10-KPeriod: FY2005

HORTON D R INC /DE/ Annual Report, Year Ended Sep 30, 2005

Filed December 14, 2005For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported a strong performance for the fiscal year ended September 30, 2005, driven by significant growth in its homebuilding operations. The company, the largest homebuilder in the U.S., experienced a substantial increase in revenues and profits, with homebuilding revenues up 28% and pre-tax income rising 51%. This growth was fueled by a robust housing market, effective cost management, and strategic improvements in operating margins. The company's financial services segment also contributed positively, with revenues increasing by 29%. DHI highlighted its strategic focus on profitable growth, market share expansion, and maintaining a strong balance sheet. Key to this strategy are geographic diversification, economies of scale, and a decentralized operational structure with centralized controls. The company demonstrated improved leverage, with its net homebuilding debt to total capital ratio reaching an all-time low of 32.2%. With a significant backlog and a solid market presence, DHI appears well-positioned for continued success, though potential risks include economic downturns, interest rate fluctuations, and regulatory changes.

Key Highlights

  • 1D.R. Horton is the largest homebuilder in the United States, closing 51,172 homes in FY 2005.
  • 2Total revenues reached $13,863.7 million, with homebuilding accounting for approximately 98% of consolidated revenues.
  • 3Homebuilding revenues increased 28% year-over-year to $13,376.6 million, with a 250 basis point improvement in homebuilding operating margins.
  • 4Net income increased 51% to $1,470.5 million, leading to a 50% increase in diluted earnings per share to $4.62.
  • 5The company achieved a record sales order backlog of $5.8 billion at year-end, up 28% from the prior year.
  • 6The net homebuilding debt to total capital ratio improved to 32.2%, an all-time low for the company.
  • 7The financial services segment (mortgage and title) saw revenues increase 29% to $235.1 million, with pre-tax income up 41%.

Frequently Asked Questions

D.R. Horton's primary business focus remained its homebuilding operations, which constituted approximately 98% of its consolidated revenues and 96% of its consolidated income before income taxes. The company also operated a financial services segment, offering mortgage banking and title agency services.

D.R. Horton actively managed its capital structure, achieving an all-time low net homebuilding debt to total capital ratio of 32.2% at the end of fiscal year 2005. This was achieved through a combination of increasing stockholders' equity and managing its debt levels. The company also engaged in debt repayment and refinancing activities, including redeeming senior notes and utilizing its revolving credit facility.

The company's strong financial performance was driven by several factors: a favorable housing market with sustained demand from first-time and move-up buyers, historically low mortgage rates, effective cost management leading to improved gross and operating margins, and strategic geographic diversification and economies of scale. Growth in home prices in many markets also contributed to the revenue and profit increases.

D.R. Horton identified several key risks, including the cyclical nature of the homebuilding industry, potential adverse impacts from changes in general economic conditions, interest rates, and mortgage financing availability. Other risks include inventory management, supply chain issues, natural disasters, government regulations, substantial debt levels, intense competition, and the need for future capital. Warranty and product liability claims were also noted as potential risks.