10-KPeriod: FY2010

HORTON D R INC /DE/ Annual Report, Year Ended Sep 30, 2010

Filed November 17, 2010For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) for the fiscal year ended September 30, 2010, reported a significant recovery in its financial performance compared to the prior year. The company, a major homebuilder in the United States, saw its homebuilding revenues increase by 20% to $4.3 billion, driven by a 25% increase in homes closed, although the average selling price saw a slight decrease. This improvement was largely attributed to stabilizing housing market conditions in the first half of the year, aided by the federal homebuyer tax credit. Despite the overall improvement, the company highlighted that demand weakened significantly after the expiration of the tax credit, indicating a continued challenging environment. D.R. Horton managed its business through cost controls, renegotiating contracts, and strategically managing inventory, which allowed it to generate substantial cash flow and reduce its debt. The company's financial services segment also improved, turning a loss in the prior year into a profit. Looking ahead, management expressed a cautious outlook, expecting lower sales and profitability in fiscal 2011 compared to fiscal 2010.

Financial Highlights

35 data points
Beta

Revenue

$4.40B

Net Income

$245.10M

5.6% Net Margin

EPS (Diluted)

$0.77

Total Assets

$5.94B

Cash & Equivalents

$1.31B

Free Cash Flow

$690.20M

Financial Statements
Beta
Revenue$4.40B
Net Income$245.10M
EPS (Basic)$0.77
EPS (Diluted)$0.77
Shares Outstanding (Basic)318.10M
Shares Outstanding (Diluted)318.60M

Key Highlights

  • 1Homebuilding revenues increased 20% to $4.3 billion, with home closings up 25% to 20,875 homes.
  • 2Home sales gross margins improved significantly to 17.3% from 13.1% in the prior year.
  • 3Inventory impairments and land option cost write-offs decreased substantially to $64.7 million from $407.7 million.
  • 4The company reported a homebuilding pre-tax income of $78.1 million, a significant improvement from a pre-tax loss of $541.3 million in the prior year.
  • 5Financial services operations turned profitable, reporting pre-tax income of $21.4 million, compared to a pre-tax loss of $15.5 million.
  • 6Consolidated diluted earnings per share improved to $0.77 from a loss of $1.73 in the prior year.
  • 7Total homebuilding debt was reduced by $1.0 billion to $2.1 billion.

Frequently Asked Questions

D.R. Horton showed a strong recovery in fiscal year 2010, with homebuilding revenues increasing by 20% to $4.3 billion and homes closed increasing by 25%. This was driven by a combination of stabilizing market conditions, the federal homebuyer tax credit, and the company's strategic cost management. The company returned to profitability, reporting a consolidated net income of $245.1 million, a significant improvement from the net loss in fiscal year 2009.

The company experienced a mixed market. The first half of the fiscal year saw improved demand, partly due to the federal homebuyer tax credit, leading to increased sales orders and closings. However, demand softened considerably after the tax credit expired, indicating continued weakness in the housing market. D.R. Horton acknowledged this ongoing challenge and maintained a cautious outlook for fiscal year 2011.

D.R. Horton implemented several strategies, including maintaining a strong cash balance and liquidity, managing sales prices and incentives to optimize sales volume and profit, renegotiating lot option contracts, limiting land development spending, controlling SG&A expenses, and modifying product offerings to be more affordable. The company also focused on reducing inventory and debt.

Management expressed a cautious outlook, anticipating that sales, closings, and profitability in fiscal year 2011 would likely be lower than in fiscal year 2010, primarily due to the continued weakness in housing market conditions following the expiration of the federal homebuyer tax credit.