<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File number 1-14112
D.R. HORTON, INC.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 75-2386963
------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Ascension Blvd., Suite 100
Arlington, Texas 76006
------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(817) 856-8200
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.01 par value --32,359,836 shares as of July 24, 1996
<PAGE>
PART I. FINANCIAL INFORMATION
- - ------------------------------
ITEM 1. FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Consolidated Balance Sheets -- June 30, 1996, and September 30, 1995.
Consolidated Statements of Income -- Three Months Ended June 30, 1996 and 1995;
and Nine Months Ended June 30, 1996 and 1995.
Consolidated Statements of Stockholders' Equity -- Nine Months Ended
June 30, 1996.
Consolidated Statements of Cash Flows -- Nine Months Ended ended June 30,
1996 and 1995.
Notes to Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION.
- - ----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
SIGNATURES.
- - ----------
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30 September 30,
1996 1995
---- ----
(In thousands)
(Unaudited)
ASSETS
Cash $29,607 $16,737
Inventories:
Finished homes and construction in progress 223,654 182,772
Residential lots-developed and under development 114,445 98,824
Land held for development 1,312 1,312
----- -----
339,411 282,908
Property and equipment (net) 5,714 5,359
Earnest money deposits and other assets 12,412 10,680
Excess of cost over net assets acquired (net) 3,534 3,103
----- -----
$390,678 $318,787
======== ========
LIABILITIES
Accounts payable $34,561 $29,312
Accrued expenses and customer deposits 16,829 13,523
Notes payable 171,014 169,879
------- -------
222,404 212,714
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value, 30,000,000 shares
authorized, no shares issued. - -
Common stock, $.01 par value, 100,000,000 shares
authorized, 32,359,750 at June 30, 1996 and 25,437,067
at September 30, 1995, issued and outstanding. 324 254
Additional capital 159,758 91,635
Retained earnings 8,192 14,184
----- ------
168,274 106,073
------- -------
$390,678 $318,787
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Nine Months
Ended June 30, Ended June 30,
------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands, except net income per share)
(Unaudited)
Revenues $143,283 $120,529 $378,393 $304,561
Cost of sales 117,386 98,882 310,788 250,907
------- ------ ------- -------
25,897 21,647 67,605 53,654
Selling, general and administrative
expense 14,101 11,953 38,674 31,926
------ ------ ------ ------
Operating income 11,796 9,694 28,931 21,728
Other:
Interest expense (216) (560) (1,157) (560)
Other income 449 209 1,046 265
--- --- ----- ---
233 (351) (111) (295)
--- ---- ---- ----
INCOME BEFORE INCOME TAXES 12,029 9,343 28,820 21,433
Provision for income taxes 4,595 3,253 10,849 7,575
----- ----- ------ -----
NET INCOME $7,434 $6,090 $17,971 $13,858
====== ====== ======= =======
Net income per share $0.23 $0.22 $0.58 $0.50
===== ===== ===== =====
Weighted average number of shares
of common stock and common stock
equivalents outstanding 32,972 27,841 30,903 27,738
====== ====== ====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Total
Common Additional Retained Stockholders'
Stock Capital Earnings Equity
----- ------- ------- ------
(In thousands)
(Unaudited)
Balances at October 1, 1995 $254 $91,635 $14,184 $106,073
Eight percent stock dividend 24 23,938 (23,963) (1)
Net income - - 17,971 17,971
Issuance of 4,375,000 shares of common
stock 44 43,215 - 43,259
Issuance under employee benefit plans - 275 - 275
Exercise of stock options 2 695 697
---------------------------------
Balances at June 30, 1996 $324 $159,758 $8,192 $168,274
=================================
See accompanying notes to consolidated financial statements.
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months
Ended June 30,
--------------
1996 1995
---- ----
(In thousands)
(Unaudited)
OPERATING ACTIVITIES
Net income $17,971 $13,858
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,156 1,414
Expense associated with issuance of stock under
employee benefit plans 159 174
Changes in operating assets and liabilities:
Increase in inventories (56,503) (36,241)
Increase in earnest money deposits and other assets (1,807) (237)
Decrease in accounts payable, accrued expenses
and customer deposits 8,444 2,744
----- -----
NET CASH USED IN OPERATING ACTIVITIES (29,580) (18,288)
------- -------
INVESTING ACTIVITIES
Purchase of property and equipment (2,382) (1,842)
Additional costs over net assets of acquisitions (560) -
---- -----
NET CASH USED IN INVESTING ACTIVITIES (2,942) (1,842)
------ ------
FINANCING ACTIVITIES
Proceeds from notes payable 225,093 192,836
Repayment of notes payable (223,703) (151,683)
Issuance of common stock 43,259 -
Issuance of common stock associated with Employee
Stock Purchase Plan 46 -
Proceeds from exercise of stock options 697 368
--- ---
NET CASH PROVIDED BY FINANCING ACTIVITIES 45,392 41,521
------ ------
INCREASE IN CASH 12,870 21,391
Cash at beginning of period 16,737 11,190
------ ------
Cash at end of period $29,607 $32,581
======= =======
Supplemental cash flow information:
Interest paid $10,553 $7,863
======= ======
Income taxes paid $11,218 $6,493
======= ======
See accompanying notes to consolidated financial statements.
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements include the
accounts of D.R. Horton, Inc. (the "Company") and its subsidiaries, all of
which are majority owned. Intercompany accounts and transactions have been
eliminated in consolidation. The statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month and nine-month periods ended June 30, 1996, are not
necessarily indicative of the results that may be expected for the year ending
September 30, 1996.
NOTE B - NET INCOME PER SHARE
Net income per share for the three and nine month periods ended June 30, 1996
and 1995, is based on the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding.
On August 15, 1995, the Board of Directors declared a seven-for-five stock split
effected in the form of a 40% stock dividend on the Company's common stock. The
seven-for-five stock split was paid on September 16, 1995, to stockholders of
record on August 31, 1995. On April 23, 1996, the Board of Directors declared an
eight percent common stock dividend, which was paid on May 24, 1996, to
stockholders of record on May 8, 1996. Earnings per share and weighted average
shares outstanding for the three and nine month periods ended June 30, 1995,
have been restated to reflect the seven-for-five stock split and the eight
percent stock dividend.
NOTE C - PROVISIONS FOR INCOME TAXES
Deferred tax liabilities and assets, arising from temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes, consist primarily of differences
in depreciation, warranty costs and inventory cost capitalization methods and
were, as of June 30, 1996, not significant.
The provisions for income tax expense for the three and nine month periods ended
June 30, 1996 and 1995, are based on the effective tax rates estimated to be in
effect for the respective years. The deferred income tax provisions were not
significant in either period.
The difference between income tax expense and tax computed by applying the
statutory Federal income tax rate to income before income taxes is due primarily
to the effect of applicable state income taxes.
NOTE D - INTEREST
Three months ended Nine months ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Capitalized interest, beginning
of period $9,855 $6,912 $7,118 $4,325
Interest incurred 3,343 2,753 10,897 8,458
Interest expensed:
Directly (216) (560) (1,157) (560)
Amortized to cost of sales (2,153) (2,091) (6,029) (5,209)
------ ------ ------ ------
Capitalized interest, end of
period $10,829 $7,014 $10,829 $7,014
======= ====== ======= ======
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following tables set forth certain operating and financial data for the
Company:
<TABLE>
<CAPTION>
Percentages of Revenue
------------------------------------
Three Nine
Months Ended Months Ended
June 30, June 30,
--------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Costs and expenses:
Cost of sales 81.9 % 82.0 % 82.1 % 82.4 %
Selling, general and administra-
tive expense 9.8 9.9 10.2 10.5
Interest expense 0.2 0.5 0.3 0.2
--- --- --- ---
Total costs and expenses 91.9 92.4 92.6 93.1
Other (income) (0.3) (0.2) (0.2) (0.1)
---- ---- ---- ----
Income before income taxes 8.4 7.8 7.6 7.0
Income taxes 3.2 2.7 2.9 2.5
--- --- --- ---
Net income 5.2 % 5.1 % 4.7 % 4.5 %
=== === === ===
</TABLE>
<TABLE>
<CAPTION>
New sales contracts, net Homes in
of cancellations Home closings sales backlog
----------------------------- -------------------------- --------------
Three Nine Three Nine
Months Ended Months Ended Months Ended Months Ended As of
June 30, June 30, June 30, June 30, June 30,
-------- -------- -------- -------- --------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic (North and
South Carolina,
Washington, D.C.) 127 92 405 260 136 94 407 267 196 224
Midwest (Illinois,
Kansas, Minnesota,
Missouri, Ohio) 157 95 430 244 131 86 266 232 278 135
Southeast (Alabama,
Florida, Georgia) 129 104 385 286 136 108 382 210 193 144
Southwest (Arizona, New
Mexico, Texas) 389 348 1,019 891 300 316 901 816 535 475
West(California, Colorado,
Nevada, Utah) 194 63 484 191 157 75 333 177 232 59
--- -- ----- ----- --- -- ----- ----- ----- -----
Totals 996 702 2,723 1,872 860 679 2,289 1,702 1,434 1,037
=== === ===== ===== === === ===== ===== ===== =====
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Revenues for the three months ended June 30, 1996, increased by 18.9%, to $143.3
million, from $120.5 million in the comparable period of 1995. The number of
homes closed by the Company increased by 26.7%, to 860 homes in the three months
ended June 30, 1996, from 679 in the same period of 1995. Large percentage
increases in the number of homes closed were achieved in each of the Company's
market regions except for the Southwest region, which declined 5.1%. The average
selling price of homes closed declined 5.9%, to $166,200 in the three months
ended June 30, 1996, from $176,600 in the same period of 1995. The decrease in
average sales price was attributable to differences in the geographic mix of
markets in which homes were closed, to the introduction of new product lines
with lower average selling prices, and to closings from the Greensboro and
Birmingham markets, acquired in the last quarter of fiscal 1995, where homes are
generally priced lower than the Company's overall average selling prices.
New net sales contracts increased 41.9%, to 996 homes for the three months ended
June 30, 1996, from 702 homes for the three months ended June 30, 1995. The 1996
quarterly average sales price approximated $167,600, compared to $175,300 for
the same period of the prior year.
The Company was operating in 180 subdivisions at June 30, 1996, compared to 146
subdivisions at June 30, 1995. At June 30, 1996, the Company's backlog of sales
contracts was 1,434 homes, a 38.3% increase over comparable figures at June 30,
1995. Because large, more expensive homes require longer construction periods,
the average sales value of homes in backlog increased to $174,000 at June 30,
1996, from $170,600 at June 30, 1995, after consideration for the sales backlog
included in the 1995 Greensboro acquisition.
Cost of sales increased by 18.7%, to $117.4 million in the three months ended
June 30, 1996, from $98.9 million in the comparable period of 1995. The increase
was attributable to the increase in revenues. As a percentage of revenues, cost
of sales for the quarter decreased to 81.9% in 1996 from 82.0% in 1995.
Selling, general and administrative (SG&A) expense increased by 18.0%, to $14.1
million in the three months ended June 30, 1996, from $12.0 million in the
comparable period of 1995. As a percentage of revenues, SG&A expense for the
quarter decreased 0.1%, to 9.8% in 1996 from 9.9% in 1995.
Interest expense totalled $0.2 million in the three months ended June 30, 1996,
compared to $0.6 million in the comparable period of 1995. The Company's stock
offering in January 1996, allowed the Company to invest an incremental $43
million of equity in inventory without increasing debt, thereby limiting
incurred interest. The Company follows a policy of capitalizing interest only on
inventory under construction or development. Capitalized interest and other
financing costs are included in cost of sales at the time of home closings.
Other income, which consists mainly of interest income and the pre-tax earnings
of DRH Title Company of Texas, Ltd. and DRH Mortgage Company, Ltd., increased to
$449,000 in the three months ended June 30, 1996, from $209,000 in the same
period of 1995.
The provision for income taxes increased by 41.3%, to $4.6 million in the three
months ended June 30, 1996, from $3.3 million in the comparable period of 1995,
due primarily to an increase in the overall estimated income tax rate
anticipated for fiscal 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended June 30, 1996 Compared to Nine Months Ended June 30, 1995
Revenues for the nine months ended June 30, 1996, increased by 24.2%, to $378.4
million, from $304.6 million in the comparable period of 1995. The number of
homes closed by the Company increased by 34.5%, to 2,289 in the nine months
ended June 30, 1996, from 1,702 in the same period of 1995. Percentage increases
in the number of homes closed were achieved in each of the Company's market
regions. There was a 6.5% decrease in the average selling price of homes closed,
to $165,000 in the nine months ended June 30, 1996, from $176,400 in the same
period of 1995. The decrease in average sales price was attributable to
differences in the geographic mix of markets in which homes were closed, new
product lines closed at lower average selling prices, and to closings from the
Greensboro and Birmingham markets, acquired in the last quarter of fiscal 1995,
where homes are generally priced lower than the Company's average selling prices
in other markets.
New net sales contracts increased 45.5%, to 2,723 homes for the nine months
ended June 30, 1996, from 1,872 homes for the nine months ended June 30, 1995.
Large percentage increases in new net sales contracts were achieved in each of
the Company's market regions. The nine-month average sales price for 1996
approximated $167,900, compared to $176,600 for the same period of the prior
year.
Cost of sales increased by 23.9%, to $310.8 million in the nine months ended
June 30, 1996, from $250.9 million in the comparable period of 1995. The
increase was attributable to the increase in revenues, as the cost of sales as a
percentage of revenues decreased to 82.1% in the nine months ended June 30,
1996, from 82.4% in the same period of 1995.
Selling, general and administrative (SG&A) expense increased by 21.1%, to $38.7
million in the nine months ended June 30, 1996, from $31.9 million in the
comparable period of 1995. As a percentage of revenues, SG&A expense decreased
to 10.2% for the nine months ended June 30, 1996, from 10.5% for the same period
of 1995. The decrease in SG&A expense as a percentage of revenues is due
primarily to increased revenue growth during the 1996 period.
Interest expense during the nine months ended June 30, 1996 amounted to $1.2
million, compared to $0.6 million in the comparable period of 1995. The Company
follows a policy of capitalizing interest only on inventory under construction
or development. Capitalized interest and other financing costs are included in
cost of sales at the time of home closings.
Other income, which consists mainly of interest income and pre-tax earnings of
DRH Title Company of Texas, Ltd. and DRH Mortgage Company, Ltd., increased to
$1,046,000 in the nine months ended June 30, 1996, from $265,000 in the same
period of 1995. The increase is due primarily to the fact that the 1995 period
includes only three months of DRH Title Company's results of operations, from
its April 1995 formation through June 30, 1995.
The provision for income taxes increased by 43.2%, to $10.8 million in the nine
months ended June 30, 1996, from $7.6 million in the comparable period of 1995,
due primarily to an increase in the overall estimated income tax rate
anticipated for fiscal 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had available cash and cash equivalents of $29.6
million. Inventories (including finished homes, construction in progress, and
developed residential lots and other land) at June 30, 1996, had increased by
$56.5 million (20.0%) since September 30, 1995, to $339.4 million. The increase
was due primarily to the fact that the Company was operating in more markets and
subdivisions. The Company financed the inventory increase by borrowing,
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
retaining earnings and the $43.3 million net proceeds of a public stock offering
in January 1996. As a result, the Company's ratio of notes payable to total
capital at June 30, 1996, was 50.4%, compared to the September 30, 1995 ratio of
61.6%. The Company's equity to total assets ratio was 43.1% at June 30, 1996,
compared to the September 30, 1995 ratio of 33.3%.
The Company's financing needs depend upon the results of its operations, sales
volume, inventory levels, and inventory turnover. Historically, the Company has
financed its operations through borrowings from financial institutions, through
retaining earnings, and from the sale of common stock.
At June 30, 1996, the Company had outstanding debt of $171.0 million.
Substantially all of that amount represents borrowings under the terms of the
Company's new $260 million unsecured bank credit facility, which was consummated
in April 1996. The new facility consists of a $100 million five-year term loan,
a $150 million three-year revolving loan and a $10 million three-year letter of
credit facility. The Company also has $10 million in additional borrowing
capacity under a separate unsecured bank revolving credit facility. The
completion of the January public sale of common stock and the new credit
facilities provide the Company with a strong financial position, with resources
adequate to fund near-term growth objectives.
Except for ordinary expenditures for the construction of homes, the acquisition
of land and lots for development and sale of homes, at June 30, 1996, the
Company had no material commitments for capital expenditures.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1-5. Inapplicable
ITEM 6 Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
D.R. HORTON, INC.
- - -----------------
(Registrant)
Date: July 24, 1996 By: David J. Keller
------------- ---------------
(Signature)
David J. Keller, on behalf of D.R. Horton,Inc.
and as Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Income found
on pages 3 and 4 of the Company's Form 10-Q for the year-to-date, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> Oct-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 29,607
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 339,411
<CURRENT-ASSETS> 369,018
<PP&E> 5,714
<DEPRECIATION> 0
<TOTAL-ASSETS> 390,678
<CURRENT-LIABILITIES> 51,390
<BONDS> 171,014
0
0
<COMMON> 324
<OTHER-SE> 167,950
<TOTAL-LIABILITY-AND-EQUITY> 390,678
<SALES> 378,393
<TOTAL-REVENUES> 378,393
<CGS> 310,788
<TOTAL-COSTS> 310,788
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,157
<INCOME-PRETAX> 28,820
<INCOME-TAX> 10,849
<INCOME-CONTINUING> 17,971
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,971
<EPS-PRIMARY> .58
<EPS-DILUTED> 0
</TABLE>
