10-QPeriod: Q1 FY2014

HORTON D R INC /DE/ Quarterly Report for Q1 Ended Dec 31, 2013

Filed January 28, 2014For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported a strong first quarter for fiscal year 2014, with significant year-over-year growth in its homebuilding segment. Revenues increased by 33% to $1.6 billion, driven by a 19% increase in homes closed and a 12% rise in the average closing price. This performance was supported by favorable housing market conditions, including increased demand and limited supply, which allowed the company to improve its home sales gross margins by 350 basis points to 22.3%. Net income surged by 86% to $123.2 million, and diluted earnings per share rose by 80% to $0.36. While the homebuilding segment showed robust growth, the financial services segment experienced a decline in revenues and pre-tax income. Despite this, the company's overall financial position remains solid, with a strong cash balance and liquidity. DHI is strategically positioned to capitalize on the ongoing housing recovery through its broad geographic presence, land and lot position, and flexible operating strategy. Management anticipates continued profitable growth, while acknowledging potential headwinds from economic conditions and interest rate fluctuations.

Financial Highlights

32 data points
Beta

Revenue

$1.67B

Net Income

$123.20M

7.4% Net Margin

EPS (Diluted)

$0.36

Total Assets

$8.93B

Cash & Equivalents

$860.80M

Free Cash Flow

-$26.00M

Financial Statements
Beta
Revenue$1.67B
Interest Expense$0
Net Income$123.20M
EPS (Basic)$0.38
EPS (Diluted)$0.36
Shares Outstanding (Basic)323.10M
Shares Outstanding (Diluted)364.40M

Key Highlights

  • 1Homebuilding revenues increased by 33% to $1.6 billion for the quarter ended December 31, 2013, compared to the prior year.
  • 2The number of homes closed rose by 19% to 6,188, with the average closing price increasing by 12% to $263,500.
  • 3Home sales gross margins improved significantly, increasing by 350 basis points to 22.3%.
  • 4Net income saw a substantial increase of 86%, reaching $123.2 million, leading to diluted EPS growth of 80% to $0.36.
  • 5The company's financial services segment experienced a 16% decrease in revenues and a 56% drop in pre-tax income.
  • 6D.R. Horton maintained a strong liquidity position with $801.1 million in homebuilding cash and marketable securities at quarter-end.
  • 7The company acquired the homebuilding operations of Regent Homes, Inc. in October 2013 for $34.5 million, adding operations in North Carolina.

Frequently Asked Questions

The primary drivers of revenue growth were a 19% increase in the number of homes closed and a 12% increase in the average selling price of homes closed. This was facilitated by improved housing market conditions, including higher demand and limited supply, which allowed DHI to increase sales prices and reduce incentives.

The financial services segment underperformed the homebuilding segment. While homebuilding revenues increased by 33%, financial services revenues decreased by 16%. Financial services pre-tax income fell by 56%, whereas homebuilding pre-tax income more than doubled, increasing by 102%.

DHI views itself as well-positioned to benefit from the housing recovery due to its strong balance sheet, liquidity, land and lot position, and broad geographic operating base. Its strategy includes maintaining liquidity, diversifying inventory investments, offering a range of product types, adapting pricing and sales pace to local demand, and controlling costs. Management expects continued profitable growth but acknowledges risks from economic conditions, interest rates, and market competition.

The company repaid its $145.9 million of 6.125% senior notes on January 15, 2014. Additionally, approximately $499.9 million in convertible senior notes mature on May 15, 2014, and are convertible into common stock. The company intends to satisfy any conversion obligations with shares of its common stock.