10-QPeriod: Q1 FY2018

HORTON D R INC /DE/ Quarterly Report for Q1 Ended Dec 31, 2017

Filed February 8, 2018For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported solid performance for the quarter ended December 31, 2017, showcasing revenue growth driven by increased home closings. The company's homebuilding segment saw revenues rise 14% year-over-year, with a 15% increase in homes closed. This growth was supported by a significant increase in net sales orders and a growing backlog, indicating strong future demand. The acquisition of Forestar Group Inc. in October 2017 is expected to bolster DHI's land and lot positioning, aligning with its strategy to enhance operational efficiency and returns. While revenues and pre-tax income saw healthy increases, net income attributable to D.R. Horton, Inc. and diluted earnings per share experienced a slight decrease compared to the prior year, largely influenced by a significant income tax expense related to the Tax Cuts and Jobs Act. The company maintained a strong balance sheet with growing stockholders' equity and continued to return value to shareholders through dividends and share repurchases.

Financial Highlights

38 data points
Beta

Revenue

$3.33B

22.6% Gross Margin

Net Income

$188.80M

5.7% Net Margin

EPS (Diluted)

$0.49

Total Assets

$12.96B

Cash & Equivalents

$920.30M

Free Cash Flow

-$100.30M

Financial Statements
Beta
Revenue$3.33B
Cost of Revenue$2.58B
Gross Profit$752.60M
SG&A Expenses$384.20M
Interest Expense$0
Net Income$188.80M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)375.80M
Shares Outstanding (Diluted)383.80M

Key Highlights

  • 1Homebuilding revenues increased 14% to $3.2 billion, with homes closed up 15% to 10,788.
  • 2Net sales orders increased 17% to $3.2 billion, and the sales order backlog grew 11% to $3.8 billion, indicating strong future demand.
  • 3The acquisition of Forestar Group Inc. (75% ownership) on October 5, 2017, is expected to enhance access to land and lot positions.
  • 4Home sales gross margin improved by 100 basis points to 20.8%, reflecting improved operational efficiency.
  • 5Financial services revenues saw a modest 4% increase to $81.0 million, although pre-tax income decreased by 16%.
  • 6Net income attributable to D.R. Horton, Inc. decreased 9% to $189.3 million, and diluted EPS fell 11% to $0.49, largely due to a significant income tax charge ($108.7 million) related to the Tax Cuts and Jobs Act.
  • 7The company maintained a strong financial position with stockholders' equity increasing to $7.9 billion and declared a quarterly cash dividend of $0.125 per share.

Frequently Asked Questions

The primary driver of D.R. Horton's revenue growth was an increase in home closings. Homebuilding revenues rose 14% to $3.2 billion, with the number of homes closed increasing by 15% to 10,788 compared to the same period last year.

The acquisition of Forestar Group Inc. (75% ownership) on October 5, 2017, contributed $30.8 million in revenues and $4.0 million in pre-tax income for the period from acquisition date to December 31, 2017. It also resulted in the recognition of $20.0 million in goodwill and added $130.1 million in Forestar's notes payable to the consolidated balance sheet. The acquisition aligns with DHI's strategy to expand its land and lot positions.

The company reported a significant income tax expense of $202.4 million for the quarter, compared to $111.2 million in the prior year. This increase was largely due to a $108.7 million charge related to the remeasurement of deferred tax assets and liabilities resulting from the enactment of the Tax Cuts and Jobs Act in December 2017. This charge impacted net income attributable to D.R. Horton, Inc., leading to a decrease from $206.9 million in the prior year to $189.3 million in the current quarter.

The homebuilding segment shows a positive outlook with net sales orders increasing 17% to $3.2 billion and the sales order backlog growing 11% to $3.8 billion. This indicates continued demand for DHI's homes and provides visibility into future revenue streams.