e10vq
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For the Quarterly Period Ended June 30, 2005
OR
|
|
|
o |
|
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)
|
|
|
DELAWARE
|
|
75-2386963 |
|
|
|
(State or other jurisdiction of incorporation
or organization)
|
|
(I.R.S. Employer Identification No.) |
|
|
|
301 Commerce Street, Suite 500, Fort Worth, Texas
|
|
76102 |
|
|
|
(Address of principal executive offices)
|
|
(Zip Code) |
(817) 390-8200
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).
Yes þ No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
Common
stock, $.01 par value 312,824,500 shares as of August 3, 2005
This report contains 35 pages.
D.R. HORTON, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
September 30, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(In millions) |
|
|
|
(Unaudited) |
|
ASSETS
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
109.8 |
|
|
$ |
480.1 |
|
Inventories: |
|
|
|
|
|
|
|
|
Construction in progress and finished homes |
|
|
3,945.3 |
|
|
|
2,878.5 |
|
Residential lots developed and under development |
|
|
4,485.6 |
|
|
|
3,529.0 |
|
Land held for development |
|
|
6.3 |
|
|
|
6.2 |
|
Consolidated land inventory not owned |
|
|
185.2 |
|
|
|
153.7 |
|
|
|
|
|
|
|
|
|
|
|
8,622.4 |
|
|
|
6,567.4 |
|
Property and equipment (net) |
|
|
97.8 |
|
|
|
91.9 |
|
Earnest money deposits and other assets |
|
|
706.7 |
|
|
|
576.6 |
|
Goodwill |
|
|
578.9 |
|
|
|
578.9 |
|
|
|
|
|
|
|
|
|
|
|
10,115.6 |
|
|
|
8,294.9 |
|
|
|
|
|
|
|
|
Financial Services: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
62.0 |
|
|
|
37.9 |
|
Mortgage loans held for sale |
|
|
828.7 |
|
|
|
623.3 |
|
Other assets |
|
|
38.2 |
|
|
|
29.1 |
|
|
|
|
|
|
|
|
|
|
|
928.9 |
|
|
|
690.3 |
|
|
|
|
|
|
|
|
|
|
$ |
11,044.5 |
|
|
$ |
8,985.2 |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
722.6 |
|
|
$ |
585.2 |
|
Accrued expenses and other liabilities |
|
|
929.3 |
|
|
|
756.9 |
|
Notes payable |
|
|
3,654.7 |
|
|
|
3,006.5 |
|
|
|
|
|
|
|
|
|
|
|
5,306.6 |
|
|
|
4,348.6 |
|
|
|
|
|
|
|
|
Financial Services: |
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
|
16.8 |
|
|
|
16.8 |
|
Notes payable to financial institutions |
|
|
708.4 |
|
|
|
492.7 |
|
|
|
|
|
|
|
|
|
|
|
725.2 |
|
|
|
509.5 |
|
|
|
|
|
|
|
|
|
|
|
6,031.8 |
|
|
|
4,858.1 |
|
|
|
|
|
|
|
|
Minority interests |
|
|
192.4 |
|
|
|
166.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued |
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 400,000,000 shares authorized, 315,328,863 shares
issued and 312,676,063 shares outstanding at June 30, 2005 and 236,028,696
shares issued and 233,375,896 shares outstanding at September 30, 2004 |
|
|
3.2 |
|
|
|
2.4 |
|
Additional capital |
|
|
1,620.3 |
|
|
|
1,599.9 |
|
Retained earnings |
|
|
3,255.7 |
|
|
|
2,417.3 |
|
Treasury stock, 2,652,800 shares at June 30, 2005 and September 30, 2004, at cost |
|
|
(58.9 |
) |
|
|
(58.9 |
) |
|
|
|
|
|
|
|
|
|
|
4,820.3 |
|
|
|
3,960.7 |
|
|
|
|
|
|
|
|
|
|
$ |
11,044.5 |
|
|
$ |
8,985.2 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-3-
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
(In millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
$ |
3,277.1 |
|
|
$ |
2,695.5 |
|
|
$ |
8,432.9 |
|
|
$ |
7,080.7 |
|
Land/lot sales |
|
|
32.4 |
|
|
|
46.2 |
|
|
|
177.5 |
|
|
|
117.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,309.5 |
|
|
|
2,741.7 |
|
|
|
8,610.4 |
|
|
|
7,198.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
2,413.7 |
|
|
|
2,086.8 |
|
|
|
6,279.8 |
|
|
|
5,490.0 |
|
Land/lot sales |
|
|
17.0 |
|
|
|
29.1 |
|
|
|
105.4 |
|
|
|
72.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,430.7 |
|
|
|
2,115.9 |
|
|
|
6,385.2 |
|
|
|
5,562.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
863.4 |
|
|
|
608.7 |
|
|
|
2,153.1 |
|
|
|
1,590.7 |
|
Land/lot sales |
|
|
15.4 |
|
|
|
17.1 |
|
|
|
72.1 |
|
|
|
45.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
878.8 |
|
|
|
625.8 |
|
|
|
2,225.2 |
|
|
|
1,636.1 |
|
|
Selling, general and administrative expense |
|
|
302.0 |
|
|
|
244.3 |
|
|
|
826.7 |
|
|
|
679.5 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
Other (income) |
|
|
(0.5 |
) |
|
|
(7.4 |
) |
|
|
(11.4 |
) |
|
|
(7.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
577.3 |
|
|
|
388.9 |
|
|
|
1,409.9 |
|
|
|
960.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
60.7 |
|
|
|
48.7 |
|
|
|
156.5 |
|
|
|
131.7 |
|
General and administrative expense |
|
|
38.5 |
|
|
|
32.2 |
|
|
|
105.1 |
|
|
|
83.8 |
|
Interest expense |
|
|
4.1 |
|
|
|
1.6 |
|
|
|
9.1 |
|
|
|
4.0 |
|
Other (income) |
|
|
(9.0 |
) |
|
|
(4.8 |
) |
|
|
(22.0 |
) |
|
|
(12.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27.1 |
|
|
|
19.7 |
|
|
|
64.3 |
|
|
|
56.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
604.4 |
|
|
|
408.6 |
|
|
|
1,474.2 |
|
|
|
1,017.0 |
|
Provision for income taxes |
|
|
232.7 |
|
|
|
157.3 |
|
|
|
567.5 |
|
|
|
391.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
371.7 |
|
|
$ |
251.3 |
|
|
$ |
906.7 |
|
|
$ |
625.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share |
|
$ |
1.19 |
|
|
$ |
0.81 |
|
|
$ |
2.91 |
|
|
$ |
2.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share assuming dilution |
|
$ |
1.17 |
|
|
$ |
0.80 |
|
|
$ |
2.85 |
|
|
$ |
1.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
0.09 |
|
|
$ |
0.06 |
|
|
$ |
0.2175 |
|
|
$ |
0.155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-4-
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Nine Months |
|
|
|
Ended June 30, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(In millions) |
|
|
|
(Unaudited) |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income |
|
$ |
906.7 |
|
|
$ |
625.5 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
39.2 |
|
|
|
34.4 |
|
Amortization of debt premiums, discounts and fees |
|
|
3.1 |
|
|
|
5.0 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Increase in inventories |
|
|
(2,003.8 |
) |
|
|
(1,334.1 |
) |
Increase in earnest money deposits and other assets |
|
|
(133.3 |
) |
|
|
(39.6 |
) |
(Increase) decrease in mortgage loans held for sale |
|
|
(205.4 |
) |
|
|
71.9 |
|
Increase in accounts payable and other liabilities |
|
|
292.6 |
|
|
|
73.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES |
|
|
(1,100.9 |
) |
|
|
(563.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Net purchases of property and equipment |
|
|
(44.7 |
) |
|
|
(39.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES |
|
|
(44.7 |
) |
|
|
(39.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from notes payable |
|
|
2,344.0 |
|
|
|
2,313.9 |
|
Repayment of notes payable |
|
|
(1,497.8 |
) |
|
|
(2,017.7 |
) |
Proceeds from stock associated with certain employee benefit plans |
|
|
21.5 |
|
|
|
11.5 |
|
Cash dividends paid |
|
|
(68.3 |
) |
|
|
(48.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
799.4 |
|
|
|
259.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(346.2 |
) |
|
|
(342.8 |
) |
Cash and cash equivalents at beginning of period |
|
|
518.0 |
|
|
|
582.9 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
171.8 |
|
|
$ |
240.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of noncash activities: |
|
|
|
|
|
|
|
|
Notes payable issued for inventory |
|
$ |
17.8 |
|
|
$ |
63.8 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-5-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2005
NOTE A BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements include the accounts of D.R. Horton,
Inc. and all of its wholly-owned, majority-owned and controlled subsidiaries (the Company), as well as certain
variable interest entities from which we are purchasing land or lots under option purchase
contracts. All significant intercompany accounts, transactions and balances have
been eliminated in consolidation. The statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the instructions to Form 10-Q
and Regulation S-X. In the opinion of management, all adjustments (consisting of normal, recurring
accruals) considered necessary for a fair presentation have been included. These statements do not
include all of the information and notes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction with the consolidated financial
statements and accompanying notes included in the Companys annual report on Form 10-K for the
fiscal year ended September 30, 2004. Certain reclassifications have been made in the prior years
financial statements to conform to classifications used in the current year.
Historically, the homebuilding industry has experienced seasonal fluctuations; therefore, the
operating results for the three-month and nine-month periods ended June 30, 2005 are not
necessarily indicative of the results that may be expected for the fiscal year ending September 30,
2005.
Business - The Company is a national homebuilder that is engaged primarily in the construction and
sale of single-family housing in 71 markets and 23 states in the United States. The Company
designs, builds and sells single-family houses on lots developed by the Company and on finished
lots which it purchases, ready for home construction. Periodically, the Company sells land and lots
it has developed or bought. The Company also provides title agency and mortgage brokerage services
to its homebuyers. The Company does not retain or service the mortgages that it originates but,
rather, sells the mortgages and related servicing rights to investors.
Stock Split In February 2005, the Companys Board of Directors declared a four-for-three stock
split (effected as a 33% stock dividend), paid on March 16, 2005 to common stockholders of record
on March 1, 2005. The earnings per share and cash dividends declared per share for the three and
nine months ended June 30, 2005 and 2004 reflect the effects of the stock split.
NOTE B SEGMENT INFORMATION
The Companys reportable business segments consist of homebuilding and financial services.
Homebuilding is the Companys core business, generating 98% of consolidated revenues during the
nine months ended June 30, 2005 and 2004, and 96% and 94% of consolidated income before income
taxes during the nine months ended June 30, 2005 and 2004, respectively. The homebuilding reporting
segment is comprised of the aggregate of the Companys regional homebuilding operations and
generates most of its revenues from the sale of completed homes, with a lesser amount from the sale
of land and lots. Approximately 85% and 84% of home sales revenues were generated from the sale of
single-family detached homes for the nine months ended June 30, 2005 and 2004, respectively, and
the remainder of home sales revenues were generated from the sale of attached homes, such as town
homes, duplexes, triplexes and condominiums (including some mid-rise buildings), which share common
walls and roofs. The financial services segment generates its revenues from originating and selling
mortgages and collecting fees for title insurance agency and closing services.
-6-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE C EARNINGS PER SHARE
Basic earnings per share for the three months and nine months ended June 30, 2005 and 2004 is based
on the weighted average number of shares of common stock outstanding. Diluted earnings per share is
based on the weighted average number of shares of common stock and dilutive securities outstanding.
The following table sets forth the denominators used in the computation of basic and diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
Denominator for basic
earnings per share weighted
average common shares |
|
|
312.4 |
|
|
|
310.7 |
|
|
|
312.0 |
|
|
|
310.3 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options |
|
|
5.9 |
|
|
|
5.4 |
|
|
|
5.8 |
|
|
|
5.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted
earnings per share adjusted
weighted average common
shares |
|
|
318.3 |
|
|
|
316.1 |
|
|
|
317.8 |
|
|
|
316.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In February 2005, the Companys Board of Directors declared a four-for-three stock split (effected
as a 33% stock dividend), paid on March 16, 2005 to common stockholders of record on March 1, 2005.
The share amounts presented above reflect the effects of the four-for-three stock split.
All options outstanding during the three and nine months ended June 30, 2005 and 2004 were included
in the computation of diluted earnings per share.
NOTE D CONSOLIDATED LAND INVENTORY NOT OWNED
In the ordinary course of its homebuilding business, the Company enters into land and lot option
purchase contracts in order to procure land or lots for the construction of homes. Under such
option purchase contracts, the Company will fund a stated deposit in consideration for the right,
but not the obligation, to purchase land or lots at a future point in time with predetermined
terms. Under the terms of the option purchase contracts, many of the Companys option deposits are
non-refundable. Under the requirements of Financial Accounting Standards Board (FASB)
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), certain of the
Companys option purchase contracts result in the acquisition of a variable interest in the entity
holding the land parcel under option.
In applying the provisions of FIN 46, the Company evaluates those land and lot option purchase
contracts with variable interest entities to determine whether the Company is the primary
beneficiary based upon analysis of the variability of the expected gains and losses of the entity.
Based on this evaluation, if the Company is the primary beneficiary of an entity with which the
Company has entered into a land or lot option purchase contract, the variable interest entity is
consolidated.
The consolidation of these variable interest entities and other inventory obligations added $185.2
million in land inventory not owned and minority interests related to entities not owned to the
Companys balance sheet at June 30, 2005. The Companys obligations related to these land or lot
option contracts are guaranteed by cash deposits totaling $18.8 million and performance letters of
credit, promissory notes and surety bonds totaling $3.3 million. Creditors of these variable
interest entities have no recourse against the Company.
At June 30, 2005, including the deposits with the variable interest entities above, the Company had
deposits amounting to $284.0 million to purchase land and lots with a total remaining purchase
price of $5.7 billion. For the variable interest entities which are unconsolidated because the
Company is not subject to a majority of the risk of loss or entitled to receive a majority of the
entities residual returns, the maximum exposure to loss is generally limited to the amounts of the
Companys option deposits, which totaled $218.4 million at June 30, 2005.
-7-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE E NOTES PAYABLE
The Companys notes payable at their principal amounts, net of unamortized discount or premium, as
applicable, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
September 30, |
|
|
|
2005 |
|
|
2004 |
|
|
|
(In millions) |
|
Homebuilding: |
|
|
|
|
|
|
|
|
Unsecured: |
|
|
|
|
|
|
|
|
Revolving credit facility due 2008 |
|
$ |
50.0 |
|
|
$ |
|
|
10.5% senior notes due 2005, net |
|
|
|
|
|
|
199.9 |
|
7.5% senior notes due 2007 |
|
|
215.0 |
|
|
|
215.0 |
|
5% senior notes due 2009, net |
|
|
199.6 |
|
|
|
199.5 |
|
8% senior notes due 2009, net |
|
|
384.0 |
|
|
|
383.8 |
|
9.375% senior notes due 2009, net |
|
|
241.5 |
|
|
|
242.5 |
|
9.75% senior subordinated notes due 2010, net |
|
|
149.2 |
|
|
|
149.2 |
|
4.875% senior notes due 2010, net |
|
|
248.6 |
|
|
|
|
|
7.875% senior notes due 2011, net |
|
|
198.8 |
|
|
|
198.7 |
|
9.375% senior subordinated notes due 2011, net |
|
|
199.8 |
|
|
|
199.8 |
|
10.5% senior subordinated notes due 2011, net |
|
|
150.4 |
|
|
|
150.9 |
|
8.5% senior notes due 2012, net |
|
|
248.4 |
|
|
|
248.3 |
|
6.875% senior notes due 2013 |
|
|
200.0 |
|
|
|
200.0 |
|
5.875% senior notes due 2013 |
|
|
100.0 |
|
|
|
100.0 |
|
6.125% senior notes due 2014, net |
|
|
197.3 |
|
|
|
197.2 |
|
5.625% senior notes due 2014, net |
|
|
248.1 |
|
|
|
247.9 |
|
5.25% senior notes due 2015, net |
|
|
297.8 |
|
|
|
|
|
5.625% senior notes due 2016, net |
|
|
297.4 |
|
|
|
|
|
Other secured |
|
|
28.8 |
|
|
|
73.8 |
|
|
|
|
|
|
|
|
|
|
$ |
3,654.7 |
|
|
$ |
3,006.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services: |
|
|
|
|
|
|
|
|
Mortgage warehouse facility due 2006 |
|
$ |
308.4 |
|
|
$ |
267.7 |
|
Commercial paper conduit facility due 2006 |
|
|
400.0 |
|
|
|
225.0 |
|
|
|
|
|
|
|
|
|
|
$ |
708.4 |
|
|
$ |
492.7 |
|
|
|
|
|
|
|
|
Homebuilding:
The Company has a $1.21 billion unsecured revolving credit facility, which includes a $350 million
letter of credit sub-facility, that matures on March 25, 2008. The Companys borrowing capacity
under this facility is reduced by the amount of letters of credit outstanding. At June 30, 2005,
the Companys borrowing capacity from this facility was $1.04 billion. The facility is guaranteed
by substantially all of the Companys wholly-owned subsidiaries other than its financial services
subsidiaries. Borrowings bear daily interest at rates based upon the London Interbank Offered Rate
(LIBOR) plus a spread based upon the Companys ratio of debt to tangible net worth and senior
unsecured debt rating. The interest rate applicable to the revolving credit facility at June 30,
2005 was 4.6%. In addition to the stated interest rates, the revolving credit facility requires the
Company to pay certain fees.
In October 2004, the Company issued $250 million principal amount of 4.875% senior notes due 2010.
The notes, which are due January 15, 2010, with interest payable semi-annually, represent unsecured
obligations of the Company. The Company may redeem the notes in whole at any time or in part from
time to time, at a redemption price equal to the greater of 100% of their principal amount or the
present value of the remaining scheduled payments on the redemption date, discounted at a rate
equal to the yield to maturity of a United States Treasury security with a comparable maturity,
plus 25 basis points (0.25%), plus, in each case, accrued interest. The annual effective interest
rate of the notes, after giving effect to the amortization of deferred financing costs and
discounts, is 5.1%.
-8-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
In December 2004, the Company issued $300 million principal amount of 5.625% senior notes due 2016.
The notes, which are due January 15, 2016, with interest payable semi-annually, represent unsecured
obligations of the Company. The Company may redeem the notes in whole at any time or in part from
time to time, at a redemption price equal to the greater of 100% of their principal amount or the
present value of the remaining scheduled payments on the redemption date, discounted at a rate
equal to the yield to maturity of a United States Treasury security with a comparable maturity,
plus 30 basis points (0.30%), plus, in each case, accrued interest. The annual effective interest
rate of the notes, after giving effect to the amortization of deferred financing costs and
discounts, is 5.8%.
In February 2005, the Company issued $300 million principal amount of 5.25% senior notes due 2015.
The notes, which are due February 15, 2015, with interest payable semi-annually, represent
unsecured obligations of the Company. The Company may redeem the notes in whole at any time or in
part from time to time, at a redemption price equal to the greater of 100% of their principal
amount or the present value of the remaining scheduled payments on the redemption date, discounted
at a rate equal to the yield to maturity of a United States Treasury security with a comparable
maturity, plus 25 basis points (0.25%), plus, in each case, accrued interest. The annual effective
interest rate of the notes, after giving effect to the amortization of deferred financing costs and
discounts, is 5.4%.
On April 1, 2005, the Company repaid the $200 million principal amount of its 10.5% senior notes
which were due on that date.
The bank credit facilities and the indentures for most of the senior and senior subordinated notes
contain covenants which, taken together, limit investments in inventory, stock repurchases, cash
dividends and other restricted payments, incurrence of indebtedness, asset dispositions and
creation of liens, and require certain levels of tangible net worth. At June 30, 2005, under the
most restrictive covenants, the additional debt the Company could incur would be limited to $3.1
billion, which included $1.04 billion available under the revolving credit facility. At that date,
under the most restrictive covenants, $1.2 billion was available for restricted payments.
Financial Services:
In April 2005, the Companys mortgage subsidiary renewed its $300 million mortgage warehouse loan
facility payable to financial institutions, extending the maturity date to April 7, 2006 and
increasing the amount that may be borrowed under the uncommitted accordion feature to $150 million.
In June 2005, through amendment to the credit agreement, the Company exercised the accordion
feature and obtained commitments from its lenders that increased the total size of the facility to
$450 million. The mortgage warehouse facility is secured by certain mortgage loans held for sale
and is not guaranteed by D.R. Horton, Inc. or any of the guarantors of its homebuilding debt.
Borrowings bear daily interest at the 30-day LIBOR rate plus a fixed premium. The interest rate of
the mortgage warehouse facility at June 30, 2005 was 4.2%.
The Companys mortgage subsidiary also has a $500 million commercial paper conduit facility (the CP
conduit facility), that expires on June 29, 2006. In June 2005, through amendment to the credit
agreement, the Company increased the capacity available under this facility from $300 million to
$500 million. The CP conduit facility is secured by certain mortgage loans held for sale and is not
guaranteed by D.R. Horton, Inc. or any of the guarantors of its homebuilding debt. The mortgage
loans pledged to secure the CP conduit facility are used as collateral for asset backed commercial
paper issued by multi-seller conduits in the commercial paper market. The interest rate of the CP
conduit facility at June 30, 2005 was 3.9%.
-9-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE F HOMEBUILDING INTEREST
The Company capitalizes homebuilding interest costs to inventory during development and
construction. Capitalized interest is charged to cost of sales as the related inventory is
delivered to the buyer. The following table summarizes the Companys homebuilding interest costs
incurred, charged to cost of sales, and expensed directly during the three-month and nine-month
periods ended June 30, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
|
(In millions) |
|
Capitalized interest, beginning of period |
|
$ |
189.7 |
|
|
$ |
175.4 |
|
|
$ |
152.7 |
|
|
$ |
168.4 |
|
Interest incurred homebuilding |
|
|
68.8 |
|
|
|
59.7 |
|
|
|
204.7 |
|
|
|
177.7 |
|
Interest expensed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directly homebuilding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.3 |
) |
Amortized to cost of sales |
|
|
(59.7 |
) |
|
|
(65.4 |
) |
|
|
(158.6 |
) |
|
|
(173.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized interest, end of period |
|
$ |
198.8 |
|
|
$ |
169.7 |
|
|
$ |
198.8 |
|
|
$ |
169.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE G WARRANTY
The Company provides its homebuyers a one-year comprehensive limited warranty for all parts and
labor and a ten-year limited warranty for major construction defects. The Companys warranty
reserve is based upon historical warranty cost experience in each market in which it operates and
is adjusted as appropriate to reflect qualitative risks associated with the types of homes built
and the geographic areas in which they are built.
Changes in the Companys warranty reserve are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2005 |
| |
2004 |
| |
2005 |
| |
2004 |
|
|
(In millions) |
Warranty reserve, beginning of period |
|
$ |
100.9 |
|
|
$ |
79.7 |
|
|
$ |
96.0 |
|
|
$ |
73.1 |
|
Warranties issued |
|
|
17.2 |
|
|
|
14.0 |
|
|
|
44.5 |
|
|
|
36.9 |
|
Changes in reserves for pre-existing warranties |
|
|
(1.2 |
) |
|
|
(5.9 |
) |
|
|
(3.3 |
) |
|
|
(9.2 |
) |
Settlements made |
|
|
(10.9 |
) |
|
|
(7.8 |
) |
|
|
(31.2 |
) |
|
|
(20.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty reserve, end of period |
|
$ |
106.0 |
|
|
$ |
80.0 |
|
|
$ |
106.0 |
|
|
$ |
80.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE H STOCK-BASED COMPENSATION
The Company may, with the approval of the Compensation Committee of its Board of Directors, grant
to its employees options to purchase a fixed number of shares of its common stock. The Company
accounts for stock option grants in accordance with Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees. The exercise price of the Companys employee stock
options generally equals the market price of the underlying stock on the date of grant; therefore,
no compensation expense is recognized for the initial grant. The Company adopted the disclosure
provisions specified by Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for
Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation
Transition and Disclosure. SFAS No. 123 and SFAS No. 148 require disclosure of pro forma net
income and pro forma net income per share as if the fair value based method had been applied in
measuring compensation expense.
-10-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
The following table sets forth the effect on net income and earnings per share (split-adjusted) for
the three months and nine months ended June 30, 2005 and 2004 as if the fair value based method had
been applied:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
(In millions, except per share data) |
Net income as reported |
|
$ |
371.7 |
|
|
$ |
251.3 |
|
|
$ |
906.7 |
|
|
$ |
625.5 |
|
Add: Stock-based employee compensation expense
included in reported net income, net of tax |
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
1.0 |
|
Deduct: Total stock-based employee compensation
expense determined under fair value based method,
net of tax |
|
|
(1.9 |
) |
|
|
(2.0 |
) |
|
|
(5.9 |
) |
|
|
(4.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
369.8 |
|
|
$ |
249.6 |
|
|
$ |
900.8 |
|
|
$ |
621.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported basic earnings per share |
|
$ |
1.19 |
|
|
$ |
0.81 |
|
|
$ |
2.91 |
|
|
$ |
2.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic earnings per share |
|
$ |
1.18 |
|
|
$ |
0.80 |
|
|
$ |
2.89 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported diluted earnings per share |
|
$ |
1.17 |
|
|
$ |
0.80 |
|
|
$ |
2.85 |
|
|
$ |
1.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma diluted earnings per share |
|
$ |
1.16 |
|
|
$ |
0.79 |
|
|
$ |
2.83 |
|
|
$ |
1.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE I RECENT ACCOUNTING PRONOUNCEMENTS
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. This
statement, which replaces APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting
Accounting Changes in Interim Financial Statements, changes the requirements for the accounting
for and reporting of a change in accounting principle. The statement requires retrospective
application of changes in accounting principle to prior periods financial statements unless it is
impracticable to determine the period-specific effects or the cumulative effect of the change. SFAS
No. 154 is effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. The adoption of SFAS No. 154 is not expected to have a material
impact on the Companys consolidated financial position, results of operations or cash flows.
In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. This statement, which
replaces SFAS No. 123 and supersedes APB Opinion No. 25, requires that companies measure and
recognize compensation expense at an amount equal to the fair value of share-based payments granted
under compensation arrangements. The statement will be effective beginning in the Companys first
quarter of fiscal year 2006. The Company is currently evaluating the impact of the adoption of SFAS
No. 123(R); however, it is not expected to have a material impact on the Companys consolidated
financial position, results of operations or cash flows.
In December 2004, the FASB issued Staff Position 109-1, Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by
the American Jobs Creation Act of 2004 (FSP 109-1). The American Jobs Creation Act, which was
signed into law in October 2004, provides a tax deduction on qualified domestic production
activities. When fully phased-in, the deduction will be up to 9% of the lesser of qualified
production activities income or taxable income. Based on the guidance provided by FSP 109-1, this
deduction should be accounted for as a special deduction under SFAS No. 109 and will reduce tax
expense in the period or periods that the amounts are deductible on the tax return. The tax
benefits, if any, resulting from the new deduction will be effective beginning in the Companys
first quarter of fiscal year 2006. The Company is currently evaluating the impact of this law on its future
financial statements.
-11-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
In October 2004, the FASB ratified Emerging Issues Task Force Issue No. 04-8, The Effect of
Contingently Convertible Debt on Diluted Earnings per Share (EITF 04-8). EITF 04-8 requires that
shares underlying contingently convertible debt be included in diluted earnings per share
computations using the if-converted method regardless of whether the market price trigger, or other
contingent features, has been met. The effective date for EITF 04-8 is for reporting periods ending
after December 15, 2004. EITF 04-8 also requires restatement of earnings per share amounts for
prior periods presented during which the instrument was outstanding. In May 2001, the Company
issued 381,113 zero coupon convertible senior notes, which were converted into shares of its common
stock in June 2003. During certain quarters of the years ended September 30, 2003, 2002 and 2001,
the market price trigger was not met and the convertible shares were not included in the
computation of diluted earnings per share.
The following table sets forth the effect of the adoption of EITF 04-8 on diluted income before
cumulative effect of change in accounting principle per share and net income per share for the
periods affected. Per share amounts have been adjusted to reflect the effects of all stock splits
paid subsequent to the date these per share amounts were originally reported.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
Reported diluted income per share before cumulative effect of
change in accounting principle |
|
$ |
2.05 |
|
|
$ |
1.44 |
|
|
$ |
1.10 |
|
Per share effect of adoption of EITF 04-8 |
|
|
(0.06 |
) |
|
|
(0.05 |
) |
|
|
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted diluted income per share before cumulative effect of
change in accounting principle |
|
$ |
1.99 |
|
|
$ |
1.39 |
|
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported diluted net income per share |
|
$ |
2.05 |
|
|
$ |
1.44 |
|
|
$ |
1.11 |
|
Per share effect of adoption of EITF 04-8 |
|
|
(0.06 |
) |
|
|
(0.05 |
) |
|
|
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted diluted net income per share |
|
$ |
1.99 |
|
|
$ |
1.39 |
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
NOTE J CONTINGENCIES
The Company has been named as defendant in various claims, complaints and other legal actions
arising in the ordinary course of business, including warranty and construction defect claims on
closed homes. The Company has established reserves for such contingencies, based on the expected
costs of the self-insured portion of such claims. The Companys estimates of such reserves are
based on the facts and circumstances of individual pending claims and historical data and trends,
including estimates of the costs of unreported claims related to past operations. These reserve
estimates are subject to ongoing revision as the circumstances of individual pending claims and
historical data and trends change. Adjustments to estimated reserves are recorded in the accounting
period in which the change in estimate occurs.
Management believes that, while the outcome of such contingencies cannot be predicted with
certainty, the liabilities arising from these matters will not have a material adverse effect on
the Companys financial position. However, to the extent the liability arising from the ultimate
resolution of any matter exceeds managements estimates reflected in the reserves relating to such
matter, the Company could incur additional charges that could be significant.
-12-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION
All of the Companys senior and senior subordinated notes and borrowings under the homebuilding
revolving credit facility are fully and unconditionally guaranteed, on a joint and several basis,
by all of the Companys direct and indirect subsidiaries (Guarantor Subsidiaries), other than
financial services subsidiaries and certain other inconsequential subsidiaries (collectively,
Non-Guarantor Subsidiaries). Each of the Guarantor Subsidiaries is wholly-owned. In lieu of
providing separate financial statements for the Guarantor Subsidiaries, consolidated condensed
financial statements are presented below. Separate financial statements and other disclosures
concerning the Guarantor Subsidiaries are not presented because management has determined that they
are not material to investors.
Consolidating Balance Sheet
June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
(In millions) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
47.0 |
|
|
$ |
58.7 |
|
|
$ |
66.1 |
|
|
$ |
|
|
|
$ |
171.8 |
|
Advances to and investments in subsidiaries |
|
|
6,615.6 |
|
|
|
157.8 |
|
|
|
|
|
|
|
(6,773.4 |
) |
|
|
|
|
Inventories |
|
|
2,121.0 |
|
|
|
6,291.5 |
|
|
|
209.9 |
|
|
|
|
|
|
|
8,622.4 |
|
Property and equipment (net) |
|
|
13.0 |
|
|
|
68.3 |
|
|
|
16.5 |
|
|
|
|
|
|
|
97.8 |
|
Earnest money deposits and other assets |
|
|
304.7 |
|
|
|
367.9 |
|
|
|
72.3 |
|
|
|
|
|
|
|
744.9 |
|
Mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
|
828.7 |
|
|
|
|
|
|
|
828.7 |
|
Goodwill |
|
|
|
|
|
|
578.9 |
|
|
|
|
|
|
|
|
|
|
|
578.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
9,101.3 |
|
|
$ |
7,523.1 |
|
|
$ |
1,193.5 |
|
|
$ |
(6,773.4 |
) |
|
$ |
11,044.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
634.3 |
|
|
$ |
980.4 |
|
|
$ |
54.0 |
|
|
$ |
|
|
|
$ |
1,668.7 |
|
Advances from parent/subsidiaries |
|
|
|
|
|
|
4,535.1 |
|
|
|
91.3 |
|
|
|
(4,626.4 |
) |
|
|
|
|
Notes payable |
|
|
3,646.7 |
|
|
|
8.0 |
|
|
|
708.4 |
|
|
|
|
|
|
|
4,363.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
4,281.0 |
|
|
|
5,523.5 |
|
|
|
853.7 |
|
|
|
(4,626.4 |
) |
|
|
6,031.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests |
|
|
|
|
|
|
|
|
|
|
192.4 |
|
|
|
|
|
|
|
192.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity |
|
|
4,820.3 |
|
|
|
1,999.6 |
|
|
|
147.4 |
|
|
|
(2,147.0 |
) |
|
|
4,820.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Equity |
|
$ |
9,101.3 |
|
|
$ |
7,523.1 |
|
|
$ |
1,193.5 |
|
|
$ |
(6,773.4 |
) |
|
$ |
11,044.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-13-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION (Continued)
Consolidating Balance Sheet
September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
(In millions) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
338.9 |
|
|
$ |
131.6 |
|
|
$ |
47.5 |
|
|
$ |
|
|
|
$ |
518.0 |
|
Advances to and investments in subsidiaries |
|
|
5,384.5 |
|
|
|
182.4 |
|
|
|
|
|
|
|
(5,566.9 |
) |
|
|
|
|
Inventories |
|
|
1,487.6 |
|
|
|
4,894.4 |
|
|
|
185.4 |
|
|
|
|
|
|
|
6,567.4 |
|
Property and equipment (net) |
|
|
16.3 |
|
|
|
58.8 |
|
|
|
16.8 |
|
|
|
|
|
|
|
91.9 |
|
Earnest money deposits and other assets |
|
|
256.3 |
|
|
|
299.8 |
|
|
|
49.6 |
|
|
|
|
|
|
|
605.7 |
|
Mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
|
623.3 |
|
|
|
|
|
|
|
623.3 |
|
Goodwill |
|
|
|
|
|
|
578.9 |
|
|
|
|
|
|
|
|
|
|
|
578.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
7,483.6 |
|
|
$ |
6,145.9 |
|
|
$ |
922.6 |
|
|
$ |
(5,566.9 |
) |
|
$ |
8,985.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
537.1 |
|
|
$ |
772.3 |
|
|
$ |
49.5 |
|
|
$ |
|
|
|
$ |
1,358.9 |
|
Advances from parent/subsidiaries |
|
|
|
|
|
|
3,374.5 |
|
|
|
90.6 |
|
|
|
(3,465.1 |
) |
|
|
|
|
Notes payable |
|
|
2,985.8 |
|
|
|
18.9 |
|
|
|
494.5 |
|
|
|
|
|
|
|
3,499.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
3,522.9 |
|
|
|
4,165.7 |
|
|
|
634.6 |
|
|
|
(3,465.1 |
) |
|
|
4,858.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests |
|
|
|
|
|
|
|
|
|
|
166.4 |
|
|
|
|
|
|
|
166.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity |
|
|
3,960.7 |
|
|
|
1,980.2 |
|
|
|
121.6 |
|
|
|
(2,101.8 |
) |
|
|
3,960.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Equity |
|
$ |
7,483.6 |
|
|
$ |
6,145.9 |
|
|
$ |
922.6 |
|
|
$ |
(5,566.9 |
) |
|
$ |
8,985.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-14-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION (Continued)
Consolidating Statement of Income
Three Months Ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
(In millions) |
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
$ |
743.1 |
|
|
$ |
2,528.7 |
|
|
$ |
5.3 |
|
|
$ |
|
|
|
$ |
3,277.1 |
|
Land/lot sales |
|
|
14.4 |
|
|
|
18.0 |
|
|
|
|
|
|
|
|
|
|
|
32.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
757.5 |
|
|
|
2,546.7 |
|
|
|
5.3 |
|
|
|
|
|
|
|
3,309.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
496.2 |
|
|
|
1,913.7 |
|
|
|
3.8 |
|
|
|
|
|
|
|
2,413.7 |
|
Land/lot sales |
|
|
6.7 |
|
|
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
17.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
502.9 |
|
|
|
1,924.0 |
|
|
|
3.8 |
|
|
|
|
|
|
|
2,430.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
246.9 |
|
|
|
615.0 |
|
|
|
1.5 |
|
|
|
|
|
|
|
863.4 |
|
Land/lot sales |
|
|
7.7 |
|
|
|
7.7 |
|
|
|
|
|
|
|
|
|
|
|
15.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254.6 |
|
|
|
622.7 |
|
|
|
1.5 |
|
|
|
|
|
|
|
878.8 |
|
|
Selling, general and administrative expense |
|
|
121.8 |
|
|
|
174.5 |
|
|
|
1.8 |
|
|
|
3.9 |
|
|
|
302.0 |
|
Other (income) expense |
|
|
(471.6 |
) |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
|
|
472.1 |
|
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
604.4 |
|
|
|
448.7 |
|
|
|
0.2 |
|
|
|
(476.0 |
) |
|
|
577.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
60.7 |
|
|
|
|
|
|
|
60.7 |
|
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
42.4 |
|
|
|
(3.9 |
) |
|
|
38.5 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
|
|
|
|
|
4.1 |
|
Other (income) |
|
|
|
|
|
|
|
|
|
|
(9.0 |
) |
|
|
|
|
|
|
(9.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.2 |
|
|
|
3.9 |
|
|
|
27.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
604.4 |
|
|
|
448.7 |
|
|
|
23.4 |
|
|
|
(472.1 |
) |
|
|
604.4 |
|
Provision for income taxes |
|
|
232.7 |
|
|
|
172.9 |
|
|
|
8.9 |
|
|
|
(181.8 |
) |
|
|
232.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
371.7 |
|
|
$ |
275.8 |
|
|
$ |
14.5 |
|
|
$ |
(290.3 |
) |
|
$ |
371.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-15-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION (Continued)
Consolidating Statement of Income
Nine Months Ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
(In millions) |
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
$ |
1,843.2 |
|
|
$ |
6,551.6 |
|
|
$ |
38.1 |
|
|
$ |
|
|
|
$ |
8,432.9 |
|
Land/lot sales |
|
|
119.1 |
|
|
|
58.4 |
|
|
|
|
|
|
|
|
|
|
|
177.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,962.3 |
|
|
|
6,610.0 |
|
|
|
38.1 |
|
|
|
|
|
|
|
8,610.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
1,284.4 |
|
|
|
4,969.6 |
|
|
|
25.8 |
|
|
|
|
|
|
|
6,279.8 |
|
Land/lot sales |
|
|
75.1 |
|
|
|
30.3 |
|
|
|
|
|
|
|
|
|
|
|
105.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,359.5 |
|
|
|
4,999.9 |
|
|
|
25.8 |
|
|
|
|
|
|
|
6,385.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
558.8 |
|
|
|
1,582.0 |
|
|
|
12.3 |
|
|
|
|
|
|
|
2,153.1 |
|
Land/lot
sales |
|
|
44.0 |
|
|
|
28.1 |
|
|
|
|
|
|
|
|
|
|
|
72.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
602.8 |
|
|
|
1,610.1 |
|
|
|
12.3 |
|
|
|
|
|
|
|
2,225.2 |
|
|
Selling, general and administrative expense |
|
|
321.2 |
|
|
|
489.8 |
|
|
|
5.5 |
|
|
|
10.2 |
|
|
|
826.7 |
|
Other (income) expense |
|
|
(1,192.6 |
) |
|
|
(8.8 |
) |
|
|
(0.6 |
) |
|
|
1,190.6 |
|
|
|
(11.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,474.2 |
|
|
|
1,129.1 |
|
|
|
7.4 |
|
|
|
(1,200.8 |
) |
|
|
1,409.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
156.5 |
|
|
|
|
|
|
|
156.5 |
|
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
115.3 |
|
|
|
(10.2 |
) |
|
|
105.1 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
9.1 |
|
|
|
|
|
|
|
9.1 |
|
Other (income) |
|
|
|
|
|
|
|
|
|
|
(22.0 |
) |
|
|
|
|
|
|
(22.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54.1 |
|
|
|
10.2 |
|
|
|
64.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
1,474.2 |
|
|
|
1,129.1 |
|
|
|
61.5 |
|
|
|
(1,190.6 |
) |
|
|
1,474.2 |
|
Provision for income taxes |
|
|
567.5 |
|
|
|
434.9 |
|
|
|
23.5 |
|
|
|
(458.4 |
) |
|
|
567.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
906.7 |
|
|
$ |
694.2 |
|
|
$ |
38.0 |
|
|
$ |
(732.2 |
) |
|
$ |
906.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-16-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION (Continued)
Consolidating Statement of Income
Three Months Ended June 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
(In millions) |
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
$ |
527.8 |
|
|
$ |
2,121.1 |
|
|
$ |
46.6 |
|
|
$ |
|
|
|
$ |
2,695.5 |
|
Land/lot sales |
|
|
2.3 |
|
|
|
43.9 |
|
|
|
|
|
|
|
|
|
|
|
46.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
530.1 |
|
|
|
2,165.0 |
|
|
|
46.6 |
|
|
|
|
|
|
|
2,741.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
378.1 |
|
|
|
1,677.6 |
|
|
|
31.1 |
|
|
|
|
|
|
|
2,086.8 |
|
Land/lot sales |
|
|
2.3 |
|
|
|
26.8 |
|
|
|
|
|
|
|
|
|
|
|
29.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
380.4 |
|
|
|
1,704.4 |
|
|
|
31.1 |
|
|
|
|
|
|
|
2,115.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
149.7 |
|
|
|
443.5 |
|
|
|
15.5 |
|
|
|
|
|
|
|
608.7 |
|
Land/lot sales |
|
|
|
|
|
|
17.1 |
|
|
|
|
|
|
|
|
|
|
|
17.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149.7 |
|
|
|
460.6 |
|
|
|
15.5 |
|
|
|
|
|
|
|
625.8 |
|
|
Selling, general and administrative expense |
|
|
89.9 |
|
|
|
147.5 |
|
|
|
3.7 |
|
|
|
3.2 |
|
|
|
244.3 |
|
Other (income) expense |
|
|
(348.8 |
) |
|
|
(3.6 |
) |
|
|
3.4 |
|
|
|
341.6 |
|
|
|
(7.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
408.6 |
|
|
|
316.7 |
|
|
|
8.4 |
|
|
|
(344.8 |
) |
|
|
388.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
48.7 |
|
|
|
|
|
|
|
48.7 |
|
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
35.4 |
|
|
|
(3.2 |
) |
|
|
32.2 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
1.6 |
|
|
|
|
|
|
|
1.6 |
|
Other (income) |
|
|
|
|
|
|
|
|
|
|
(4.8 |
) |
|
|
|
|
|
|
(4.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.5 |
|
|
|
3.2 |
|
|
|
19.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
408.6 |
|
|
|
316.7 |
|
|
|
24.9 |
|
|
|
(341.6 |
) |
|
|
408.6 |
|
Provision for income taxes |
|
|
157.3 |
|
|
|
121.9 |
|
|
|
9.6 |
|
|
|
(131.5 |
) |
|
|
157.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
251.3 |
|
|
$ |
194.8 |
|
|
$ |
15.3 |
|
|
$ |
(210.1 |
) |
|
$ |
251.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-17-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION (Continued)
Consolidating Statement of Income
Nine Months Ended June 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
(In millions) |
|
Homebuilding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
$ |
1,273.4 |
|
|
$ |
5,709.3 |
|
|
$ |
98.0 |
|
|
$ |
|
|
|
$ |
7,080.7 |
|
Land/lot sales |
|
|
10.9 |
|
|
|
106.9 |
|
|
|
|
|
|
|
|
|
|
|
117.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,284.3 |
|
|
|
5,816.2 |
|
|
|
98.0 |
|
|
|
|
|
|
|
7,198.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
918.8 |
|
|
|
4,501.7 |
|
|
|
69.5 |
|
|
|
|
|
|
|
5,490.0 |
|
Land/lot sales |
|
|
7.0 |
|
|
|
65.4 |
|
|
|
|
|
|
|
|
|
|
|
72.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
925.8 |
|
|
|
4,567.1 |
|
|
|
69.5 |
|
|
|
|
|
|
|
5,562.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
354.6 |
|
|
|
1,207.6 |
|
|
|
28.5 |
|
|
|
|
|
|
|
1,590.7 |
|
Land/lot sales |
|
|
3.9 |
|
|
|
41.5 |
|
|
|
|
|
|
|
|
|
|
|
45.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
358.5 |
|
|
|
1,249.1 |
|
|
|
28.5 |
|
|
|
|
|
|
|
1,636.1 |
|
|
Selling, general and administrative expense |
|
|
235.5 |
|
|
|
427.2 |
|
|
|
8.2 |
|
|
|
8.6 |
|
|
|
679.5 |
|
Interest expense |
|
|
3.0 |
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
3.3 |
|
Other (income) expense |
|
|
(897.0 |
) |
|
|
(7.2 |
) |
|
|
7.6 |
|
|
|
889.5 |
|
|
|
(7.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,017.0 |
|
|
|
829.1 |
|
|
|
12.4 |
|
|
|
(898.1 |
) |
|
|
960.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
131.7 |
|
|
|
|
|
|
|
131.7 |
|
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
92.4 |
|
|
|
(8.6 |
) |
|
|
83.8 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
4.0 |
|
|
|
|
|
|
|
4.0 |
|
Other (income) |
|
|
|
|
|
|
|
|
|
|
(12.7 |
) |
|
|
|
|
|
|
(12.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48.0 |
|
|
|
8.6 |
|
|
|
56.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
1,017.0 |
|
|
|
829.1 |
|
|
|
60.4 |
|
|
|
(889.5 |
) |
|
|
1,017.0 |
|
Provision for income taxes |
|
|
391.5 |
|
|
|
319.2 |
|
|
|
23.2 |
|
|
|
(342.4 |
) |
|
|
391.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
625.5 |
|
|
$ |
509.9 |
|
|
$ |
37.2 |
|
|
$ |
(547.1 |
) |
|
$ |
625.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-18-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION (Continued)
Consolidating Statement of Cash Flows
Nine Months Ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
(In millions) |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
906.7 |
|
|
$ |
694.2 |
|
|
$ |
38.0 |
|
|
$ |
(732.2 |
) |
|
$ |
906.7 |
|
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
5.0 |
|
|
|
31.8 |
|
|
|
2.4 |
|
|
|
|
|
|
|
39.2 |
|
Amortization of debt premiums, discounts
and fees |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in inventories |
|
|
(624.6 |
) |
|
|
(1,388.1 |
) |
|
|
8.9 |
|
|
|
|
|
|
|
(2,003.8 |
) |
Increase in earnest money deposits and
other assets |
|
|
(42.9 |
) |
|
|
(67.3 |
) |
|
|
(23.1 |
) |
|
|
|
|
|
|
(133.3 |
) |
Increase in mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
|
(205.4 |
) |
|
|
|
|
|
|
(205.4 |
) |
Increase (decrease) in accounts payable
and other liabilities |
|
|
87.6 |
|
|
|
208.0 |
|
|
|
(3.0 |
) |
|
|
|
|
|
|
292.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating
activities |
|
|
334.9 |
|
|
|
(521.4 |
) |
|
|
(182.2 |
) |
|
|
(732.2 |
) |
|
|
(1,100.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net purchases of property and equipment |
|
|
(2.2 |
) |
|
|
(40.9 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
(44.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(2.2 |
) |
|
|
(40.9 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
(44.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in notes payable |
|
|
645.2 |
|
|
|
(12.9 |
) |
|
|
213.9 |
|
|
|
|
|
|
|
846.2 |
|
(Decrease) increase in intercompany payables |
|
|
(1,223.0 |
) |
|
|
1,177.3 |
|
|
|
(11.5 |
) |
|
|
57.2 |
|
|
|
|
|
Proceeds from stock associated with certain
employee benefit plans |
|
|
21.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.5 |
|
Cash dividends/distributions paid |
|
|
(68.3 |
) |
|
|
(675.0 |
) |
|
|
|
|
|
|
675.0 |
|
|
|
(68.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing
activities |
|
|
(624.6 |
) |
|
|
489.4 |
|
|
|
202.4 |
|
|
|
732.2 |
|
|
|
799.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(291.9 |
) |
|
|
(72.9 |
) |
|
|
18.6 |
|
|
|
|
|
|
|
(346.2 |
) |
Cash and cash equivalents at beginning of period |
|
|
338.9 |
|
|
|
131.6 |
|
|
|
47.5 |
|
|
|
|
|
|
|
518.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
47.0 |
|
|
$ |
58.7 |
|
|
$ |
66.1 |
|
|
$ |
|
|
|
$ |
171.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-19-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE K SUMMARIZED FINANCIAL INFORMATION (Continued)
Consolidating Statement of Cash Flows
Nine Months Ended June 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.R. |
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Horton, Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
|
|
(In millions) |
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
625.5 |
|
|
$ |
509.9 |
|
|
$ |
37.2 |
|
|
$ |
(547.1 |
) |
|
$ |
625.5 |
|
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
5.9 |
|
|
|
26.0 |
|
|
|
2.5 |
|
|
|
|
|
|
|
34.4 |
|
Amortization of debt premiums, discounts
and fees |
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.0 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in inventories |
|
|
(310.1 |
) |
|
|
(1,042.6 |
) |
|
|
18.6 |
|
|
|
|
|
|
|
(1,334.1 |
) |
Increase in earnest money deposits and
other assets |
|
|
(5.9 |
) |
|
|
(32.8 |
) |
|
|
(0.9 |
) |
|
|
|
|
|
|
(39.6 |
) |
Decrease in mortgage loans held for sale |
|
|
|
|
|
|
|
|
|
|
71.9 |
|
|
|
|
|
|
|
71.9 |
|
(Decrease) increase in accounts payable
and other liabilities |
|
|
(44.6 |
) |
|
|
130.6 |
|
|
|
(12.1 |
) |
|
|
|
|
|
|
73.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating
activities |
|
|
275.8 |
|
|
|
(408.9 |
) |
|
|
117.2 |
|
|
|
(547.1 |
) |
|
|
(563.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net purchases of property and equipment |
|
|
(7.0 |
) |
|
|
(29.5 |
) |
|
|
(2.8 |
) |
|
|
|
|
|
|
(39.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(7.0 |
) |
|
|
(29.5 |
) |
|
|
(2.8 |
) |
|
|
|
|
|
|
(39.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in notes payable |
|
|
414.3 |
|
|
|
(29.4 |
) |
|
|
(88.7 |
) |
|
|
|
|
|
|
296.2 |
|
(Decrease) increase in intercompany payables |
|
|
(769.0 |
) |
|
|
751.6 |
|
|
|
(29.7 |
) |
|
|
47.1 |
|
|
|
|
|
Proceeds from stock associated with certain
employee benefit plans |
|
|
11.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.5 |
|
Cash dividends/distributions paid |
|
|
(48.2 |
) |
|
|
(500.0 |
) |
|
|
|
|
|
|
500.0 |
|
|
|
(48.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing
activities |
|
|
(391.4 |
) |
|
|
222.2 |
|
|
|
(118.4 |
) |
|
|
547.1 |
|
|
|
259.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
|
(122.6 |
) |
|
|
(216.2 |
) |
|
|
(4.0 |
) |
|
|
|
|
|
|
(342.8 |
) |
Cash and cash equivalents at beginning of period |
|
|
196.1 |
|
|
|
319.0 |
|
|
|
67.8 |
|
|
|
|
|
|
|
582.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
73.5 |
|
|
$ |
102.8 |
|
|
$ |
63.8 |
|
|
$ |
|
|
|
$ |
240.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-20-
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2005
NOTE L SUBSEQUENT EVENTS
In July 2005, the Company issued $300 million principal amount of 5.375% senior notes due 2012. The
notes, which are due June 15, 2012, with interest payable semi-annually, represent unsecured
obligations of the Company. The Company may redeem the notes in whole at any time or in part from
time to time, at a redemption price equal to the greater of 100% of their principal amount or the
present value of the remaining scheduled payments on the redemption date, discounted at a rate
equal to the yield to maturity of a United States Treasury security with a comparable maturity,
plus 25 basis points (0.25%), plus, in each case, accrued interest. The annual effective interest
rate of the notes, after giving effect to the amortization of deferred financing costs is 5.4%.
On July 15, 2005, the Company redeemed its 9.375% senior notes due 2009 at an aggregate redemption
price of approximately $246 million, plus accrued interest. The notes were originally issued by
Schuler Homes, Inc. and were assumed by the Company in their merger in February 2002. Concurrent
with the redemption, the Company recorded interest expense of approximately $4.6 million,
representing the call premium net of the unamortized premium related to the redeemed notes.
-21-
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. OVERVIEW
We are the largest homebuilding company in the United States based on domestic homes closed in
2004. We construct and sell single-family homes in metropolitan areas in 23 states and 71 markets
primarily under the name of D.R. Horton, Americas Builder. Our homebuilding operations primarily
include the construction and sale of single-family detached and attached homes with sales prices
generally ranging from $80,000 to $900,000.
Through our financial services operations, we provide mortgage banking and title agency services to
homebuyers in many of our homebuilding markets. DHI Mortgage, our wholly-owned subsidiary, provides
mortgage financing services principally to purchasers of homes we build and sell. We originate
mortgage loans, then package and sell them and their servicing rights to third-party investors
shortly after origination. Our subsidiary title companies serve as title insurance agents by
providing title insurance policies, examination and closing services primarily to purchasers of
homes we build and sell.
We conduct our homebuilding operations in all of the following geographic regions, states and
markets, and we conduct our mortgage and title operations in the markets indicated below:
|
|
|
|
|
|
|
|
Mortgage (M) |
State |
|
Region/Market |
Title (T) |
|
|
Mid-Atlantic Region |
|
|
Maryland |
|
Baltimore |
|
M |
|
|
Suburban Washington D.C. |
|
M,T |
New Jersey |
|
New Jersey |
|
M,T |
North Carolina |
|
Brunswick |
|
|
|
|
Charlotte |
|
M |
|
|
Greensboro/Winston-Salem |
|
M |
|
|
Raleigh/Durham |
|
M |
Pennsylvania |
|
Philadelphia |
|
|
|
|
York/Lancaster |
|
|
South Carolina |
|
Charleston |
|
M |
|
|
Columbia |
|
M |
|
|
Greenville |
|
M |
|
|
Hilton Head |
|
M |
|
|
Myrtle Beach |
|
M |
Virginia |
|
Northern Virginia |
|
M,T |
|
|
|
|
|
|
|
Midwest Region |
|
|
Illinois |
|
Chicago |
|
M |
Minnesota |
|
Minneapolis/St. Paul |
|
M,T |
Wisconsin |
|
Kenosha |
|
|
|
|
|
|
|
|
|
Southeast Region |
|
|
Alabama |
|
Birmingham |
|
M |
|
|
Huntsville |
|
M |
Georgia |
|
Atlanta |
|
M,T |
|
|
Macon |
|
|
|
|
Savannah |
|
M |
Florida |
|
Daytona Beach |
|
M |
|
|
Fort Myers/Naples |
|
M,T |
|
|
Jacksonville |
|
M,T |
|
|
Melbourne |
|
M |
|
|
Miami/West Palm Beach |
|
M,T |
|
|
Orlando |
|
M,T |
|
|
Tampa |
|
M,T |
|
|
|
|
|
|
|
|
Mortgage (M) |
State |
|
Region/Market |
Title (T) |
|
|
Southwest Region |
|
|
Arizona |
|
Casa Grande |
|
M,T |
|
|
Phoenix |
|
M,T |
|
|
Tucson |
|
M |
New Mexico |
|
Albuquerque |
|
M |
|
|
Las Cruces |
|
M |
Oklahoma |
|
Oklahoma City |
|
|
Texas |
|
Austin |
|
M,T |
|
|
Dallas |
|
M,T |
|
|
Fort Worth |
|
M,T |
|
|
Houston |
|
M,T |
|
|
Killeen/Temple |
|
M |
|
|
Laredo |
|
M |
|
|
Rio Grande Valley |
|
M |
|
|
San Antonio |
|
M,T |
|
|
Waco |
|
M |
|
|
|
|
|
|
|
West Region |
|
|
California |
|
Bakersfield/Lancaster/Palmdale |
|
M |
|
|
Fresno/Modesto |
|
M |
|
|
Los Angeles County |
|
M |
|
|
Oakland/North Bay |
|
M |
|
|
Orange County |
|
M |
|
|
Riverside/San Bernardino |
|
M |
|
|
Sacramento |
|
M |
|
|
San Diego County |
|
M |
|
|
San Francisco |
|
M |
|
|
San Jose/Pleasanton/East Bay |
|
M |
|
|
Ventura County |
|
M |
Colorado |
|
Colorado Springs |
|
M |
|
|
Denver |
|
M |
|
|
Ft. Collins |
|
M |
Hawaii |
|
Hawaii |
|
M |
|
|
Maui |
|
M |
|
|
Oahu |
|
M |
Nevada |
|
Las Vegas |
|
M,T |
|
|
Reno |
|
M |
Oregon |
|
Albany |
|
|
|
|
Bend |
|
M |
|
|
Eugene |
|
M |
|
|
Portland |
|
M |
Utah |
|
Salt Lake City |
|
M |
Washington |
|
Seattle/Tacoma |
|
M |
|
|
Vancouver |
|
M |
-22-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We experienced increases in revenues and earnings during the three and nine months ended June
30, 2005, driven by the continued growth of our homebuilding operations and by improvements in
homebuilding profit margins. Key financial highlights as of and for the three months ended June 30,
2005 as compared to the same period of 2004 were as follows:
|
|
|
Net sales orders increased 29% to $4.1 billion |
|
|
|
|
Sales order backlog increased 36% to $7.0 billion |
|
|
|
|
Homebuilding revenue increased 21% to $3.3 billion |
|
|
|
|
Home sales gross profit margin improved 370 basis points to 26.3% |
|
|
|
|
Net income increased 48% to $371.7 million |
|
|
|
|
Diluted earnings per share increased 46% to $1.17 per share |
Key financial highlights for the nine months ended June 30, 2005 as compared to the same period of
2004 were as follows:
|
|
|
Net sales orders increased 27% to $10.9 billion |
|
|
|
|
Homebuilding revenue increased 20% to $8.6 billion |
|
|
|
|
Home sales gross profit margin improved 300 basis points to 25.5% |
|
|
|
|
Net income increased 45% to $906.7 million |
|
|
|
|
Diluted earnings per share increased 44% to $2.85 per share |
RESULTS OF OPERATIONS HOMEBUILDING
The following tables set forth key operating and financial data for our homebuilding operations:
NET SALES ORDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
Homes Sold |
|
|
Value (In millions) |
|
|
Average Selling Price |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
2005 |
|
|
2004 |
|
|
Change |
|
|
2005 |
|
|
2004 |
|
|
Change |
|
|
2005 |
|
|
2004 |
|
|
Change |
|
Mid-Atlantic |
|
|
1,453 |
|
|
|
1,147 |
|
|
|
27 |
% |
|
$ |
381.6 |
|
|
$ |
296.7 |
|
|
|
29 |
% |
|
$ |
262,600 |
|
|
$ |
258,700 |
|
|
|
2 |
% |
Midwest |
|
|
952 |
|
|
|
586 |
|
|
|
62 |
% |
|
|
254.5 |
|
|
|
162.2 |
|
|
|
57 |
% |
|
|
267,300 |
|
|
|
276,800 |
|
|
|
(3 |
)% |
Southeast |
|
|
2,346 |
|
|
|
1,739 |
|
|
|
35 |
% |
|
|
577.3 |
|
|
|
394.1 |
|
|
|
46 |
% |
|
|
246,100 |
|
|
|
226,600 |
|
|
|
9 |
% |
Southwest |
|
|
5,807 |
|
|
|
4,962 |
|
|
|
17 |
% |
|
|
1,158.5 |
|
|
|
839.2 |
|
|
|
38 |
% |
|
|
199,500 |
|
|
|
169,100 |
|
|
|
18 |
% |
West |
|
|
4,422 |
|
|
|
4,010 |
|
|
|
10 |
% |
|
|
1,762.9 |
|
|
|
1,524.1 |
|
|
|
16 |
% |
|
|
398,700 |
|
|
|
380,100 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,980 |
|
|
|
12,444 |
|
|
|
20 |
% |
|
$ |
4,134.8 |
|
|
$ |
3,216.3 |
|
|
|
29 |
% |
|
$ |
276,000 |
|
|
$ |
258,500 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, |
|
|
|
Homes Sold |
|
|
Value (In millions) |
|
|
Average Selling Price |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
2005 |
|
|
2004 |
|
|
Change |
|
|
2005 |
|
|
2004 |
|
|
Change |
|
|
2005 |
|
|
2004 |
|
|
Change |
|
Mid-Atlantic |
|
|
3,753 |
|
|
|
2,896 |
|
|
|
30 |
% |
|
$ |
1,004.7 |
|
|
$ |
740.6 |
|
|
|
36 |
% |
|
$ |
267,700 |
|
|
$ |
255,700 |
|
|
|
5 |
% |
Midwest |
|
|
2,258 |
|
|
|
1,617 |
|
|
|
40 |
% |
|
|
603.8 |
|
|
|
462.5 |
|
|
|
31 |
% |
|
|
267,400 |
|
|
|
286,000 |
|
|
|
(7 |
)% |
Southeast |
|
|
6,079 |
|
|
|
4,670 |
|
|
|
30 |
% |
|
|
1,485.8 |
|
|
|
1,010.7 |
|
|
|
47 |
% |
|
|
244,400 |
|
|
|
216,400 |
|
|
|
13 |
% |
Southwest |
|
|
15,383 |
|
|
|
13,677 |
|
|
|
12 |
% |
|
|
3,007.1 |
|
|
|
2,300.2 |
|
|
|
31 |
% |
|
|
195,500 |
|
|
|
168,200 |
|
|
|
16 |
% |
West |
|
|
11,809 |
|
|
|
11,298 |
|
|
|
5 |
% |
|
|
4,787.8 |
|
|
|
4,069.8 |
|
|
|
18 |
% |
|
|
405,400 |
|
|
|
360,200 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,282 |
|
|
|
34,158 |
|
|
|
15 |
% |
|
$ |
10,889.2 |
|
|
$ |
8,583.8 |
|
|
|
27 |
% |
|
$ |
277,200 |
|
|
$ |
251,300 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-23-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES ORDER BACKLOG |
|
|
|
|
|
|
|
As of June 30, |
|
|
Homes in Backlog |
|
Value (In millions) |
|
Average Selling Price |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
% |
|
|
2005 |
|
2004 |
|
Change |
|
2005 |
|
2004 |
|
Change |
|
2005 |
|
2004 |
|
Change |
Mid-Atlantic |
|
2,812 |
|
1,861 |
|
51 |
% |
$ |
825.3 |
|
$ |
523.5 |
|
58 |
% |
$ |
293,500 |
|
$ |
281,300 |
|
4 |
% |
Midwest |
|
1,701 |
|
1,177 |
|
45 |
% |
502.3 |
|
355.5 |
|
41 |
% |
295,300 |
|
302,000 |
|
(2 |
)% |
Southeast |
|
4,027 |
|
2,730 |
|
48 |
% |
1,047.0 |
|
624.0 |
|
68 |
% |
260,000 |
|
228,600 |
|
14 |
% |
Southwest |
|
8,543 |
|
7,415 |
|
15 |
% |
1,796.9 |
|
1,280.8 |
|
40 |
% |
210,300 |
|
172,700 |
|
22 |
% |
West |
|
6,833 |
|
6,348 |
|
8 |
% |
2,853.2 |
|
2,372.7 |
|
20 |
% |
417,600 |
|
373,800 |
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,916 |
|
19,531 |
|
22 |
% |
$ |
7,024.7 |
|
$ |
5,156.5 |
|
36 |
% |
$ |
293,700 |
|
$ |
264,000 |
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HOMES CLOSED |
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Homes Closed |
|
Value (In millions) |
|
Average Selling Price |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
% |
|
|
2005 |
|
2004 |
|
Change |
|
2005 |
|
2004 |
|
Change |
|
2005 |
|
2004 |
|
Change |
Mid-Atlantic |
|
978 |
|
994 |
|
(2 |
)% |
$ |
253.1 |
|
$ |
226.0 |
|
12 |
% |
$ |
258,800 |
|
$ |
227,400 |
|
14 |
% |
Midwest |
|
563 |
|
534 |
|
5 |
% |
146.7 |
|
147.3 |
|
|
% |
260,600 |
|
275,800 |
|
(6 |
)% |
Southeast |
|
1,942 |
|
1,360 |
|
43 |
% |
447.9 |
|
281.9 |
|
59 |
% |
230,600 |
|
207,300 |
|
11 |
% |
Southwest |
|
4,819 |
|
4,565 |
|
6 |
% |
892.8 |
|
769.3 |
|
16 |
% |
185,300 |
|
168,500 |
|
10 |
% |
West |
|
3,967 |
|
3,597 |
|
10 |
% |
1,536.6 |
|
1,271.0 |
|
21 |
% |
387,300 |
|
353,400 |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,269 |
|
11,050 |
|
11 |
% |
$ |
3,277.1 |
|
$ |
2,695.5 |
|
22 |
% |
$ |
267,100 |
|
$ |
243,900 |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, |
|
|
Homes Closed |
|
Value (In millions) |
|
Average Selling Price |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
% |
|
|
2005 |
|
2004 |
|
Change |
|
2005 |
|
2004 |
|
Change |
|
2005 |
|
2004 |
|
Change |
Mid-Atlantic |
|
2,681 |
|
2,637 |
|
2 |
% |
$ |
671.6 |
|
$ |
588.0 |
|
14 |
% |
$ |
250,500 |
|
$ |
223,000 |
|
12 |
% |
Midwest |
|
1,418 |
|
1,421 |
|
|
% |
371.2 |
|
385.8 |
|
(4 |
)% |
261,800 |
|
271,500 |
|
(4 |
)% |
Southeast |
|
5,039 |
|
3,763 |
|
34 |
% |
1,137.3 |
|
750.8 |
|
51 |
% |
225,700 |
|
199,500 |
|
13 |
% |
Southwest |
|
13,472 |
|
12,938 |
|
4 |
% |
2,405.5 |
|
2,140.3 |
|
12 |
% |
178,600 |
|
165,400 |
|
8 |
% |
West |
|
9,940 |
|
9,356 |
|
6 |
% |
3,847.3 |
|
3,215.8 |
|
20 |
% |
387,100 |
|
343,700 |
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,550 |
|
30,115 |
|
8 |
% |
$ |
8,432.9 |
|
$ |
7,080.7 |
|
19 |
% |
$ |
259,100 |
|
$ |
235,100 |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HOMEBUILDING OPERATING MARGIN ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages of Total Homebuilding Revenues |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales |
|
|
26.3 |
% |
|
22.6 |
% |
|
25.5 |
% |
|
22.5 |
% |
Land/lot sales |
|
|
47.5 |
% |
|
37.0 |
% |
|
40.6 |
% |
|
38.5 |
% |
|
|
|
|
|
|
|
|
|
|
Total homebuilding gross profit |
|
|
26.6 |
% |
|
22.8 |
% |
|
25.8 |
% |
|
22.7 |
% |
Selling, general and administrative expense |
|
|
9.1 |
% |
|
8.9 |
% |
|
9.6 |
% |
|
9.4 |
% |
Interest expense |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
Other (income) |
|
|
|
% |
|
(0.3 |
)% |
|
(0.1 |
)% |
|
(0.1 |
)% |
Income before income taxes |
|
|
17.4 |
% |
|
14.2 |
% |
|
16.4 |
% |
|
13.3 |
% |
-24-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Sales Orders and Backlog
Net sales orders represent the number and dollar value of new sales contracts executed with
customers, net of sales contract cancellations. The value of net sales orders increased 29% to
$4,134.8 million (14,980 homes) for the three months ended June 30, 2005, from $3,216.3 million
(12,444 homes) for the same period of 2004. The value of net sales orders increased 27% to
$10,889.2 million (39,282 homes) for the nine months ended June 30, 2005, from $8,583.8 million
(34,158 homes) for the same period of 2004. The average price of a net sales order in the three
months ended June 30, 2005 was $276,000, up 7% from the $258,500 average in the comparable period
of 2004. The average price of a net sales order in the nine months ended June 30, 2005 was
$277,200, up 10% from the $251,300 average in the comparable period of 2004. The number and value
of net sales orders during the three and nine-month periods increased in each of our five market
regions, with all regions producing double-digit increases in both categories during the
three-month period. These results reflect the successful execution of our organic growth strategies
and the overall strong demand for our homes.
The largest percentage increase in the value of net sales orders during the three-month period
occurred in our Midwest region, which is comprised of only three markets, and where our efforts to offer more
lower priced products in the Chicago market helped contribute to a 62% increase in the number of units sold for the
region. The largest percentage increase in the value of net sales orders during the nine-month
period occurred in the Southeast region, as we continue to expand our presence in our Florida
markets where housing demand is high. The average price of net sales orders during the three and
nine-month periods increased in four of our five market regions, demonstrating our ability to
increase prices in the markets where demand for our homes is strongest. In the Midwest region, the
average sales price for the three and nine-month periods was down 3% and 7%, respectively, due to
efforts to offer more lower priced products in the Chicago market.
Sales order backlog represents homes under contract but not yet closed at the end of the period.
Some of the contracts in our sales order backlog are subject to contingencies, including mortgage
loan approval, that can result in cancellations. In the past, our backlog has been a reliable
indicator of the level of closings in our two subsequent fiscal quarters, although some contracts
in backlog will not result in closings. At June 30, 2005, the value of our backlog of sales orders
was $7,024.7 million (23,916 homes), up 36% from $5,156.5 million (19,531 homes) at June 30, 2004.
The average sales price of homes in sales order backlog was $293,700 at June 30, 2005, up 11% from
the average price of $264,000 at June 30, 2004. The value of our backlog of sales orders was up in
all of our five market regions, with the Southeast and Mid-Atlantic regions showing the largest
percentage increases from the prior period, up 68% and 58%, respectively. These increases are the
result of our continued efforts to expand our presence in our Florida, New Jersey and Northern
Virginia markets. The increase in our average selling price is due to our ability to increase
prices in the markets where demand for our homes is strongest.
Home Sales Revenue and Gross Profit
Revenues from home sales increased 22%, to $3,277.1 million (12,269 homes closed) for the three
months ended June 30, 2005, from $2,695.5 million (11,050 homes closed) for the comparable period
of 2004. Revenues from home sales increased 19%, to $8,432.9 million (32,550 homes closed) for the
nine months ended June 30, 2005, from $7,080.7 million (30,115 homes closed) for the comparable period of 2004. The average selling
price of homes closed during the three months ended June 30, 2005 was $267,100, up 10% from
$243,900 for the same period in 2004. The average selling price of homes closed during the nine
months ended June 30, 2005 was $259,100, up 10% from $235,100 for the same period in 2004. Revenues
from home sales increased in four of our five market regions during the three and nine-month
periods. The increase in our revenues is due to our continued execution of our organic growth
strategies in most of our markets and our ability to increase prices in the markets where demand
for our homes is strongest.
Gross profit from home sales increased by 42%, to $863.4 million for the three months ended June
30, 2005, from $608.7 million for the comparable period of 2004. Gross profit from home sales
increased by 35%, to $2,153.1 million for the nine months ended June 30, 2005, from $1,590.7
million for the comparable period of 2004. Gross profit from home sales as a percentage of home
sales revenues increased 370 basis points, to 26.3% for the three
-25-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
months ended June 30, 2005; and 300 basis points, to 25.5% for the nine months ended June 30, 2005,
from the comparable periods of 2004. The improvement in gross profit from home sales as a
percentage of revenue for the three and nine-month periods is attributable to our ability to
increase home prices in many of our markets, our ongoing efforts to control and reduce construction
costs through our local, regional and national purchasing programs, and our ongoing efforts to
re-allocate capital to our more profitable markets. The gross profit improvement also reflects a
decrease in the capitalized interest amortized to cost of sales, resulting from improvement in our
homebuilding leverage ratios and our debt refinancing efforts over the past two years.
Land Sales Revenue and Gross Profit
Land sales revenues decreased 30%, to $32.4 million for the three months ended June 30, 2005, and
increased 51%, to $177.5 million for the nine months ended June 30, 2005, from $46.2 million and
$117.8 million in the comparable periods of 2004. The increase in land sales revenue for the
nine-month period is due to our sale of a single, commercially-zoned parcel in our West region in
March 2005. The gross profit percentage from land sales increased to 47.5% for the three months
ended June 30, 2005, from 37.0% in the comparable period of the prior year, and increased to 40.6%
for the nine months ended June 30, 2005 from 38.5% in the prior year. The fluctuations in revenues
and gross profit percentages from land sales are a function of how we manage our inventory levels
in various markets. We generally purchase land and lots with the intent to build and sell homes on
them. When we have the opportunity and the need to sell land or lots in our various markets to
manage inventories at desired levels, or because the land is not zoned for residential
construction, the resulting land sales occur at unpredictable intervals and varying degrees of
profitability. Therefore, the revenues and gross profit from land sales can fluctuate significantly
from period to period.
Selling, General and Administrative Expense
Selling, general and administrative (SG&A) expenses from homebuilding activities increased by 24%,
to $302.0 million in the three months ended June 30, 2005, and 22%, to $826.7 million in the nine
months ended June 30, 2005, from the comparable periods of 2004. As a percentage of homebuilding
revenues, SG&A expenses increased 20 basis points in both the three months and nine months ended
June 30, 2005, to 9.1% and 9.6% for the three months and nine months ended June 30, 2005,
respectively, from the comparable periods of 2004. Our homebuilding SG&A expense as a percentage of
revenues can vary between quarters, depending largely on the relative fluctuations in quarterly
revenue levels. The increases in SG&A expenses as a percentage of homebuilding revenues in the
three and nine-month periods are due primarily to costs associated with the growth of our
infrastructure to support our planned growth in home deliveries.
Interest Expense
Interest incurred related to homebuilding debt increased by 15%, to $68.8 million in the three
months ended June 30, 2005, from $59.7 million in the comparable period in 2004, while our average
daily homebuilding debt increased 23% from the prior year period. Interest incurred related to
homebuilding debt also increased by 15%, to $204.7 million in the nine months ended June 30, 2005,
from $177.7 million in the comparable period in 2004, while our average daily homebuilding debt
increased 26% from the prior year period. Interest incurred increased at a slower rate than average
debt because we have replaced certain of our higher interest rate notes with notes bearing lower
interest rates, and we restructured and amended our unsecured revolving credit facility in March
2004, which lowered our interest costs.
We capitalize interest costs only to inventory under construction or development. During both
years, our inventory under construction or development exceeded our interest-bearing debt;
therefore, we capitalized virtually all interest from homebuilding debt. Interest expense of $3.3
million for the nine-month period of 2004 included $3.1 million of unamortized issuance costs
related to restructuring our revolving credit facility during the quarter ended March 31, 2004.
Interest amortized to cost of sales was 2.5% of total cost of sales in both the three and nine
month periods ended June 30, 2005, compared to 3.1% in both of the comparable periods of 2004. The
reduction in interest amortized to cost of sales as a percentage of total cost of sales for the
three and nine-month periods is a direct result
-26-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
of the reductions in our homebuilding leverage ratios and our debt refinancing efforts over the
past two years, which has also reduced our capitalized interest as a percentage of inventory.
Other Income
Other income associated with homebuilding activities was $0.5 million in the three months ended
June 30, 2005, compared to $7.4 million in the comparable period of 2004. Other income associated
with homebuilding activities was $11.4 million in the nine months ended June 30, 2005, compared to
$7.1 million in the comparable period of 2004. The largest component of other income for the
nine-month period is the change in the fair value of our interest rate swaps.
RESULTS OF OPERATIONS FINANCIAL SERVICES
The following tables set forth key operating and financial data for our financial services
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
2005 |
|
|
2004 |
|
|
Change |
|
|
2005 |
|
|
2004 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
Loan origination fees |
|
$ |
11.0 |
|
|
$ |
9.4 |
|
|
|
17 |
% |
|
$ |
28.0 |
|
|
$ |
24.7 |
|
|
|
13 |
% |
Sale of servicing rights and gains from
sale of mortgages |
|
|
29.1 |
|
|
|
23.9 |
|
|
|
22 |
% |
|
|
76.1 |
|
|
|
64.9 |
|
|
|
17 |
% |
Other revenues |
|
|
8.5 |
|
|
|
6.1 |
|
|
|
39 |
% |
|
|
21.2 |
|
|
|
15.3 |
|
|
|
39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage banking revenues |
|
|
48.6 |
|
|
|
39.4 |
|
|
|
23 |
% |
|
|
125.3 |
|
|
|
104.9 |
|
|
|
19 |
% |
Title policy premiums, net |
|
|
12.1 |
|
|
|
9.3 |
|
|
|
30 |
% |
|
|
31.2 |
|
|
|
26.8 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
60.7 |
|
|
|
48.7 |
|
|
|
25 |
% |
|
|
156.5 |
|
|
|
131.7 |
|
|
|
19 |
% |
General and administrative expense |
|
|
38.5 |
|
|
|
32.2 |
|
|
|
20 |
% |
|
|
105.1 |
|
|
|
83.8 |
|
|
|
25 |
% |
Interest expense |
|
|
4.1 |
|
|
|
1.6 |
|
|
|
156 |
% |
|
|
9.1 |
|
|
|
4.0 |
|
|
|
128 |
% |
Other (income) |
|
|
(9.0 |
) |
|
|
(4.8 |
) |
|
|
88 |
% |
|
|
(22.0 |
) |
|
|
(12.7 |
) |
|
|
73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
27.1 |
|
|
$ |
19.7 |
|
|
|
38 |
% |
|
$ |
64.3 |
|
|
$ |
56.6 |
|
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL SERVICES OPERATING MARGIN ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages of Total Financial Services Revenues |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
General and administrative expense |
|
|
63.4 |
% |
|
|
66.1 |
% |
|
|
67.2 |
% |
|
|
63.6 |
% |
Interest expense |
|
|
6.8 |
% |
|
|
3.3 |
% |
|
|
5.8 |
% |
|
|
3.0 |
% |
Other (income) |
|
|
(14.8 |
)% |
|
|
(9.9 |
)% |
|
|
(14.1 |
)% |
|
|
(9.6 |
)% |
Income before income taxes |
|
|
44.6 |
% |
|
|
40.5 |
% |
|
|
41.1 |
% |
|
|
43.0 |
% |
Financial Services Revenue
Revenues from the financial services segment increased 25% to $60.7 million in the three months
ended June 30, 2005, from the comparable period of 2004. Revenues from the financial services
segment increased 19% to $156.5 million in the nine months ended June 30, 2005, from the comparable
period of 2004. The increase in financial services revenues was primarily due to increases in the
number of loans originated and sold to third-party investors and title policy premiums, resulting
from the growth of our homebuilding operations. The majority of the revenues associated with our
mortgage operations are recognized when the mortgage loans and related servicing rights are sold to
third-party investors.
-27-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General and Administrative Expense
General and administrative expenses associated with financial services increased 20% and 25%, to
$38.5 million and $105.1 million in the three and nine months ended June 30, 2005, respectively,
from the comparable periods of 2004. As a percentage of financial services revenues, general and
administrative expenses in the three-month period ended June 30, 2005 was 63.4%, an improvement of
270 basis points from the comparable period of 2004. As a percentage of financial services
revenues, general and administrative expenses in the nine-month period ended June 30, 2005 was
67.2%, an increase of 360 basis points from the comparable period of 2004. The decrease in general
and administrative expenses as a percentage of financial services revenue during the three-month
period was due primarily to the quarterly increase in revenues, which better leveraged our fixed
costs than in the prior year quarter. The increase in general and administrative expenses as a
percentage of financial services revenue during the nine-month period was due primarily to changes
in the product mix of mortgage loans originated and sold, increased competition in the mortgage
industry and our efforts to strengthen our financial services infrastructure to support our growing
homebuilding business.
RESULTS OF OPERATIONS CONSOLIDATED
Income Before Income Taxes
Income before income taxes for the three months ended June 30, 2005, increased 48% from the
comparable period of 2004, to $604.4 million. Income before income taxes for the nine months ended
June 30, 2005, increased 45% from the comparable period of 2004, to $1,474.2 million. As a
percentage of revenues, income before income taxes for the three months ended June 30, 2005 was
17.9%, an increase of 330 basis points from the comparable period of 2004. As a percentage of
revenues, income before income taxes for the nine months ended June 30, 2005 was 16.8%, an increase
of 290 basis points from the comparable period of 2004. The primary factor contributing to these
improvements was the homebuilding segments pre-tax operating margin, which increased 320 basis
points and 310 basis points versus the three and nine months ended June 30, 2004, respectively.
Provision for Income Taxes
The consolidated provision for income taxes for the three and nine months ended June 30, 2005
increased 48% and 45% from the comparable periods of 2004, to $232.7 million and $567.5 million,
respectively, due to the corresponding increase in income before income taxes. The effective income
tax rate for all periods was 38.5%.
During 2004, the American Jobs Creation Act was signed into law. The tax benefits, if any,
resulting from this legislation will be effective for our fiscal year ending September 30, 2006. We
are currently evaluating the impact of this law on our future effective income tax rate and
consolidated financial statements.
CAPITAL RESOURCES AND LIQUIDITY
We fund our homebuilding and financial services operations with cash flows from operating
activities, borrowings under our bank credit facilities and the issuance of new debt securities. As
we utilize our capital resources and liquidity to fund the growth of our operations, we have
focused on maintaining strong balance sheet leverage ratios.
At June 30, 2005, our ratio of net homebuilding debt to total capital was 42.4%, increasing from
38.9% at September 30, 2004, and decreasing from 43.6% at June 30, 2004. Net homebuilding debt to
total capital consists of homebuilding notes payable (net of cash) divided by total capital
(homebuilding notes payable net of cash plus stockholders equity). The increase in our ratio of
net homebuilding debt to total capital at June 30, 2005 as compared with the ratio at September 30,
2004 is due to the increase in borrowings associated with funding a planned increase in inventory,
and is partially offset by the increase in retained earnings. We increased construction in progress
inventory to support higher home closings planned for our fourth fiscal quarter, and we increased
residential lot inventory to support our planned growth in home closings in future years. For the
same reasons, our stockholders equity to total assets ratio decreased 50 basis points, to 43.6% at
June 30, 2005, from 44.1% at September 30, 2004.
-28-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We believe that we will be able to continue to fund our homebuilding and financial services
operations and our future cash needs through a combination of our existing cash resources, cash
flows from operations, our existing credit facilities and the issuance of new debt securities
through the public capital markets.
Homebuilding Capital Resources
Cash At June 30, 2005, our available homebuilding cash and cash equivalents amounted to $109.8
million.
Bank Credit Facility We have a $1.21 billion unsecured revolving credit facility, which includes
a $350 million letter of credit sub-facility, that matures on March 25, 2008. The facility is
guaranteed by substantially all of our wholly-owned subsidiaries other than our financial services
subsidiaries.
We had $50 million in cash borrowings outstanding on our homebuilding revolving credit facility at
June 30, 2005 and no outstanding cash borrowings at September 30, 2004. Under the debt covenants
associated with our revolving credit facility, our additional homebuilding borrowing capacity under
the facility is limited to the lesser of the unused portion of the facility, $1.04 billion at June
30, 2005, or an amount determined under a borrowing base arrangement. Under the borrowing base
limitation, the sum of our senior debt and the amount drawn on our revolving credit facility may
not exceed certain percentages of the various categories of our unencumbered inventory. At June 30,
2005, the borrowing base arrangement would have limited our additional borrowing capacity from any
source to $3.1 billion. At June 30, 2005, we were in compliance with all of the covenants,
limitations and restrictions that form a part of our public debt obligations and our bank revolving
credit facility.
Shelf Registration Statements At June 30, 2005, we had the capacity to issue new debt or equity
securities amounting to $900 million under our universal shelf registration statement. In July
2005, we issued $300 million of 5.375% senior notes which reduced our capacity under the universal
shelf registration statement to $600 million. Also, at June 30, 2005, we had the capacity to issue
approximately 22.5 million shares of common stock under our acquisition shelf registration
statement, to effect, in whole or in part, possible future business acquisitions. We intend to
maintain sufficient capacity under our universal shelf registration statement and our acquisition
shelf registration statement to meet our anticipated capital needs,
which may result in our updating or filing of additional registration
statements.
Debt Repayments On April 1, 2005, we repaid the $200 million principal amount of our 10.5% senior
notes which became due on that date.
On
July 15, 2005, we redeemed our 9.375% senior notes due 2009 at an aggregate redemption
price of approximately $246 million, plus accrued interest. The notes were originally issued by
Schuler Homes, Inc. and were assumed by us in the merger in February 2002. Concurrent
with the redemption, we recorded interest expense of approximately $4.6 million,
representing the call premium net of the unamortized premium related to the redeemed notes.
Financial Services Capital Resources
Cash At June 30, 2005, we had available financial services cash and cash equivalents of $62.0
million.
Mortgage Warehouse Loan Facility - In April 2005, our wholly-owned mortgage company restructured
and amended its $300 million mortgage warehouse loan facility, increasing the accordion feature to
$150 million and extending its maturity to April 7, 2006. In June 2005, through amendment to the
credit agreement, we exercised the accordion feature and obtained commitments from our lenders that
increased the total size of the facility to $450 million. We expect the additional $150
million related to the exercise of the accordion feature to remain in place through October 2005,
the period in which we expect our highest number of home closings and loan originations to occur.
At June 30, 2005, we had borrowings of $308.4 million outstanding under the mortgage warehouse
facility.
-29-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Commercial Paper Conduit Facility - Our wholly-owned mortgage company also has a $500 million
commercial paper conduit facility (the CP conduit facility), which expires on June 29, 2006. In
June 2005, through amendment to the credit agreement, we increased the capacity available under
this facility to $500 million from its previous capacity of $300 million. At June 30, 2005, $400
million had been drawn under the CP conduit facility.
The mortgage warehouse loan facility and the CP conduit facility are not guaranteed by either the
parent company or any of the subsidiaries that guarantee our homebuilding debt. Borrowings under
both facilities are secured by certain mortgage loans held for sale. The mortgage loans pledged to
secure the CP conduit facility are used as collateral for asset backed commercial paper issued by
multi-seller conduits in the commercial paper market. At June 30, 2005, our total mortgage loans
held for sale were $828.7 million. All mortgage company activities are financed with the mortgage
warehouse facility, the CP conduit facility or internally generated funds. Both of our financial
services credit facilities contain financial covenants with which we are in compliance.
Operating Cash Flow Activities
For the nine months ended June 30, 2005, we used $1.1 billion of cash in our operating activities,
as compared to $563.0 million of cash used in such activities during the comparable period of the
prior year. The increase in cash used in operating activities is due to our decision to fund
inventory growth with $2.0 billion to support our planned home closings volume in the remainder of
fiscal 2005 and future years.
A large portion of our cash invested in inventories represents purchases of land and lots that will
be used to generate revenues and cash flows in future years. Since we control the amounts and
timing of our investments in land and lots based on our inventory growth goals and our market
opportunities, and because much of our investments in land and lots will not generate revenues in
this fiscal year, we believe that cash flows from operating activities before inventory additions
is currently a better indicator of our operational liquidity.
Investing Cash Flow Activities
For the nine months ended June 30, 2005 and 2004, cash used in investing activities represented net
purchases of property and equipment, primarily model home furniture and office equipment. Such
purchases are not significant relative to our total assets or cash flows and typically do not vary
significantly from period to period.
Financing Cash Flow Activities
The majority of our short-term financing needs are funded with cash generated from operations and
funds available under our homebuilding and financial services credit facilities. Long-term
financing needs are generally funded with the issuance of new senior unsecured debt securities
through the public capital markets. Our homebuilding senior and senior subordinated notes and
borrowings under our homebuilding revolving credit facility are guaranteed by substantially all of
our wholly-owned subsidiaries other than our financial services subsidiaries.
In October 2004, we issued $250 million of 4.875% senior notes due 2010. We used the proceeds from
this offering for general corporate purposes, including land acquisition and development, home
construction and homebuilding operations and other working capital needs.
In December 2004, we issued $300 million of 5.625% senior notes due 2016. We used the proceeds from
this offering to repay borrowings under the revolving credit facility and for general corporate
purposes, including land acquisition and development, home construction and homebuilding operations
and other working capital needs.
In February 2005, we issued $300 million of 5.25% senior notes due 2015. We used the proceeds from
this offering to repay borrowings under the revolving credit facility and for general corporate
purposes, including land acquisition and development, home construction and homebuilding operations
and other working capital needs.
In
February 2005, our Board of Directors declared a four-for-three stock split (effected
as a 33% stock dividend), paid on March 16, 2005 to common stockholders of record on March 1, 2005.
-30-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In July 2005, we issued $300 million of 5.375% senior notes due 2012. We used the proceeds from
this offering for general corporate purposes, including the repayment of borrowings under our
revolving credit facility and for the early redemption of our 9.375% senior notes due 2009.
During the three months ended June 30, 2005, our Board of Directors declared a quarterly cash
dividend of $0.09 per common share, which was paid on May 20, 2005 to stockholders of record on May
6, 2005. In July 2005, our Board of Directors declared a quarterly cash dividend of $0.09 per
common share, payable on August 19, 2005 to stockholders of record on August 5, 2005.
Changes
in Capital Structure
In May 2005, our Board of Directors authorized the repurchase of up to $175.6 million of our common stock
and up to $200 million of our outstanding debt securities, as market conditions warrant. As of June 30, 2005, we had
$175.6 million remaining of the Board of Directors authorization for repurchases of common stock
and $200 million remaining of the authorization for repurchases of debt securities.
OFF-BALANCE SHEET ARRANGEMENTS
In the ordinary course of business, we enter into land and lot option purchase contracts in order
to procure land or lots for the construction of homes. Lot option contracts enable us to control
significant lot positions with a minimal capital investment and substantially reduce the risks
associated with land ownership and development. At June 30, 2005, we had $284.0 million in deposits
to purchase land and lots with a total remaining purchase price of $5.7 billion. Only $64.7 million
of the remaining purchase price is subject to specific performance clauses which may require us to
purchase the land or lots upon the land seller meeting certain obligations. We consolidated certain
variable interest entities and other inventory obligations with assets of $185.2 million.
In the normal course of business, we provide standby letters of credit and performance bonds,
issued by third parties, to secure performance under various contracts. At June 30, 2005,
outstanding standby letters of credit and performance bonds, the majority of which mature in less
than one year, were $138.6 million and $1.6 billion, respectively.
LAND AND LOT POSITION AND HOMES IN INVENTORY
At June 30, 2005, about 54% of our total lot position of 323,000 lots was controlled under option
or similar contracts. The following is a summary of our land/lot position at June 30, 2005:
|
|
|
|
|
Lots owned developed and under development |
|
|
150,000 |
|
Lots controlled under lot option and similar contracts |
|
|
173,000 |
|
|
|
|
|
|
Total land/lots controlled |
|
|
323,000 |
|
|
|
|
|
|
|
|
|
|
|
Percentage controlled under option |
|
|
54% |
|
|
|
|
|
|
At June 30, 2005, we had a total of approximately 30,000 homes under construction and in inventory,
including approximately 1,700 model homes and approximately 350 unsold homes that had been
completed for more than six months.
CRITICAL ACCOUNTING POLICIES
There have been no significant changes to our critical accounting policies during the nine months
ended June 30, 2005, as compared to those we disclosed in Managements Discussion and Analysis of
Financial Condition and Results of Operations included in the annual report on Form 10-K for the
year ended September 30, 2004.
-31-
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEASONALITY
We have historically experienced variability in our results of operations from quarter to quarter
due to the seasonal nature of the homebuilding business. Historically, we have closed a greater
number of homes in our third and fourth fiscal quarters than in our first and second fiscal
quarters. As a result, our revenues and net income have been higher in the third and fourth
quarters of our fiscal year. In fiscal 2004, 58% of our consolidated revenues and 62% of our net
income were attributable to our operations in the third and fourth fiscal quarters. However, we can
make no assurances that this trend will continue in this or any future fiscal years.
SAFE HARBOR STATEMENT AND RISKS
Certain statements contained in this report, as well as in other materials we have filed or will
file with the Securities and Exchange Commission, statements made by us in periodic press releases
and oral statements we make to analysts, stockholders and the press in the course of presentations
about us, may be construed as forward-looking statements as defined in Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements typically include the words
anticipate, believe, estimate, expect, forecast, goal, intend, objective, plan,
projection, seek, strategy, or other words of similar meaning. Any or all of the
forward-looking statements included in this report and in any other of our reports or public
statements may not approximate actual experience, and the expectations derived from them may not be
realized, due to known or unknown risks and uncertainties. As a result, actual results may differ
materially from the results discussed in and anticipated by the forward-looking statements. The
following risks and uncertainties relevant to our business include factors we believe could
adversely affect us. Other factors beyond those listed below could also adversely affect us.
|
|
|
- changes in general economic, real estate and other conditions; |
|
|
|
|
- changes in interest rates and the availability of mortgage financing; |
|
|
|
|
- the effects of governmental regulations and environmental matters; |
|
|
|
|
- the uncertainties inherent in warranty and product liability claims matters; |
|
|
|
|
- competitive conditions within our industry; |
|
|
|
|
- our substantial debt; |
|
|
|
|
- the availability of capital; and |
|
|
|
|
- our ability to effect our growth strategies successfully. |
We undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. However, any further disclosures made on related
subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. Additional
information about issues that could lead to material changes in performance is contained in our
annual report on Form 10-K, which is filed with the Securities and Exchange Commission.
-32-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate risk on our long-term debt. We monitor our exposure to changes in
interest rates and utilize both fixed and variable rate debt. For fixed rate debt, changes in
interest rates generally affect the value of the debt instrument, but not our earnings or cash
flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the
fair value of the debt instrument, but may affect our future earnings and cash flows.
We have mitigated our exposure to changes in interest rates on our variable rate bank debt by
entering into interest rate swap agreements to obtain a fixed interest rate for a portion of the
variable rate borrowings. Our interest rate swaps were not designated as hedges under SFAS No. 133
when it was adopted on October 1, 2000. We are exposed to market risk associated with changes in
the fair values of the swaps, and such changes must be reflected in our income statements.
Our mortgage company is exposed to interest rate risk associated with its mortgage loan origination
services. Interest rate lock commitments (IRLCs) are extended to borrowers who have applied for
loan funding and who meet defined credit and underwriting criteria. Typically, the IRLCs have a
duration of less than nine months. Some IRLCs are committed immediately to a specific investor
through the use of best-efforts whole loan delivery commitments, while other IRLCs are funded prior
to being committed to third-party investors. Forward sales of mortgage backed securities (FMBS) are
used to protect uncommitted IRLCs against the risk of changes in interest rates. FMBS related to
IRLCs are classified and accounted for as non-designated derivative instruments, with gains and
losses recorded in current earnings. FMBS related to funded, uncommitted loans are designated as
fair value hedges, with changes in the value of the derivative instruments recognized in current
earnings, along with changes in the value of the funded, uncommitted loans. The effectiveness of
the fair value hedges is continuously monitored and any ineffectiveness, which for the three months
and nine months ended June 30, 2005 and 2004 was not significant, is recognized in current
earnings.
The following table sets forth, as of June 30, 2005, for our debt obligations, principal cash flows
by scheduled maturity, weighted average interest rates and estimated fair market value. In
addition, the table sets forth the notional amounts, weighted average interest rates and estimated
fair market value of our interest rate swaps. At June 30, 2005, the fair value of the interest rate
swaps was a $6.4 million liability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
|
|
September 30, |
|
|
Fiscal Year Ending September 30, |
|
|
at |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
Thereafter |
|
|
Total |
|
|
6/30/05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
$ |
249.9 |
|
|
$ |
9.0 |
|
|
$ |
3.5 |
|
|
$ |
215.3 |
|
|
$ |
586.0 |
|
|
$ |
2,544.8 |
|
|
$ |
3,608.5 |
|
|
$ |
3,757.4 |
|
Average interest rate |
|
|
8.4 |
% |
|
|
7.5 |
% |
|
|
5.6 |
% |
|
|
7.6 |
% |
|
|
7.3 |
% |
|
|
7.0 |
% |
|
|
7.2 |
% |
|
|
|
|
Variable rate |
|
$ |
|
|
|
$ |
708.4 |
|
|
$ |
|
|
|
$ |
50.0 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
758.4 |
|
|
$ |
758.4 |
|
Average interest rate |
|
|
|
|
|
|
4.0 |
% |
|
|
|
|
|
|
4.6 |
% |
|
|
|
|
|
|
|
|
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable to fixed |
|
$ |
200.0 |
|
|
$ |
200.0 |
|
|
$ |
200.0 |
|
|
$ |
200.0 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6.4 |
|
Average pay rate |
|
|
5.1 |
% |
|
|
5.1 |
% |
|
|
5.1 |
% |
|
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average receive rate |
|
90-day LIBOR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-33-
ITEM 4. CONTROLS AND PROCEDURES
The Companys management has long recognized its responsibilities for developing, implementing and
monitoring effective and efficient controls and procedures. As part of those responsibilities, as
of June 30, 2005, an evaluation was performed under the supervision and with the participation of
the Companys management, including the Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), of the effectiveness of the design and operation of the Companys disclosure controls and
procedures as defined in Rule 13a 15(e) under the Securities Exchange Act of 1934. Based on that
evaluation, the CEO and CFO concluded that the Companys disclosure controls and procedures were
effective in timely alerting them to material information relating to the Company, including its
consolidated subsidiaries, required to be included in the Companys periodic filings with the
Securities and Exchange Commission. There have been no changes in the Companys internal controls
over financial reporting during the quarter ended June 30, 2005 that have materially affected, or
are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
(a) Exhibits.
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation, as amended,
of the Company is incorporated by reference from Exhibit 3.1 to
the Companys Quarterly Report on Form 10-Q/A, filed with the
Commission on February 18, 2003. |
|
|
|
3.1(a)
|
|
Amendment to Amended and Restated Certificate of Incorporation,
as amended, of the Company, effective February 6, 2003, is
incorporated by reference from Exhibit 3.1(a) to the Companys
Quarterly Report on Form 10-Q/A, filed with the Commission on
February 18, 2003. |
|
|
|
3.2
|
|
Amended and Restated Bylaws of the Company are incorporated by
reference from Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the quarter ended December 31, 1998, filed with
the Commission on February 16, 1999.
|
|
|
|
4.1
|
|
Twenty-Fourth Supplemental Indenture, dated July 7, 2005, by and
among the Company, the Guarantors named therein and American
Stock Transfer & Trust Company, as trustee, relating to the
5.375% Senior Notes due 2012 issued by the Company (1). |
|
|
|
10.1
|
|
Second Amendment to Amended and Restated Credit Agreement
between DHI Mortgage Company, Ltd. and U.S. Bank National
Association dated April 8, 2005 (2).
|
|
|
|
10.2*
|
|
Third Amendment to Amended and Restated Credit Agreement between
DHI Mortgage Company, Ltd. and U.S. Bank National Association
dated June 23, 2005.
|
|
|
|
10.3*
|
|
Seventh Omnibus Amendment, dated
June 29, 2005, to Master Repurchase Agreement dated
July 9, 2002, as amended, among CH Funding LLC. Calyon New York
Branch (as successor in interest to Credit Lyonnais New York
Branch), Atlantic Asset Securitization Corp., La Fayette Asset
Securitization LLC, Falcon Asset Securitization Corporation,
U.S. Bank National Bank Association, Lloyds TSB Bank PLC and DHI
Mortgage Company, Ltd. |
|
|
|
10.4*
|
|
Executive Compensation Summary Named Executive Officers (COOs). |
|
|
|
12.1*
|
|
Statement of Computation of Ratio of Earnings to Fixed Charges. |
|
|
|
31.1*
|
|
Certificate of Chief Executive Officer provided pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2*
|
|
Certificate of Chief Financial Officer provided pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1*
|
|
Certificate provided pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, by the Companys Chief Executive Officer. |
|
|
|
32.2*
|
|
Certificate provided pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, by the Companys Chief Financial Officer. |
|
|
|
* |
|
Filed herewith |
|
(1) |
|
Incorporated by reference from Exhibit 4.1 to the Companys Current Report on Form 8-K dated
June 29, 2005 and filed with the SEC on July 6, 2005. |
|
(2) |
|
Incorporated by reference from Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
dated May 4, 2005 and filed with the SEC on May 4, 2005. |
-34-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
D.R. HORTON, INC. |
|
|
|
|
|
Date: August 9, 2005
|
|
By:
|
|
/s/ Bill W. Wheat |
|
|
|
|
|
|
|
|
|
Bill W. Wheat, on behalf of D.R. Horton, Inc., |
|
|
|
|
as Executive Vice President and |
|
|
|
|
Chief Financial Officer (Principal Financial and |
|
|
|
|
Principal Accounting Officer) |
-35-