10-QPeriod: Q3 FY2004

HORTON D R INC /DE/ Quarterly Report for Q3 Ended Jun 30, 2004

Filed August 13, 2004For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported a strong third quarter and nine-month performance for the period ending June 30, 2004, driven by robust growth in its homebuilding segment. The company experienced significant increases in net new sales orders, homes closed, and revenues, alongside notable improvements in homebuilding operating margins. This resulted in a substantial year-over-year increase in net income and diluted earnings per share for the nine-month period. The company's financial services segment, while experiencing revenue growth, saw a decrease in its pre-tax operating margin due to increased administrative expenses and declining average mortgage revenues per loan. Despite this, DHI's overall financial condition remains solid, supported by strong cash generation, an increased revolving credit facility, and successful debt issuances. The company is well-positioned to continue its growth trajectory, with a significant backlog and a strategic land acquisition approach.

Key Highlights

  • 1Net income for the nine months ended June 30, 2004, increased by 58.3% to $625.5 million, with diluted EPS rising 51.7% to $2.64.
  • 2Homebuilding revenues surged by 27.8% in the third quarter and 27.5% for the nine months, driven by a 22.7% increase in homes closed for the quarter and 23.4% for the nine months.
  • 3Homebuilding operating margins improved, with gross profit as a percentage of home sales revenue increasing to 22.6% for the quarter and 22.5% for the nine months.
  • 4Net new sales orders showed strong growth, up 22.8% in value for the quarter and 27.0% for the nine months, indicating continued demand.
  • 5The company's backlog of sales orders increased by 28.0% in value to $5.16 billion as of June 30, 2004, compared to the prior year.
  • 6D.R. Horton expanded its revolving credit facility to $1.21 billion, enhancing its financial flexibility.
  • 7The financial services segment's income before income taxes decreased by 17.7% for the quarter and 13.1% for the nine months, primarily due to increased SG&A expenses and lower average mortgage revenues.

Frequently Asked Questions

D.R. Horton demonstrated strong financial performance, particularly in its homebuilding segment, with significant increases in revenues, net income, and earnings per share for both the three and nine months ended June 30, 2004, compared to the prior year.

The homebuilding segment is performing exceptionally well. Revenues increased substantially due to higher volumes of homes closed and a slight increase in average selling prices. Crucially, homebuilding operating margins improved due to effective price increases and cost control measures.

The company's sales backlog increased by 28.0% in value, indicating strong future revenue potential. The average selling price in the backlog also rose, suggesting continued pricing power and demand in their markets.

The financial services segment saw revenue growth, but its profitability (income before taxes) declined due to higher administrative costs and reduced average revenue per mortgage loan. This segment's performance is being impacted by expansion efforts and competitive pressures in the mortgage market.

D.R. Horton maintains a solid financial position with $240.1 million in cash and cash equivalents. The company has increased its revolving credit facility to $1.21 billion, providing ample financial flexibility. They also recently issued new senior notes, further strengthening their capital structure.