10-KPeriod: FY2004

HORTON D R INC /DE/ Annual Report, Year Ended Sep 30, 2004

Filed December 10, 2004For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) presents a robust financial performance for the fiscal year ending September 30, 2004, demonstrating significant growth in its core homebuilding operations. The company, the largest homebuilder in the United States, saw substantial increases in revenues, homes closed, and profit margins, driven by favorable housing demand from first-time and move-up buyers, supported by low mortgage rates. Strategic geographic diversification across 21 states and 63 metropolitan markets, coupled with a decentralized operating model with centralized controls, has effectively mitigated local economic fluctuations and fostered consistent growth. The company also benefits from its scale, allowing access to lower costs for materials, labor, and capital. While the homebuilding segment is the primary revenue driver (98% of consolidated revenues), the financial services segment, offering mortgage banking and title services, complements the core business, though it faced increased competition and lower margins in the mortgage market during the fiscal year.

Key Highlights

  • 1Significant revenue and earnings growth in fiscal year 2004, with homebuilding operations showing increases exceeding 20% in sales orders, homes closed, and revenues.
  • 2Homebuilding operating margins improved by 3.5 percentage points in fiscal 2004, driven by better gross margins and cost control.
  • 3Record sales backlog of $4.6 billion at the end of fiscal 2004, a 25% increase from the prior year, indicating strong future revenue potential.
  • 4Strengthened balance sheet with a homebuilding debt-to-total capitalization ratio of 38.9%, an all-time low for the company.
  • 5Expanded credit facility to $1.21 billion, enhancing liquidity and financial flexibility.
  • 6Strategic focus on land acquisition through option contracts, controlling significant land positions with minimal capital investment to mitigate risk.
  • 7Diversified geographic presence across 21 states and 63 markets, reducing reliance on any single regional economy.

Frequently Asked Questions

D.R. Horton's primary business is constructing and selling high-quality single-family homes, mainly for first-time and move-up homebuyers. They operate nationwide, with a significant presence in 21 states and 63 metropolitan markets across the Mid-Atlantic, Midwest, Southeast, Southwest, and West regions of the United States.

The company employs a strategy of acquiring land primarily after conducting feasibility studies and obtaining necessary development rights. They heavily utilize land/lot option contracts, which give them the right to purchase land at predetermined prices on a schedule aligned with anticipated home closings. This approach limits their financial exposure to just the option deposits, substantially reducing risks associated with land ownership and development.

Key drivers include sustained demand from first-time and move-up homebuyers, favorable demographic trends, low mortgage rates, and the company's ability to leverage its scale for cost advantages. Strong execution of growth strategies, particularly in regions like the Southeast and Southwest, and improvements in homebuilding profit margins also significantly contributed to the positive results.

The financial services segment provides mortgage banking and title agency services to DHI's homebuyers. While it complements the homebuilding business, it experienced increased competition in the mortgage market during fiscal 2004, leading to lower operating margins. Despite a 4% increase in total financial services revenue, pre-tax income declined by 20% for the year.