10-QPeriod: Q2 FY2015

HORTON D R INC /DE/ Quarterly Report for Q2 Ended Mar 31, 2015

Filed April 24, 2015For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported strong performance for the quarter and six months ended March 31, 2015, driven by significant growth in homebuilding revenues and sales orders. The company experienced a substantial increase in both the volume and value of net sales orders and homes closed, indicating robust demand across its diverse markets. This top-line growth, coupled with improved operational efficiencies, contributed to higher net income and diluted earnings per share compared to the prior year periods. The financial services segment also showed impressive growth, further bolstering overall profitability. DHI's strategic expansion, including new product offerings like the Express Homes brand and recent acquisitions, appears to be successfully contributing to its market leadership and financial results. While DHI demonstrates strong operational momentum, investors should note the slight decrease in home sales gross margins, attributed to rising costs outpacing selling price increases. The company also incurred higher inventory and land option charges. However, DHI maintains a strong balance sheet and liquidity position, with a well-managed debt-to-capital ratio. The company's forward-looking strategy emphasizes continued growth, operational efficiency, and maintaining financial flexibility, positioning it to capitalize on favorable market conditions while managing potential risks.

Financial Highlights

31 data points
Beta

Revenue

$2.40B

Net Income

$147.90M

6.2% Net Margin

EPS (Diluted)

$0.40

Total Assets

$10.71B

Cash & Equivalents

$697.70M

Free Cash Flow

-$52.50M

Financial Statements
Beta
Revenue$2.40B
Net Income$147.90M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)365.80M
Shares Outstanding (Diluted)369.40M

Key Highlights

  • 1Homebuilding revenues increased by 38% and 38% for the three and six months ended March 31, 2015, respectively, compared to the prior year.
  • 2Net sales orders increased by 30% and 32% in volume and 33% and 35% in value for the three and six months ended March 31, 2015, respectively.
  • 3Homes closed increased by 33% and 31% in volume for the three and six months ended March 31, 2015, respectively.
  • 4Home sales gross margins slightly decreased by 280 basis points to 19.7% for the three months and 270 basis points to 19.7% for the six months, primarily due to rising costs.
  • 5Financial services revenues grew by 55% and 49%, with pre-tax income increasing by 111% and 101% for the three and six months ended March 31, 2015, respectively.
  • 6Diluted earnings per share increased to $0.40 for the three-month period and $0.79 for the six-month period, up from $0.38 and $0.73 in the prior year.
  • 7The company maintained a strong cash position, with homebuilding cash and cash equivalents at $665.8 million as of March 31, 2015.

Frequently Asked Questions

The primary driver of D.R. Horton's revenue growth was a significant increase in homebuilding revenues, fueled by a substantial rise in both the number of homes closed and net sales orders. This growth was observed across most of the company's operating regions, indicating broad-based demand.

The decrease in home sales gross margin was primarily due to the average cost of homes closed increasing at a faster rate than the average selling price. Additionally, an increase in warranty and construction defect expenses as a percentage of home sales revenues contributed to the margin compression.

The financial services segment demonstrated strong performance, with revenues increasing significantly and pre-tax income more than doubling for both the three and six-month periods. This segment, which provides mortgage financing and title services, significantly contributes to the company's overall profitability and offers a synergistic benefit to the homebuilding operations.

D.R. Horton has been strategically managing its inventory. While land and lot inventories grew in prior years, the company has slowed this growth to capture more new home demand and improve returns on land investments. The focus is now on managing the balance between homes in inventory and land/lots relative to market demand, and utilizing option contracts to control land with limited capital investment.