets. The operating results of these subsidiaries are immaterial for separate reporting and therefore are grouped together and presented as other. One of these subsidiaries, DHI Communities, constructs multi-family rental properties and has three projects under active construction and one project that was substantially complete at March 31, 2020. In November 2019, DHI Communities sold a multi-family rental property for $61.5 million and recorded a gain on the sale of $31.2 million. In February 2020, DHI Communities sold a multi-family rental property for $67.0 million and recorded a gain on the sale of $28.2 million. At March 31, 2020 and September 30, 2019, the consolidated balance sheets included $202.8 million and $204.0 million, respectively, of assets owned by DHI Communities.


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D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)
March 31, 2020



The accounting policies of the reporting segments are described throughout Note A included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2019. Financial information relating to the Company’s reporting segments is as follows:
March 31, 2020
HomebuildingForestar (1)Financial ServicesOther (2)Eliminations (3)Other Adjustments (4)Consolidated
(In millions)
Assets
Cash and cash equivalents
$1,012.6  $438.2  $45.8  $26.2  $  $  $1,522.8  
Restricted cash
7.8    6.6  0.1      14.5  
Inventories:
     Construction in progress and finished homes
6,003.8        (34.4)   5,969.4  
     Residential land and lots — developed and under development
5,009.6  1,171.0      (29.9) 1.2  6,151.9  
     Land held for development
48.9  28.2          77.1  
     Land held for sale
26.1            26.1  

11,088.4  1,199.2      (64.3) 1.2  12,224.5  
Mortgage loans held for sale
    1,379.4        1,379.4  
Deferred income taxes, net
136.7  8.0      10.8  (6.0) 149.5  
Property and equipment, net
327.2  1.0  3.3  259.2