<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
___ SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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)
(Former name, former address and former fiscal year, if changed since last
report)
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 -- 32,435,553 shares as of January 29, 1997
<PAGE>
INDEX
D.R. HORTON, INC.
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
Consolidated Balance Sheets--December 31, 1996 and September 30, 1995.
Consolidated Statements of Income--Three Months Ended December 31,
1996 and 1995.
Consolidated Statement of Stockholders' Equity--Three Months Ended
December 31, 1996.
Consolidated Statements of Cash Flows--Three Months Ended December 31,
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.
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D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1996 1996
---- ----
(In thousands)
(Unaudited)
ASSETS
Cash $15,125 $32,467
Inventories:
Finished homes and construction in progress 237,858 216,264
Residential lots-developed and under development 161,283 127,707
Land held for development 1,312 1,312
----- -----
400,453 345,283
Property and equipment (net) 5,754 5,631
Earnest money deposits and other assets 18,940 15,247
Excess of cost over net assets acquired (net) 5,582 4,285
----- -----
$445,854 $402,913
======== ========
LIABILITIES
Accounts payable $33,434 $34,391
Accrued expenses and customer deposits 24,440 21,011
Notes payable 203,200 169,873
------- -------
261,074 225,275
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, 32,415,729 at December 31, 1996 and
32,362,036 at September 30, 1996, issued and
outstanding. 324 324
Additional capital 160,049 159,714
Retained earnings 24,407 17,600
------ ------
184,780 177,638
------- -------
$445,854 $402,913
======== ========
See accompanying notes to consolidated financial statements.
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D. R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended December 31,
------------------
1996 1995
---- ----
(In thousands, except
net income per share)
(Unaudited)
Revenues $144,381 $121,068
Cost of sales 118,036 99,535
------- ------
26,345 21,533
Selling, general and administrative expense 15,117 12,513
------ ------
Operating income 11,228 9,020
Other:
Interest expense (784) (669)
Other income 715 374
--- ---
(69) (295)
--- ----
INCOME BEFORE INCOME TAXES 11,159 8,725
Provision for income taxes 4,352 3,310
----- -----
NET INCOME $6,807 $5,415
====== ======
Net income per share $0.21 $0.19
===== =====
Weighted average number of shares of common stock
and common stock equivalents outstanding 33,003 28,250
====== ======
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, 1996 $324 $159,714 $17,600 $177,638
Net income - - 6,807 6,807
Issuance under D.R.Horton, Inc.
employee benefit plans - 133 - 133
Exercise of stock options - 202 - 202
--------------------------------------
Balances at December 31, 1996 $324 $160,049 $24,407 $184,780
======================================
See accompanying notes to consolidated financial statements.
<PAGE>
D. R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months
Ended December 31,
------------------
1996 1995
---- ----
(In thousands)
(Unaudited)
OPERATING ACTIVITIES
Net income $6,807 $5,415
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 739 665
Expense associated with issuance of stock under
employee benefit plans 133 -
Changes in operating assets and liabilities:
Increase in inventories (30,262) (11,134)
Increase in earnest money deposits and other assets (1,750) (727)
Increase (decrease) in accounts payable, accrued
expenses and customer deposits (4,167) 74
------ --
NET CASH USED IN OPERATING ACTIVITIES (28,500) (5,707)
------- ------
INVESTING ACTIVITIES
Net purchase of property and equipment (501) (1,095)
Net cash paid for acquisitions (17,737) 0
------- -
NET CASH USED IN INVESTING ACTIVITIES (18,238) (1,095)
------- ------
FINANCING ACTIVITIES
Proceeds from notes payable 46,372 24,648
Repayment of notes payable (17,178) (11,434)
Proceeds from exercise of stock options 202 26
--- --
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,396 13,240
------ ------
INCREASE (DECREASE) IN CASH (17,342) 6,438
Cash at beginning of period 32,467 16,737
------ ------
Cash at end of period $15,125 $23,175
======= =======
Supplemental cash flow information:
Interest paid $3,578 $3,473
====== ======
Income taxes paid $4,505 $1,784
====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
December 31, 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 wholly 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 period ended December 31, 1996, are not necessarily indicative of
the results that may be expected for the year ending September 30, 1997.
NOTE B - NET INCOME PER SHARE
Net income per share for the three month periods ended December 31, 1996 and
1995, is based on the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding.
On April 23, 1996, the Board of Directors declared an eight percent stock
dividend on the Company's common stock, which was paid on May 24, 1996, to
stockholders of record on May 8, 1996. Earnings per share and weighted average
shares outstanding have been restated to reflect 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 December 31, 1996, not significant.
The provisions for income tax expense for the three month periods ended December
31, 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
December 31,
------------
1996 1995
---- ----
Interest costs are (in thousands):
Capitalized interest, beginning of period $11,042 $7,118
Interest incurred 3,872 3,880
Interest expensed:
Directly (784) (669)
Amortized to cost of sales (2,057) (1,986)
------ ------
Capitalized interest, end of period $12,073 $8,343
======= ======
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D.R. HORTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
December 31, 1996
NOTE E - ACQUISITIONS
In October, 1996, the Company completed the acquisition of the principal assets
(approximately $7.6 million, primarily inventories) of Trimark Communities,
L.L.C., of Denver, Colorado, for $6.6 million in cash and the assumption of
approximately $1.1 million in trade accounts and notes payable associated with
the acquired assets.
In December, 1996, the Company purchased the principal assets (approximately
$20.4 million, primarily inventories) of SGS Communities, Inc., of New Jersey,
for $11.8 million in cash and the assumption of $9.7 million in trade accounts
and notes payable associated with the acquired assets. At January 29, 1997, the
final determination of the valuations of the acquired assets had not yet been
made. Any subsequent adjustments to the beginning balance sheet valuation
amounts estimated herein will be recorded in future periods as adjustments to
the excess of cost over net assets acquired.
The Company has announced the pending acquisition of the Torrey Group of
Companies of Atlanta, Georgia, which is expected to be consummated during the
Company's second fiscal quarter. Under the terms of the acquisition agreement,
the Company will pay total consideration for all of the outstanding capital
stock of Torrey of $38 million, consisting of $28.5 million in cash and $9.5
million in common stock (approximately 863,000 shares). The Company will also
assume approximately $74 million of Torrey indebtedness upon consummation of the
acquisition.
<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:
Percentages of
Revenue
--------------
Three
Months Ended
December 31,
--------------
1996 1995
---- ----
Costs and expenses:
Cost of sales 81.8 % 82.2 %
Selling, general and administrative expense 10.5 10.3
Interest expense 0.5 0.6
--- ---
Total costs and expenses 92.8 93.1
Other (income) (0.5) (0.3)
---- ----
Income before income taxes 7.7 7.2
Income taxes 3.0 2.7
--- ---
Net income 4.7 % 4.5 %
=== ===
New sales
contracts, net Homes in
of cancellations Home closings sales backlog
---------------- ------------- -------------
Three Three
Months Ended Months Ended As of
December 31, December 31, December 31,
------------ ------------ ------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
Mid-Atlantic (Maryland, New Jersey,
North and South Carolina,
Virginia) 108 113 116 137 214 174
Midwest(Illinois, Kansas, Minnesota,
Missouri, Ohio) 89 111 105 72 168 153
Southeast(Alabama, Florida, Georgia,
Tennessee) 100 107 130 140 134 157
Southwest (Arizona, New Mexico,
Texas) 265 267 333 308 421 376
West (California, Colorado, Nevada,
Utah) 189 101 171 74 271 108
--- --- --- -- --- ---
Totals 751 699 855 731 1,208 968
=== === === === ===== ===
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three Months Ended December 31, 1996 Compared to Three Months Ended December 31,
1995
Revenues for the three months ended December 31, 1996, increased by 19.3%, to
$144.4 million, from $121.1 million for the comparable period of 1995. The
number of homes closed by the Company increased by 17.0% to 855 homes in the
three months ended December 31, 1996, from 731 homes in the same period of 1995.
Percentage increases in home closings ranging from 8.1% to 131.1% were achieved
in the Company's Midwest, Southwest and Western market regions, which were
somewhat offset by modest percentage decreases in home closings in the
Mid-Atlantic and Southeast market regions. Home sales revenues increased partly
due to an increase in the average home delivery price (to $168,700 in 1996, from
$165,600 for the comparable period of 1995). The increase in the average home
delivery price was due primarily to changes in the geographic mix of homes
closed within the Company.
New net sales contracts increased 7.4%, to 751 homes for the three months ended
December 31, 1996, from 699 homes for the three months ended December 31, 1995.
The dollar amount of new net sales contracts increased 12.5%, to $129.8 million,
with percentage increases ranging from 4.4% to 102.5% achieved in the Company's
Mid-Atlantic, Southwest and Western market regions. Those increases were offset
by moderate percentage declines in the Midwest and Southeast market regions. The
Company was operating in 225 subdivisions at December 31, 1996, compared to 171
subdivisions at December 31, 1995. At December 31, 1996, the Company's backlog
of sales contracts was 1,208 homes, a 24.8% increase over comparable figures at
December 31, 1995. The increase in sales backlog was partially due to the sales
backlog acquired in the purchase of Trimark Communities, L.L.C., of Denver,
Colorado (Trimark), and SGS Communities, Inc., of New Jersey (SGS) during the
quarter. The average sales value of homes in backlog increased to $185,000 at
December 31, 1996, from $170,500 at December 31, 1995. The increase was due
partially to the high average dollar value of the sales backlog acquired with
the December, 1996 acquisition of SGS, and to changes in the geographic mix of
homes sold during the quarter.
The increase in revenues caused cost of sales to increase by 18.6%, to $118.0
million in the three months ended December 31, 1996, from $99.5 million in the
comparable period of 1995. As a percentage of revenues, cost of sales decreased
to 81.8% in 1996 from 82.2% in 1995. The decrease in cost of sales as a
percentage of revenues is primarily due to efforts to increase sales prices and
control costs.
Selling, general and administrative (SG&A) expense increased by 20.8%, to $15.1
million in the three months ended December 31, 1996, from $12.5 million in the
comparable period of 1995. As a percentage of revenues, SG&A expense increased
to 10.5% in 1996, from 10.3% in 1995. This increase was partially due to costs
associated with the first quarter acquisitions.
Interest expense amounted to $0.8 million in the three months ended December 31,
1996, compared to $0.7 in the comparable period of 1995. The Company follows a
policy of capitalizing interest only on inventory under construction or
development. During the three months ended December 31, 1996 and 1995, the
Company expensed a portion of incurred interest and other financing costs due to
increased levels of developed lots and finished homes. 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 the DRH Title Companies and DRH Mortgage Company, Ltd., increased to $715,000
in the three months ended December 31, 1996, from $374,000 for the comparable
period of 1995. The increase was primarily due to expanded title agency
activities and the initiation of mortgage company services which were not
provided in 1995. Increased interest income from overnight investing of cash
balances also contributed to the increase in other income.
The provision for income taxes was $4.4 million in the three months ended
December 31, 1996, up $1.1 million from the $3.3 million for the comparable
quarter of 1995. The increase in income taxes was attributable to the increase
in income before income taxes and an increase in the estimated effective income
tax rate anticipated for fiscal 1997.
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had available cash and cash equivalents of
$15.1 million. Inventories (including finished homes and construction in
progress, developed residential lots and other land) at December 31, 1996,
increased by $55.2 million from September 30, 1996, due to the acquisitions of
selected assets (including inventories) of Trimark and SGS. Inventories also
increased due to a general increase in business activity and the expansion of
operations in the newer market areas. Because the inventory increase and the
acquisitions were financed largely by borrowing, the Company's ratio of notes
payable to total capital increased to 52.4% at December 31, 1996, from 48.9% at
September 30, 1996. The equity to total assets ratio decreased slightly during
the three months, to 41.4% at December 31, 1996, from 44.1% at September 30,
1996.
The Company's financing needs depend upon the results of its operations, sales
volume, inventory levels, inventory turnover, and acquisitions. The Company has
financed its operations through borrowings from financial institutions, through
funds from earnings, and, in 1992 and 1996, from the sale of common stock.
At December 31, 1996, the Company had outstanding debt of $203.2 million and
aggregate unsecured financing available under debt agreements with twelve
lenders approximating $287.5 million. The Company is currently in the final
stages of negotiating increases to its existing unsecured credit facilities,
which will increase its debt capacity to $410 million. Consummation of these
increased credit facilities is expected to occur during the Company's second
fiscal quarter.
In October, 1996, the Company completed the acquisition of the principal assets
(approximately $7.6 million, primarily inventories) of Trimark for approximately
$6.6 million in cash and the assumption of approximately $1.1 million in trade
accounts and notes payable associated with the acquired assets. In December,
1996, the Company purchased the principal assets (approximately $20.4 million,
primarily inventories) of SGS for $11.8 million in cash and the assumption of
$9.7 million in trade accounts and notes payable associated with the acquired
assets.
The Company has announced the pending acquisition of the Torrey Group of
Companies of Atlanta, Georgia, which is expected to be consummated during the
Company's second fiscal quarter. Under the terms of the acquisition agreement,
the Company will pay total consideration for all of the outstanding capital
stock of Torrey of $38 million, consisting of $28.5 million in cash and $9.5
million in common stock (approximately 863,000 shares). The Company will also
assume approximately $74 million of Torrey indebtedness upon consummation of the
acquisition.
The Company's rapid growth requires significant amounts of cash. It is
anticipated that future home construction, lot and land purchases and
acquisitions will be funded through internally generated funds and new and
existing borrowing relationships. The Company continuously evaluates its capital
structure and, in the future, may seek to further increase unsecured debt and
obtain additional equity to fund ongoing operations as well as to pursue
additional growth opportunities.
Except for ordinary expenditures for the construction of homes and, to a limited
extent, the acquisition of land and lots for development and sale of homes, at
December 31, 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: January 30, 1997 By: /s/ 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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 15,125
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 400,453
<CURRENT-ASSETS> 415,578
<PP&E> 5,754
<DEPRECIATION> 0
<TOTAL-ASSETS> 445,854
<CURRENT-LIABILITIES> 57,874
<BONDS> 0
0
0
<COMMON> 324
<OTHER-SE> 184,456
<TOTAL-LIABILITY-AND-EQUITY> 445,854
<SALES> 144,381
<TOTAL-REVENUES> 144,381
<CGS> 118,036
<TOTAL-COSTS> 118,036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 784
<INCOME-PRETAX> 11,159
<INCOME-TAX> 4,352
<INCOME-CONTINUING> 6,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,807
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
