10-QPeriod: Q3 FY2013

HORTON D R INC /DE/ Quarterly Report for Q3 Ended Jun 30, 2013

Filed July 25, 2013For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported strong performance in its third quarter of fiscal year 2013, demonstrating significant growth in its homebuilding and financial services segments. The company experienced a substantial increase in homebuilding revenues, driven by a 30% rise in homes closed and a 12% increase in the average closing price. This growth is attributed to a strengthening housing market, with increased demand and limited supply, allowing DHI to raise sales prices and improve gross margins. The financial services segment also saw robust growth, with revenues increasing by 43% year-over-year, supported by higher loan origination and sales volumes. The company's overall pre-tax income surged significantly, reflecting the combined strength of both business segments. DHI's strategic focus on expanding its land and lot position, managing inventory effectively, and controlling costs appears to be paying off, positioning it well for continued growth in the recovering housing market.

Financial Highlights

33 data points
Beta

Revenue

$1.69B

Net Income

$146.00M

8.6% Net Margin

EPS (Diluted)

$0.42

Total Assets

$8.29B

Cash & Equivalents

$638.00M

Free Cash Flow

-$311.30M

Financial Statements
Beta
Revenue$1.69B
Interest Expense$0
Net Income$146.00M
EPS (Basic)$0.45
EPS (Diluted)$0.42
Shares Outstanding (Basic)322.60M
Shares Outstanding (Diluted)365.60M

Key Highlights

  • 1Homebuilding revenues increased by 47% to $1.6 billion for the quarter, driven by a 30% increase in homes closed and a 12% rise in average closing prices.
  • 2Net sales orders rose by 12% in volume and 30% in value, indicating strong demand. The sales order backlog also saw a significant increase of 36% in homes and 56% in value.
  • 3Home sales gross margins improved by 340 basis points to 21.4%, reflecting favorable market conditions and pricing power.
  • 4Financial services revenues grew by 43% to $48.3 million, with loan origination and sales volumes increasing.
  • 5Consolidated pre-tax income more than doubled to $205.1 million, demonstrating strong operational performance across both segments.
  • 6The company significantly increased its land and lot position, owning or controlling 189,800 lots as of June 30, 2013, up from 152,700 at the end of the prior fiscal year.
  • 7Inventory levels increased, with homes in inventory rising to 17,500 from 13,000 at the end of the prior fiscal year, reflecting investments to meet anticipated demand.

Frequently Asked Questions

The substantial increase in homebuilding revenues was primarily driven by a 30% rise in the number of homes closed and a 12% increase in the average selling price of those homes. This performance was supported by improving housing market conditions, characterized by increased demand and limited supply, which allowed D.R. Horton to raise prices and reduce sales incentives.

The financial services segment demonstrated strong growth, with total revenues increasing by 43% to $48.3 million. This was fueled by a 21% increase in first-lien loans originated for D.R. Horton homebuyers and a 20% increase in the number of loans sold to third parties. Gains from the sale of servicing rights and mortgage loans also saw significant growth.

D.R. Horton is strategically increasing its investment in land and lot inventory to meet growing housing demand and expand its operations in desirable markets. The company controls approximately 189,800 lots as of June 30, 2013, a significant increase from the prior year, and has also increased its inventory of homes under construction to capture new home demand. This approach is balanced with managing sales pace and pricing to optimize profitability.

The company notes that demand for new homes has increased in most of its markets, leading to higher sales volumes, prices, and margins. While recent increases in mortgage interest rates may cause some short-term moderation in demand, DHI believes long-term demand is tied to local economic indicators. D.R. Horton is well-positioned to capitalize on the housing recovery due to its strong balance sheet, liquidity, and extensive land and lot position.