10-QPeriod: Q2 FY2016

HORTON D R INC /DE/ Quarterly Report for Q2 Ended Mar 31, 2016

Filed April 25, 2016For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported strong financial results for the quarter and six months ended March 31, 2016, reflecting continued growth in its core homebuilding business. Total revenues increased significantly, driven by a rise in home sales and a higher number of homes closed. The company's strategic focus on offering a diverse range of homes, from entry-level to luxury, across its geographically diverse markets has proven effective. Profitability improved substantially, with homebuilding pre-tax income seeing a notable increase due to higher revenues and improved operational efficiencies, including a reduction in SG&A expenses as a percentage of revenue. The financial services segment also showed revenue growth, though pre-tax income experienced a slight decrease, largely attributed to increased general and administrative expenses to support higher volumes and new regulatory compliance. Despite a slight increase in homes in inventory, the company's land and lot position remains robust, with a significant number of controlled lots through option contracts, indicating a well-managed inventory strategy. DHI maintained a strong balance sheet with solid liquidity, further supported by its revolving credit facility and a healthy debt-to-capital ratio.

Financial Highlights

32 data points
Beta

Revenue

$2.77B

Net Income

$195.10M

7.0% Net Margin

EPS (Diluted)

$0.52

Total Assets

$11.30B

Cash & Equivalents

$1.22B

Free Cash Flow

$8.10M

Financial Statements
Beta
Revenue$2.77B
Net Income$195.10M
EPS (Basic)$0.53
EPS (Diluted)$0.52
Shares Outstanding (Basic)370.20M
Shares Outstanding (Diluted)373.70M

Key Highlights

  • 1Homebuilding revenues increased by 16% year-over-year for the quarter and 10% for the six-month period, reaching $2.7 billion and $5.1 billion, respectively.
  • 2Net income grew by 32% for the quarter to $195.1 million, and by 21% for the six-month period to $352.8 million.
  • 3Diluted earnings per share (EPS) saw a 30% increase for the quarter to $0.52 and a 19% increase for the six-month period to $0.94.
  • 4Homebuilding pre-tax income rose 36% to $283.1 million for the quarter and 23% to $512.1 million for the six-month period.
  • 5The company's mortgage capture rate improved to 53% for the quarter and 52% for the six-month period, up from 51% and 50% in the prior year.
  • 6Homebuilding debt to total capital improved to 33.6% as of March 31, 2016, down from 36.1% at September 30, 2015.
  • 7Total equity increased to $6.2 billion as of March 31, 2016, reflecting strong retained earnings growth.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in home sales, fueled by a 12% rise in homes closed for the quarter and a 7% rise for the six-month period. The average selling price of homes closed also saw a 3% increase in both periods, contributing to the overall revenue uplift.

The company is actively managing its inventory and land positions. Homebuilding inventories increased to $8.2 billion, and homes in inventory rose to 24,600. However, the company also controls a substantial number of lots through option purchase contracts (76,600), indicating a strategy to balance ownership with flexibility. The increase in construction in progress and finished homes inventory is supporting higher sales and closing volumes.

The financial services segment experienced revenue growth of 12%, driven by increased mortgage originations and title services. However, pre-tax income decreased by 19% for the quarter, attributed to higher general and administrative expenses, including costs for regulatory compliance and personnel to support higher homebuilding volumes. The mortgage capture rate improved, indicating strong synergy with the homebuilding segment.

D.R. Horton maintains a strong focus on liquidity and debt management. The company's homebuilding debt to total capital ratio improved to 33.6%. It has significant cash reserves of $1.2 billion and an undrawn revolving credit facility of $883.9 million, providing ample liquidity to fund operations and debt obligations. The company also has a $500 million authorization for debt repurchase.