<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1997
Registration No. 333-21183
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
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 NUMBER)
CHARLES N. WARREN
SENIOR VICE PRESIDENT
AND GENERAL COUNSEL
1901 ASCENSION BLVD., SUITE 100
ARLINGTON, TEXAS 76006
(817) 856-8200
1901 ASCENSION BLVD., SUITE 100 (NAME, ADDRESS, INCLUDING ZIP CODE,
ARLINGTON, TEXAS 76006 AND
(817) 856-8200 TELEPHONE NUMBER, INCLUDING AREA CODE,
(ADDRESS, INCLUDING ZIP CODE, AND OF AGENT FOR SERVICE)
TELEPHONE
NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
COPIES OF COMMUNICATIONS TO:
IRWIN F. SENTILLES, III DANIEL J. ZUBKOFF
GIBSON, DUNN & CRUTCHER LLP CAHILL GORDON & REINDEL
1717 MAIN STREET, SUITE 5400 EIGHTY PINE STREET
DALLAS, TEXAS 75201 NEW YORK, NEW YORK 10005
(214) 698-3100 (212) 701-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
-----------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
-----------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
-----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF NUMBER OF MAXIMUM AGGREGATE
SECURITIES TO BE SHARES TO BE OFFERING PRICE OFFERING PRICE AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2)(3) (2)(3) REGISTRATION FEE(4)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share......... 3,910,000 $11.50 $44,965,000 $13,626
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</TABLE>
(1) Includes 510,000 shares of Common Stock which the Underwriters have the
option to purchase from the Company to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee.
(3) Based on the average of the high and low prices of the Common Stock as
reported on the New York Stock Exchange Composite Tape on March 6, 1997.
(4) Registration fee previously paid with initial filing with respect to
5,750,000 shares of Common Stock on February 5, 1997.
-----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
WITHDRAWAL OF CERTAIN SHARES FROM REGISTRATION
D.R. Horton, Inc. (the "Company") hereby withdraws, as of the date of
effectiveness of this Post-Effective Amendment No. 1, 1,840,000 shares of its
Common Stock, par value $.01 per share (the "Common Stock") from this
Registration Statement. As a consequence, out of the 5,750,000 shares of
Common Stock originally subject to this Registration Statement, 3,910,000
shares of Common Stock remain subject to this Post-Effective Amendment No. 1.
The Company is withdrawing the foregoing amount of shares of Common Stock to
reflect a reduction in size of the proposed offering subject to this
Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 10, 1997
PROSPECTUS
3,400,000 SHARES
D.R. HORTON, INC.
CUSTOM HOMES
COMMON STOCK
--------
All of the 3,400,000 shares of Common Stock offered hereby (the "Offering")
are being sold by D.R. Horton, Inc. (the "Company").
The Common Stock is listed on the New York Stock Exchange under the symbol
"DHI." The last reported sale price of the Common Stock on the New York Stock
Exchange Composite Tape was $11 1/2 per share on March 6, 1997. See "Price
Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
</TABLE>
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(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting estimated expenses of $ , payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 510,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. See "Underwriting." If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $ , $
and $ , respectively.
--------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if delivered to and accepted
by them and subject to certain conditions. It is expected that the shares of
Common Stock offered hereby will be available for delivery on or about ,
1997, at the office of Smith Barney Inc., 333 West 34th Street, New York, New
York 10001, or through the facilities of The Depository Trust Company.
--------
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
, 1997
<PAGE>
The pictures below are representative of homes built by the Company.
Charlotte, North Carolina Dallas-Fort Worth, Texas
Suburban Washington D.C. Phoenix, Arizona
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus. As used in this Prospectus, except as the context
otherwise requires, references to D.R. Horton, Inc. and its subsidiaries
(collectively, the "Company"), and the financial and operating data contained
in this Prospectus reflect the consolidated results of such entities for the
periods indicated. All share and per share data included or incorporated by
reference herein have been adjusted to reflect the Company's 9% stock dividend
of June 1995, seven-for-five stock split of September 1995 and 8% stock
dividend of May 1996. Unless otherwise indicated, information set forth herein
assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
The Company is a national homebuilder constructing and selling single-family
homes in metropolitan areas of the Mid-Atlantic, Midwest, Southeast, Southwest
and Western regions of the United States. The Company builds homes in 27
markets and believes that it is one of only three public homebuilders with
operations in 21 or more states. The Company offers high-quality homes with
custom features, designed principally for the entry-level and move-up market
segments. The Company's homes generally range in size from 1,000 to 5,000
square feet and in price from $80,000 to $600,000, with an average selling
price of $166,600 for the year ended September 30, 1996, and $168,700 for the
three months ended December 31, 1996.
In fiscal 1996, the Company recorded its tenth consecutive year of record
revenues, earnings and sales backlog. The Company's revenues have increased
from $393.3 million in fiscal 1994 to $547.3 million in fiscal 1996, a compound
annual growth rate of 18%. Over this same period, net income has increased from
$17.7 million to $27.4 million, a 25% compound annual growth rate. Homes closed
by the Company have increased from 2,360 in fiscal 1994 to 3,284 in fiscal
1996.
Revenues increased 19%, to $144.4 million from $121.1 million for the three
months ended December 31, 1996, compared to the same period in 1995. The sales
value of net new contracts signed by the Company increased 12%, to $129.8
million (751 homes) compared to $115.4 million (699 homes) for the comparable
period in 1995. At December 31, 1996, the Company's backlog of homes under
contract totaled $223.5 million (1,208 homes), a 35% increase from $165.0
million (968 homes) at December 31, 1995. Net income for the three months ended
December 31, 1996, increased 26%, to $6.8 million ($0.21 per share), from $5.4
million ($0.19 per share), for the same quarter of 1995.
OPERATING STRATEGY
The Company attributes its success to its proven operating strategy, which
focuses on the following elements:
Geographic Diversification. The Company is one of the most geographically
diversified homebuilders in the United States, with operating divisions in 21
states and 27 markets, as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC REGION MARKETS
----------------- -------
<S> <C>
Mid-Atlantic............ Charlotte, Greensboro, Greenville, North Central New Jersey,
Raleigh/Durham, Suburban Washington, D.C.
Midwest................. Chicago, Cincinnati, Kansas City, Minneapolis/St. Paul, St. Louis
Southeast............... Atlanta, Birmingham, Nashville, Orlando, Pensacola, South Florida
Southwest............... Albuquerque, Austin, Dallas/Fort Worth, Houston, Phoenix
Western................. Denver, Las Vegas, Los Angeles, Salt Lake City, San Diego
</TABLE>
3
<PAGE>
The Company believes that its diversification strategy mitigates the effects
of local and regional economic cycles and enhances its growth potential.
New Markets/Acquisitions. While the Company believes that there are
significant growth opportunities in its existing markets, it intends to
continue to evaluate new markets for entry that have significant entry-level
and move-up segments and satisfy the Company's profitability, investment return
and other criteria. Since October 1, 1992, the Company has expanded into 15 new
markets through start-up operations and has completed complementary
acquisitions that have expanded the Company into four additional markets.
Additionally, the Company recently completed the acquisition of the Torrey
Group of Companies ("Torrey"), the largest builder in the rapidly growing
Atlanta, Georgia market. See "The Torrey Acquisition." The Company believes
that the expansion of its operations through the selective acquisition of
existing homebuilding companies can afford it several benefits not found in
start-up operations.
Before entering new markets, the Company evaluates their potential on the
basis of local housing demand, demographic trends and other factors, such as
local growth initiatives, employment demand and growth, and the availability of
quality lots and undeveloped real estate at reasonable prices. Typically, the
Company will not invest significant amounts in real estate, including raw land,
developed lots, models and speculative homes, or overhead in start-up
operations in new markets until such markets demonstrate significant growth
potential and acceptance of the Company and its products.
In evaluating potential acquisition candidates, the Company seeks
homebuilding companies that have an excellent reputation, a track record of
profitability and a strong management team. Typically, the Company endeavors to
limit the risks associated with acquiring an existing homebuilding company by
conducting extensive operational, financial and legal due diligence on each
acquisition candidate and by only acquiring homebuilding companies that the
Company believes should have an immediate positive impact on the Company's
earnings.
Market Focus-Custom Features. The Company typically positions itself in its
markets between large volume homebuilders and local custom builders by offering
a broader selection of homes with more amenities and greater design flexibility
than homes offered by volume builders, at prices that are generally more
affordable than those charged by local custom builders. The Company also is
able to customize its designs to deliver personalized homes to its customers.
While most design modifications are significant to the homebuyer, such changes
improve margins and typically involve relatively minor adjustments that allow
the Company to maintain the efficiencies of a volume homebuilder. The Company
believes that its ability to cater to the design tastes of prospective
homebuyers at competitive prices, even at the entry level, distinguishes it
from many of its competitors.
Decentralized Operations. The Company's homebuilding activities are
decentralized to give maximum flexibility to its local division managers. The
Company believes that division management is more informed to make decisions
regarding local operations. Each operating division is responsible for
preliminary site selection, negotiation of option contracts, and overseeing
land development activities. Additionally, each operating division plans its
homebuilding schedule, selects the building plans and architectural scheme for
its subdivisions, obtains all building approvals, and develops a marketing plan
for its homes. The Company's corporate office retains oversight and
responsibility for final approval of all land and lot acquisitions, inventory
levels, financing arrangements, accounting and management reporting, payment of
subcontractor invoices, payroll and employee benefits.
Cost Management. The Company strives to control its overhead costs by
centralizing the administrative and accounting functions and by limiting the
number of field administrative personnel and middle level management positions.
The Company attempts to control construction costs through the efficient design
of its homes and obtaining favorable pricing from certain subcontractors based
on the high volume of work performed
4
<PAGE>
for the Company. The Company's management information systems also assist in
controlling construction costs, overhead and capital by allowing management to
monitor construction expenditures on a home-by-home basis and the composition
and level of inventory on a subdivision basis.
Limited Real Estate Exposure. The Company attempts to minimize the risks
associated with land ownership while maximizing its return on invested capital
by acquiring developed building lots pursuant to lot option contracts,
generally on a non-recourse basis, after all zoning and other governmental
entitlements and approvals are obtained. The Company attempts to control a two
to four year supply of building lots based on current and expected absorption
rates. The Company also pursues selected land acquisition and development
opportunities to augment its inventory of option building lots and to maximize
profit opportunities. These acquisitions are generally limited to smaller
tracts of entitled land that will yield 50 to 150 lots when developed. By
limiting its land acquisition and development activities generally to smaller
parcels of land, the Company reduces the financial and market risks associated
with owning land during the development period.
THE TORREY ACQUISITION
On January 29, 1997, the Company entered into a stock purchase agreement (the
"Stock Purchase Agreement") for the acquisition of the entities comprising
Torrey (the "Torrey Acquisition"). The Company completed the Torrey Acquisition
on February 27, 1997. Under the terms of the Stock Purchase Agreement, the
Company paid at closing consideration consisting of $28.5 million in cash and
844,444 shares of Common Stock, and agreed to a contingent payment estimated at
$1 million, for all of the outstanding capital stock of the entities comprising
Torrey. The Company also assumed and refinanced approximately $89 million of
indebtedness, other obligations and minority interests.
Torrey has been the leading builder of single-family homes in the large and
growing Atlanta, Georgia market for the past three years as reported in Builder
Magazine. Atlanta has been the largest housing market in the United States for
the past three years based on single-family building permits issued. Torrey
targets both entry-level and first time move-up buyers. For the twelve months
ended September 30, 1996, Torrey delivered 1,442 homes, generating $183.8
million of revenue. In addition to building homes in the Atlanta market, Torrey
has homebuilding operations in Charlotte and Raleigh/Durham, North Carolina,
and Greenville, South Carolina. Despite Torrey's leading market share position
in the Atlanta market, the Company believes that it can improve Torrey's
operating results by providing additional and lower cost capital and operating
synergies.
The Company believes that the Torrey Acquisition is consistent with its
strategy of selectively pursuing acquisitions of homebuilders that have an
excellent reputation, a track record of profitability and a strong management
team.
5
<PAGE>
THE OFFERING
Total Common Stock
offered.................... 3,400,000 shares
Common Stock to be
outstanding after the
Offering...................
New York Stock Exchange 36,660,173 shares(1)
Symbol..................... DHI
Use of proceeds.............
The net proceeds to the Company from the Offering
will be used to temporarily repay indebtedness
under revolving credit facilities and for
general corporate purposes.
- --------
(1) Does not reflect 2,372,756 additional shares of Common Stock subject to
outstanding options as of December 31, 1996 pursuant to the Company's 1991
Stock Incentive Plan (the "Stock Option Plan").
RISK FACTORS
Investment in the Common Stock involves certain risks discussed under "Risk
Factors" that should be considered by prospective investors.
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT NET INCOME PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------------------------- -------------------------------
PRO FORMA PRO FORMA
AS AS
ADJUSTED(1) ADJUSTED(1)
1994 1995 1996 1996 1995 1996 1996
-------- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $393,317 $437,388 $547,336 $780,438 $121,068 $144,381 $214,891
Gross profit........... 67,218 77,646 98,282 144,641 21,533 26,345 38,651
Income before income
taxes................. 28,591 32,557 44,432 69,438 8,725 11,159 14,674
Net income............. $ 17,663 $ 20,539 $ 27,379 $ 42,633 $ 5,415 $ 6,807 $ 8,952
Net income per share... $ 0.63 $ 0.74 $ 0.87 $ 1.20 $ 0.19 $ 0.21 $ 0.24
Weighted average number
of common shares (in
thousands)............ 27,845 27,849 31,420 35,664 28,250 33,003 37,247
SELECTED OPERATING DATA:
Gross profit margin.... 17.1% 17.8% 18.0% 18.5% 17.8% 18.2% 18.0%
Number of homes
closed................ 2,360 2,474 3,284 5,037 731 855 1,333
New sales orders, net
(homes)(2)............ 2,327 2,553 3,488 5,150 699 751 1,102
New sales orders, net
($ value)(2).......... $394,587 $449,260 $585,489 $826,214 $115,363 $129,776 $179,954
Sales backlog at end of
period (homes)(3)..... 773 1,000 1,204 1,712 968 1,208 1,499
Sales backlog at end of
period ($ value)(3)... $140,524 $170,736 $208,888 $297,572 $165,030 $223,474 $267,392
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-------------------------
PRO FORMA
AS
ACTUAL ADJUSTED(4)
----------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Inventories........................................... $ 400,453 $ 497,037
Total assets.......................................... 445,854 567,300
Total debt............................................ 203,200 264,682
Stockholders' equity.................................. 184,780 229,047
</TABLE>
- --------
(1) Pro forma to reflect the acquisitions of the assets of Trimark Communities,
LLC ("Trimark") and SGS Communities, Inc. ("SGS"), which were both
completed during the first quarter of fiscal 1997, and the Torrey
Acquisition, which was completed in the second quarter of fiscal 1997, as
if such acquisitions had occurred on the first day of each reported period.
See "Unaudited Pro Forma Financial Data." As adjusted to reflect the sale
of 3,400,000 shares of Common Stock offered hereby by the Company and the
application of the estimated net proceeds therefrom to temporarily reduce
indebtedness under the Company's revolving credit facilities.
(2) Represents homes placed under contract during the period, net of
cancellations. See "Business--Marketing and Sales."
(3) Represents homes under contract but not yet closed at the end of the
period. See "Business--Marketing and Sales."
(4) Pro forma to reflect the Torrey Acquisition and the sale of 3,400,000
shares of Common Stock offered hereby by the Company and the application of
the estimated net proceeds therefrom to temporarily reduce indebtedness
under the Company's revolving credit facilities.
7
<PAGE>
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, prospective investors should carefully consider the
factors set forth below before purchasing any shares of Common Stock offered
hereby.
General Real Estate, Economic and Other Conditions. The homebuilding
industry is cyclical and is significantly affected by changes in general and
local economic conditions, such as employment levels, availability of
financing for homebuyers, interest rates, consumer confidence and housing
demand. In addition, homebuilders are subject to various risks, including
competitive overbuilding, availability and cost of building lots, materials
and labor, weather conditions, delays in construction schedules, cost
overruns, changes in governmental regulation and increases in real estate
taxes and other local government fees. Moreover, homebuilders are subject to
the risks associated with natural disasters such as hurricanes, earthquakes,
and fires. The Company and its competitors also are impacted by comprehensive
local, state and Federal statutes and rules regulating environmental matters,
zoning, building design and density requirements, as they affect the
availability and cost of building lots and the timing of homebuilding
activities.
Interest Rates; Mortgage Financing. Virtually all purchasers of the
Company's homes finance their acquisitions through third-party lenders
providing mortgage financing. In general, housing demand is adversely affected
by increases in interest rates, decreasing availability of mortgage financing,
increasing housing costs and unemployment. If mortgage interest rates increase
and the ability of prospective buyers to finance home purchases is adversely
affected, the Company's operating results may be negatively impacted. The
Company's homebuilding activities also are dependent upon the availability and
cost of mortgage financing for buyers of homes owned by potential customers so
those customers can sell their existing homes and purchase a home from the
Company. In addition, the Company believes that the availability of Federal
Housing Administration and Veterans Administration mortgage financing is an
important factor in marketing many of its homes. Any limitations or
restrictions on the availability of such financing could adversely affect the
Company's sales. See "Business--Customer Financing."
Competition. The homebuilding industry is highly competitive and fragmented.
Homebuilders compete not only for homebuyers, but also for desirable
properties, financing, raw materials and skilled labor. The Company competes
with other local, regional and national homebuilders, often within larger
subdivisions designed, planned and developed by such homebuilders. Some of the
Company's competitors have longer operating histories and greater financial,
marketing and sales resources than the Company, including, in some instances,
affiliated mortgage companies.
Future Capital Requirements. The Company's operations require significant
amounts of cash, and the Company will be required to seek additional capital
for the future growth and development of its business. There can be no
assurance as to the terms or availability of such additional capital. If the
Company is not successful in obtaining sufficient capital on favorable terms,
it could result in a reduction in sales and may adversely affect the Company's
future growth or results of operations. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
Acquisitions. From April 1994, through the present, the Company has acquired
six homebuilding companies, including the Torrey Acquisition completed on
February 27, 1997. In the future, the Company intends to seek to acquire
additional homebuilding companies. Subsequent to the acquisitions, the
previous owners of the acquired companies normally continue to manage their
operations as subsidiaries of the Company. Although the Company believes that
it has successfully integrated the companies it has previously acquired into
its operations without substantial costs, delays or other problems, there is
no assurance that the Company will be able to successfully integrate the
operations of Torrey and any future acquisitions of homebuilding companies. In
addition, while the Company believes that its management has been effective in
overseeing the combined operations of the Company and its acquisitions, there
can be no assurance that the Company will be able to implement successfully
its operating and growth strategies in each of its markets. Finally, there can
be no
8
<PAGE>
assurance that the pace of the Company's acquisitions will not adversely
affect the Company's efforts to integrate acquisitions and manage the acquired
companies profitably.
Control Relationships. Donald R. Horton and other affiliates of the Company
will own, directly or indirectly, approximately 39.80% of the Company's
outstanding Common Stock after giving effect to the Offering (39.26% if the
Underwriters' over-allotment option is exercised in full). Accordingly, such
persons may effectively be able to elect the entire board of Directors of the
Company and control its management, operations and affairs. Donald R. Horton,
along with his children and certain family trusts of which he and his wife and
children are the beneficiaries, will own approximately 34.10% of the Company's
outstanding Common Stock after giving effect to the Offering (33.63% if the
Underwriters' over-allotment option is exercised in full).
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
in the Offering are estimated to be approximately $37.0 million ($42.5 million
if the Underwriters' over-allotment option is exercised in full). The Company
intends to use the proceeds from the Offering to temporarily repay
indebtedness under revolving credit facilities and for general corporate
purposes. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition--Financial Condition, Liquidity and Capital
Resources." Borrowings under the Company's various credit facilities bear
interest at effective rates ranging from LIBOR plus 1 1/4% to LIBOR plus 2%.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "DHI." The following table sets forth the high and low sale prices
for the Common Stock for the periods indicated, as reported on the Nasdaq
National Market (through December 13, 1995) and the New York Stock Exchange
(on and after December 14, 1995).
<TABLE>
<CAPTION>
FISCAL YEAR 1997
FISCAL YEAR FISCAL YEAR (THROUGH
1995 1996 MARCH 6, 1997)
----------------- ------------------ ----------------
HIGH LOW HIGH LOW HIGH LOW
--------- ------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Quarter ended December
31..................... $ 8 5/16 $5 3/8 $11 $8 15/16 $ 11 3/8 $8 5/8
Quarter ended March 31.. 6 5/16 5 5/16 11 15/16 8 15/16 13 10 1/8
Quarter ended June 30... 8 15/16 6 9/16 10 5/8 8 5/8
Quarter ended September
30..................... 10 1/2 8 1/2 10 3/8 7 1/2
</TABLE>
As of January 31, 1997, there were 181 holders of record of the Common
Stock. On March 6, 1997, the last sale price reported on the New York Stock
Exchange Composite Tape for the Common Stock was $11 1/2.
DIVIDEND POLICY
Declarations of cash dividends are within the discretion of the Board of
Directors and are dependent upon various factors, including the earnings, cash
flow, capital requirements and operating and financial condition of the
Company. Other than as required to maintain the financial ratios and net worth
requirements under the Company's revolving credit facilities, there are no
restrictions on payments of cash dividends by the Company. On January 20,
1997, the Company declared a cash dividend of $.02 per outstanding share of
Common Stock, its first cash dividend since its initial public offering. The
Company intends to pay an annual cash dividend, payable quarterly on
outstanding shares of Common Stock.
9
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
31, 1996, with pro forma adjustments to reflect the acquisition of Torrey as
if such acquisition had occurred on December 31, 1996, and as adjusted to
reflect the Torrey Acquisition and the sale by the Company of the Common Stock
offered hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds".
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED(2)
-------- ------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Notes Payable.......................... $203,200 $301,634 $264,682
Stockholders' equity(3):
Common Stock, par value $.01 per share;
100,000,000 shares authorized;
32,415,729 actual shares; 33,260,173
pro forma shares, and 36,660,173 pro
forma as adjusted shares, issued and
outstanding........................... 324 333 367
Additional capital..................... 160,049 167,355 204,273
Retained earnings...................... 24,407 24,407 24,407
-------- -------- --------
Total stockholders' equity........... $184,780 $192,095 $229,047
======== ======== ========
Total capitalization................. $387,980 $493,729 $493,729
======== ======== ========
</TABLE>
- --------
(1) Pro forma to reflect the Torrey Acquisition as if such acquisition had
occurred on December 31, 1996. See "Unaudited Pro Forma Consolidated
Balance Sheets."
(2) As adjusted to reflect the Torrey Acquisition and the sale of 3,400,000
shares of Common Stock offered hereby by the Company and the application
of the estimated net proceeds therefrom to temporarily reduce indebtedness
under the Company's revolving credit facilities.
(3) Does not reflect 2,372,756 additional shares of Common Stock subject to
outstanding options as of December 31, 1996, pursuant to the Stock Option
Plan.
10
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The unaudited Pro Forma Consolidated Statements of Operations of the Company
for the three months ended December 31, 1996, and for the fiscal year ended
September 30, 1996, were prepared to illustrate the estimated effects of: (i)
the acquisitions of the assets of Trimark and SGS, which were completed during
the first quarter of fiscal 1997; (ii) the Torrey Acquisition, which was
completed in the second quarter of fiscal 1997; and (iii) the sale of
3,400,000 shares of Common Stock offered hereby by the Company and the
application of the estimated net proceeds therefrom to temporarily reduce
indebtedness under the Company's revolving credit facilities, as if such
acquisitions and Common Stock sale had occurred on the first day of each
period.
The unaudited Pro Forma Consolidated Balance Sheets of the Company as of
December 31, 1996, were prepared to illustrate the estimated effects of the
Torrey Acquisition and the sale of the 3,400,000 shares of Common Stock
offered by the Company.
The pro forma statements do not purport to represent either the actual
financial position or results of operations of the Company had the pro forma
transactions occurred on the dates assumed, or the results expected in the
future. The pro forma adjustments are based upon available information and
upon certain assumptions that management believes are reasonable. The notes to
the unaudited Pro Forma Consolidated Statements of Operations and Balance
Sheets provide a summary of the adjustments made in determining the pro forma
amounts. The pro forma financial information should be read in conjunction
with the historical financial statements of the Company, including the notes
thereto, and the other financial information pertaining to the Company,
including information set forth in "Capitalization" and the related notes
thereto, included elsewhere or incorporated by reference into this Prospectus.
The pro forma financial information is based upon the purchase method of
accounting for the acquisitions of Trimark, SGS and Torrey.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
D.R. TRIMARK PRO FORMA PRO FORMA AS
HORTON AND SGS (1) TORREY ADJUSTMENTS COMBINED(2) ADJUSTMENTS(3) ADJUSTED(3)
-------- ----------- ------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $144,381 $8,136 $62,374 $ -- $214,891 $ -- $214,891
Cost of sales........... 118,036 6,287 53,079 (1,162)(5) 176,240 -- 176,240
-------- ------ ------- ------ -------- ----- --------
Gross profit............ 26,345 1,849 9,295 1,162 38,651 -- 38,651
Selling, general and
administrative
expenses............... 15,117 634 7,531 851 (6) 24,133 -- 24,133
-------- ------ ------- ------ -------- ----- --------
Operating income........ 11,228 1,215 1,764 311 14,518 -- 14,518
-------- ------ ------- ------ -------- ----- --------
Other:
Interest (expense)..... (784) -- (192) -- (976) 716 (260)
Other
income/(expense)...... 715 (207) 79 (171)(7) 416 -- 416
-------- ------ ------- ------ -------- ----- --------
(69) (207) (113) (171) (560) 716 156
-------- ------ ------- ------ -------- ----- --------
Income before income
taxes.................. 11,159 1,008 1,651 140 13,958 716 14,674
Provision for income
taxes (4).............. 4,352 392 644 55 5,443 279 5,722
-------- ------ ------- ------ -------- ----- --------
Net income.............. $ 6,807 $ 616 $ 1,007 $ 85 $ 8,515 $ 437 8,952
======== ====== ======= ====== ======== ===== ========
Net income per share.... $ 0.21 $ 0.25 $ 0.24
======== ======== ========
Weighted average number
of common shares (in
thousands)............. 33,003 844(8) 33,847 3,400 37,247
======== ====== ======== ===== ========
</TABLE>
11
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA
D.R. TRIMARK PRO FORMA PRO FORMA AS
HORTON AND SGS TORREY ADJUSTMENTS COMBINED(2) ADJUSTMENTS(3) ADJUSTED(3)
--------- -------- -------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 547,336 $ 49,274 $183,828 $ -- $780,438 $ -- $780,438
Cost of sales........... 449,054 36,854 155,593 (4,725)(5) 636,776 (979) 635,797
--------- -------- -------- ------- -------- ------ --------
Gross profit............ 98,282 12,420 28,235 4,725 143,662 979 144,641
Selling, general and
administrative
expenses............... 53,860 5,374 16,131 1,484(6) 76,849 -- 76,849
--------- -------- -------- ------- -------- ------ --------
Operating income........ 44,422 7,046 12,104 3,241 66,813 979 67,792
--------- -------- -------- ------- -------- ------ --------
Other:
Interest (expense)..... (1,474) -- -- -- (1,474) 1,474 0
Other income/
(expense)............. 1,484 (413) (594) 1,169(7) 1,646 -- 1,646
--------- -------- -------- ------- -------- ------ --------
10 (413) (594) 1,169 172 1,474 1,646
--------- -------- -------- ------- -------- ------ --------
Income before income
taxes.................. 44,432 6,633 11,510 4,410 66,985 2,453 69,438
Provision for income
taxes (4).............. 17,053 2,586 4,489 1,720 25,848 957 26,805
--------- -------- -------- ------- -------- ------ --------
Net income.............. $ 27,379 $ 4,047 $ 7,021 $ 2,690 $ 41,137 $1,496 $ 42,633
========= ======== ======== ======= ======== ====== ========
Net income per share.... $ 0.87 $ 1.28 $ 1.20
========= ======== ========
Weighted average number
of common shares (in
thousands)............. 31,420 844(8) 32,264 3,400 35,664
========= ======= ======== ====== ========
</TABLE>
- --------
The anticipated cost savings described below are based upon estimates and
assumptions made by the Company that, although considered reasonable by the
Company, are subject to business, economic and other uncertainties.
(1) Reflects the estimated financial results from October 1, 1996, until the
dates of acquisition (October 15, 1996, for Trimark, and December 2, 1996,
for SGS). The results for Trimark and SGS subsequent to such dates are
included in the Company's financial results.
(2) To reflect the estimated combined results of the Company and the
acquisitions of Trimark, SGS and Torrey.
(3) To reflect the sale of the Common Stock to be issued in conjunction with
the Offering. A Common Stock price of $11.50 per share was assumed. The
adjustments reflect reduction of previously capitalized and expensed
interest.
(4) Prior to their acquisition by the Company, Trimark, SGS and Torrey
operated as S corporations under applicable provisions of the Internal
Revenue Code of 1986, as amended, and taxable income was taxed directly to
their stockholders. For pro forma purposes, income taxes are provided at
the Company's estimated incremental tax rate.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED
DECEMBER SEPTEMBER
31, 1996 30, 1996
-------- ----------
<S> <C> <C>
(5)Adjustments to cost of sales are:
Net financing costs of incremental debt incurred to
finance acquisitions................................... $ 331 $ 1,661
Reclassification of capitalized inventory costs to
conform to Company accounting policies................. (1,317) (6,153)
Reduction in warranty insurance costs paid to third
parties................................................ (76) (233)
Reduction in employee benefit costs..................... (100) --
------- -------
Total adjustments to cost of sales.................... $(1,162) $(4,725)
======= =======
(6)Adjustments to selling, general and administrative
expenses are:
Reductions in salaries and related employee benefits.... $ (583) $(5,116)
Reductions in overhead items such as: insurance, audit,
bank charges, referral fees, autos, telephone, etc.,
consistent with Company policies, net of capitalized
items expensed under Company accounting policies....... (105) (483)
Amortization of excess of cost over net assets acquired
over 20 years.......................................... 222 930
Reclassification of capitalized inventory costs to
conform to Company accounting policies................. 1,317 6,153
------- -------
Total adjustments to selling, general and
administrative expenses.............................. $ 851 $ 1,484
======= =======
</TABLE>
(7) To eliminate earnings of minority interests purchased in the Torrey
Acquisition.
(8) Common Stock issued as consideration in the Torrey Acquisition.
12
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
D.R. HORTON, PRO FORMA PRO FORMA PRO FORMA
INC. TORREY ADJUSTMENTS(1) COMBINED(2) ADJUSTMENTS(3) AS ADJUSTED(4)
------------ -------- -------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash.................... $ 15,125 $ 4,903 $(4,903) $ 15,125 $ -- $ 15,125
Inventories............. 400,453 94,184 2,400 497,037 -- 497,037
Property and equipment
(net).................. 5,754 4,949 921 11,624 -- 11,624
Earnest money deposits
and other assets....... 18,940 2,195 -- 21,135 -- 21,135
Excess of cost over net
assets acquired (net).. 5,582 -- 16,797 22,379 -- 22,379
-------- -------- ------- -------- -------- --------
$445,854 $106,231 $15,215 $567,300 $ -- $567,300
======== ======== ======= ======== ======== ========
LIABILITIES
Accounts payable........ $ 33,434 $ 11,450 $ -- $ 44,884 $ -- $ 44,884
Accrued expenses and
customer deposits...... 24,440 4,247 -- 28,687 -- 28,687
Notes payable........... 203,200 67,847 30,587 301,634 (36,952) 264,682
-------- -------- ------- -------- -------- --------
261,074 83,544 30,587 375,205 (36,952) 338,253
-------- -------- ------- -------- -------- --------
Minority interests...... -- 5,785 (5,785) 0 -- 0
-------- -------- ------- -------- -------- --------
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 actual
shares, 33,260,173 pro
forma shares, and
36,660,173 pro forma as
adjusted shares, issued
and outstanding........ 324 -- 9 333 34 367
Additional capital...... 160,049 -- 7,306 167,355 36,918 204,273
Retained earnings....... 24,407 16,902 (16,902) 24,407 -- 24,407
-------- -------- ------- -------- -------- --------
184,780 16,902 (9,587) 192,095 36,952 229,047
-------- -------- ------- -------- -------- --------
$445,854 $106,231 $15,215 $567,300 $ -- $567,300
======== ======== ======= ======== ======== ========
</TABLE>
- --------
(1) To reflect the Torrey Acquisition for $28.5 million in cash, 844,444
shares of Common Stock, a contingent payment of $1 million, and the
assumption and refinancing of approximately $89 million in liabilities,
other obligations and minority interests. Adjustments to balance sheets
are as follows:
<TABLE>
<S> <C>
Net increase in inventory to fair market value...................... $2,400
Adjust building to appraised value.................................. 921
Increase in notes payable to finance goodwill and net assets........ 30,587
</TABLE>
(2) To reflect the combined financial position of the Company and Torrey, as
if the Torrey Acquisition had occurred on December 31, 1996. A Common
Stock price of $11.25 per share, the maximum valuation under the terms of
the Stock Purchase Agreement, was used with a discount to reflect its
restricted nature.
(3) To reflect the effects of the sale of 3,400,000 shares of Common Stock
offered hereby by the Company and the application of the estimated net
proceeds therefrom to temporarily reduce indebtedness under the Company's
revolving credit facilities, as if such Common Stock sale had occurred on
December 31, 1996. A Common Stock price of $11.50 was assumed.
(4) To reflect the combined financial position of the Company and Torrey, the
effects of the sale of 3,400,000 shares of Common Stock offered hereby by
the Company and the application of the estimated net proceeds therefrom to
temporarily reduce indebtedness under the Company's revolving credit
facilities, as if such combination and Common Stock sale had occurred on
December 31, 1996. For the purpose of determining the effects of the
Common Stock sale, a Common Stock price of $11.50 was assumed.
13
<PAGE>
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT NET INCOME PER SHARE AMOUNTS)
The following selected financial data (except for the selected operating
data) are derived from the Consolidated Financial Statements of the Company.
The Company's Consolidated Financial Statements as of and for each of the
three years ended September 30, 1996, have been audited by Ernst & Young LLP,
independent auditors. The selected financial information of the Company as of
December 31, 1995 and 1996, and for each of the three month periods then
ended, have been derived from unaudited financial statements, which, in the
opinion of management, include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of such information
for the unaudited interim periods. The selected financial data should be read
in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the Company's Consolidated Financial
Statements, including the related notes thereto, incorporated by reference in
this Prospectus.
<TABLE>
<CAPTION>
FOR THE FOR THE
FISCAL YEARS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------------- ------------------
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................... $393,317 $437,388 $547,336 $121,068 $144,381
Gross profit............... 67,218 77,646 98,282 21,533 26,345
Selling, general and
administrative expenses... 39,073 44,549 53,860 12,513 15,117
Operating income........... 28,145 33,097 44,422 9,020 11,228
Interest and other income
(expense)................. 446 (540) 10 (295) (69)
-------- -------- -------- -------- --------
Income before income
taxes..................... 28,591 32,557 44,432 8,725 11,159
Provision for income
taxes..................... 10,928 12,018 17,053 3,310 4,352
-------- -------- -------- -------- --------
Net income................. $ 17,663 $ 20,539 $ 27,379 $ 5,415 $ 6,807
======== ======== ======== ======== ========
Net income per share....... $ 0.63 $ 0.74 $ 0.87 $ 0.19 $ 0.21
======== ======== ======== ======== ========
Weighted average number of
common shares (in
thousands)................ 27,845 27,849 31,420 28,250 33,003
======== ======== ======== ======== ========
SELECTED OPERATING DATA:
Gross profit margin........ 17.1% 17.8% 18.0% 17.8% 18.2%
Number of homes closed..... 2,360 2,474 3,284 731 855
New sales orders, net
(homes)(1)................ 2,327 2,553 3,488 699 751
New sales orders, net ($
value)(1)................. $394,587 $449,260 $585,489 $115,363 $129,776
Sales backlog at end of
period (homes)(2)......... 773 1,000 1,204 968 1,208
Sales backlog at end of
period ($ value)(2)....... $140,524 $170,736 $208,888 $165,030 $223,474
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
-------------------------- -----------------
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Inventories...................... $204,094 $282,908 $345,283 $294,042 $400,453
Total assets..................... 230,898 318,787 402,913 337,630 445,854
Total debt....................... 108,578 169,879 169,873 183,207 203,200
Stockholders' equity............. 84,553 106,073 177,638 111,514 184,780
</TABLE>
- --------
(1) Represents homes placed under contract during the period, net of
cancellations. See "Business--Marketing and Sales."
(2) Represents homes under contract but not yet closed at the end of the
period. See "Business--Marketing and Sales."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following tables set forth certain information regarding the Company's
operations for the periods indicated.
<TABLE>
<CAPTION>
PERCENTAGES OF REVENUE
-----------------------------------------
FISCAL YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- --------------------
1994 1995 1996 1995 1996
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Costs and Expenses:
Cost of sales..................... 82.9% 82.2% 82.0% 82.2% 81.8%
Selling, general and
administrative expenses.......... 9.9 10.2 9.8 10.3 10.5
Interest expense.................. -- 0.3 0.3 0.6 0.5
----- ----- ----- --------- ---------
Total costs and expenses........... 92.8 92.7 92.1 93.1 92.8
Other (income)..................... (0.1) (0.1) (0.2) (0.3) (0.5)
----- ----- ----- --------- ---------
Income before income taxes......... 7.3 7.4 8.1 7.2 7.7
Income taxes....................... 2.8 2.7 3.1 2.7 3.0
----- ----- ----- --------- ---------
Net income......................... 4.5% 4.7% 5.0% 4.5% 4.7%
===== ===== ===== ========= =========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED DECEMBER 31,
---------------------------------------- ------------------------------------
1994 1995 1996 1995 1996
------------ ------------ ------------ ----------------- -----------------
HOMES HOMES HOMES HOMES HOMES
CLOSED % CLOSED % CLOSED % CLOSED % CLOSED %
------ ----- ------ ----- ------ ----- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOMES CLOSED
Mid-Atlantic (Charlotte,
Greensboro, New Jersey,
Raleigh/Durham,
Suburban Washington D.
C.).................... 442 18.7% 436 17.6% 547 16.7% 137 18.7% 116 13.6%
Midwest (Chicago,
Cincinnati, Kansas
City, Minneapolis/St.
Paul, St. Louis)....... 286 12.1 348 14.1 457 13.9 72 9.9 105 12.3
Southeast (Atlanta,
Birmingham, Nashville,
Orlando, Pensacola,
South Florida)......... 398 16.9 303 12.2 519 15.8 140 19.2 130 15.2
Southwest (Albuquerque,
Austin, Dallas/Fort
Worth, Houston,
Phoenix)............... 1,108 47.0 1,131 45.7 1,239 37.7 308 42.1 333 38.9
Western (Denver, Las
Vegas, Los Angeles,
Salt Lake City, San
Diego)................. 126 5.3 256 10.4 522 15.9 74 10.1 171 20.0
----- ----- ----- ----- ----- ----- ------ -------- ------ --------
2,360 100.0% 2,474 100.0% 3,284 100.0% 731 100.0% 855 100.0%
===== ===== ===== ===== ===== ===== ====== ======== ====== ========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED DECEMBER 31,
-------------------------------------------- -----------------------------------
1994 1995 1996 1995 1996
-------------- -------------- -------------- ----------------- -----------------
HOMES HOMES HOMES HOMES HOMES
SOLD $ SOLD $ SOLD $ SOLD $ SOLD $
----- -------- ----- -------- ----- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NEW SALES CONTRACTS
($ IN THOUSANDS)
Mid-Atlantic (Charlotte,
Greensboro, New Jersey,
Raleigh/Durham,
Suburban Washington D.
C.).................... 402 $113,434 403 $103,952 495 $106,908 113 $ 23,958 108 $ 25,010
Midwest (Chicago,
Cincinnati, Kansas
City, Minneapolis/St.
Paul, St. Louis)....... 272 51,890 339 68,675 527 100,990 111 21,953 89 17,874
Southeast (Atlanta,
Birmingham, Nashville,
Orlando, Pensacola,
South Florida)......... 346 48,073 371 64,654 493 80,104 107 17,517 100 16,158
Southwest (Albuquerque,
Austin, Dallas/Fort
Worth, Houston,
Phoenix)............... 1,138 149,023 1,148 155,202 1,311 190,006 267 36,978 265 40,451
Western (Denver, Las
Vegas, Los Angeles,
Salt Lake City, San
Diego)................. 169 32,167 292 56,777 662 107,481 101 14,957 189 30,283
----- -------- ----- -------- ----- -------- ----- ---------- ----- ----------
2,327 $394,587 2,553 $449,260 3,488 $585,489 699 $ 115,363 751 $ 129,776
===== ======== ===== ======== ===== ======== ===== ========== ===== ==========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED DECEMBER 31,
-------------------------------------------- ---------------------------------
1994 1995 1996 1995 1996
-------------- -------------- -------------- ---------------- ----------------
HOMES $ HOMES $ HOMES $ HOMES $ HOMES $
----- -------- ----- -------- ----- -------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
END OF PERIOD SALES
BACKLOG
($ IN THOUSANDS)
Mid-Atlantic (Charlotte,
Greensboro, New Jersey,
Raleigh/Durham,
Suburban Washington D.
C.).................... 137 $ 42,886 198 $ 43,949 146 $ 34,405 174 $ 39,642 214 $ 60,842
Midwest (Chicago,
Cincinnati, Kansas
City, Minneapolis/St.
Paul, St. Louis)....... 123 23,585 114 22,332 184 34,861 153 29,326 168 30,981
Southeast (Atlanta,
Birmingham, Nashville,
Orlando, Pensacola,
South Florida)......... 68 10,216 190 33,557 164 26,479 157 26,886 134 20,474
Southwest (Albuquerque,
Austin, Dallas/Fort
Worth, Houston,
Phoenix)............... 400 56,004 417 58,132 489 74,336 376 53,156 421 65,887
Western (Denver, Las
Vegas, Los Angeles,
Salt Lake City, San
Diego)................. 45 7,833 81 12,766 221 38,807 108 16,020 271 45,290
--- -------- ----- -------- ----- -------- ---- --------- ------ ---------
773 $140,524 1,000 $170,736 1,204 $208,888 968 $ 165,030 1,208 $ 223,474
=== ======== ===== ======== ===== ======== ==== ========= ====== =========
</TABLE>
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.
16
<PAGE>
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 by 12.5%,
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.
YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO YEAR ENDED SEPTEMBER 30, 1995
Revenues increased by 25.1% to $547.3 million in 1996 from $437.4 million in
1995. The number of homes closed by the Company increased by 32.7%, to 3,284
homes in 1996 from 2,474 homes in 1995. Home closings increased in all of the
Company's market regions, with percentage increases ranging from 9.5% in the
Southwest region to 103.9% in the Western region. Of the 32.7% increase in
1996 home closings, 13.4% was the result of acquisitions made in Greensboro
and Birmingham in the last quarter of 1995. The 1996 increase in revenues was
achieved in spite of a 4.1% decrease in the average selling price of homes
closed, to $166,600 in 1996 from $173,700 in 1995. The decrease was due to
changes in the geographic mix of homes closed within the Company and different
price points in certain markets.
17
<PAGE>
New net sales contracts increased 36.6%, to 3,488 homes in 1996 from 2,553
in 1995. Percentage increases in new net sales contracts ranging from 126.7%
to 14.2% were achieved in the Company's market regions. The 1996 average sales
price was $167,900, compared to $176,000 in 1995.
The Company was operating in 184 subdivisions at September 30, 1996,
compared to 162 at September 30, 1995. At September 30, 1996, the Company's
backlog of sales contracts was 1,204 homes, a 20.4% increase over the
comparable figure at September 30, 1995. The average sales price of homes in
backlog increased to $173,500 at September 30, 1996, from $170,700 at
September 30, 1995.
Cost of sales increased by 24.8%, to $449.1 million in 1996 from $359.7
million in 1995. As a percentage of revenues, cost of sales decreased by 0.2%,
to 82.0% in 1996 from 82.2% in 1995. This improvement resulted from good
market conditions during the year, proactive efforts to maintain sales prices
and control costs, and higher margins on homes closed on internally developed
lots. The Company does not capitalize pre-opening costs for new subdivisions.
Selling, general and administrative (SG&A) expense increased by 20.9%, to
$53.9 million in 1996 from $44.5 million in 1995. The increase in SG&A expense
was due largely to the increases in sales and construction activity required
to sustain the higher levels of revenues. SG&A expense as a percentage of
revenues decreased by 0.4%, to 9.8% in 1996 from 10.2% in 1995, as the Company
was successful in controlling its variable overhead costs while the revenue
increase offset more fixed costs.
Interest expense increased to $1.5 million in 1996, from $1.2 million in
1995, caused by average interest-bearing debt growing at a slightly faster
pace than the average amount of inventory under construction and development.
The Company follows a policy of capitalizing interest only on inventory under
construction or development. During both 1996 and 1995, a portion of incurred
interest and other financing costs could not be charged to inventory and was
expensed. 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, pretax earnings from
the Company's title operations and, in 1996, pretax earnings from the
Company's mortgage operations, increased to $1.5 million in 1996, from $0.6
million in 1995. The increase was due primarily to the fact that 1996
comprised a full year of operations for DRH Title Company of Texas, Ltd.,
compared to only six months in 1995. Additionally, DRH Title Company of
Florida, Inc., and DRH Mortgage Company, Ltd. commenced operations in 1996 and
provided pretax earnings.
The provision for income taxes increased 41.9%, to $17.1 million in 1996
from $12.0 million in 1995, due in part to the corresponding increase in
income before income taxes. The effective tax rate increased to 38.4% in 1996
from 36.9% in 1995. As a percentage of revenues, the income tax provision
increased 0.4% to 3.1% in 1996. The increases in the effective tax rate and in
the tax provision as a percentage of revenues were due primarily to higher
expected rates of state and local income taxes.
YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO YEAR ENDED SEPTEMBER 30, 1994
Revenues increased by 11.2%, to $437.4 million in 1995 from $393.3 million
in 1994. The number of homes closed by the Company increased by 4.8% to 2,474
homes in 1995 from 2,360 homes in 1994, led by a 103.2% increase in the
Company's Western region and a 21.7% increase in the Company's Midwest region.
The large increase in the Western region resulted from earlier investments
incurred to enter markets within this region and illustrates a normal
progression for newer markets. The 1995 increase in revenues also was due in
part to a 4.3% increase in the average selling price of homes closed, to
$173,700 in 1995 from $166,600 in 1994. The increase was due primarily to
changes in the geographic mix of homes closed within the Company, as homes
closed in the newer markets were at higher prices. Miscellaneous land/lot
sales in 1995 and the impact of acquisitions also contributed to the increase
in revenues.
18
<PAGE>
New net sales contracts increased by 9.7%, to 2,553 homes in 1995 from 2,327
in 1994. Percentage increases in new net sales contracts were achieved in all
of the Company's market regions, led by 72.8% and 24.6% increases in the
Western and Midwest regions, respectively. The 1995 average selling price was
$176,000, compared to $169,600 in 1994.
The Company was operating in 162 subdivisions at September 30, 1995,
compared to 137 at September 30, 1994. At September 30, 1995, the Company's
backlog of sales contracts was 1,000 homes, a 29.4% increase over the
comparable figure at September 30, 1994. The average sales price of homes in
backlog decreased to $170,700 at September 30, 1995, from $181,800 at
September 30, 1994.
Cost of sales increased by 10.3%, to $359.7 million in 1995 from $326.1
million in 1994. As a percentage of revenues, cost of sales decreased by 0.7%,
to 82.2% in 1995 from 82.9% in 1994. This improvement resulted from proactive
efforts to maintain sales prices and control costs, higher margins on homes
closed on internally developed lots, and miscellaneous land/lot sales. The
Company does not capitalize pre-opening costs for new subdivisions.
Selling, general and administrative (SG&A) expense increased by 14.0%, to
$44.5 million in 1995 from $39.1 million in 1993. The increase in SG&A expense
was due largely to the increases in sales and construction activity required
to sustain the higher levels of revenues. SG&A expense as a percentage of
revenues increased by 0.3%, to 10.2% in 1995 from 9.9% in 1994, due partly to
costs associated with expansion into new markets which had not yet generated
significant revenues.
Interest expense totalled $1.2 million in 1995, compared to none in 1994.
The Company follows a policy of capitalizing interest only on inventory under
construction or development. During 1995, the Company expensed a portion of
incurred interest and other financing costs due to increased levels of
developed lots and finished homes. During the 1994 period, all such costs were
capitalized in inventory. Capitalized interest and other financing costs are
included in cost of sales at the time of home closings.
Other income, which consisted mainly of interest income and pretax earnings
of DRH Title Company of Texas, Ltd. in 1995, increased to $621,000 in 1995,
from $446,000 in 1994.
The provision for income taxes increased 10.0%, to $12.0 million in 1995
from $10.9 million in 1994, due primarily to the corresponding increase in
income before income taxes. The effective tax rate decreased to 36.9% in 1995
from 38.2% in 1994. As a percentage of revenues, the income tax provision
decreased by 0.1% to 2.7% in 1995. The decreases in the effective tax rate and
in the tax provision as a percentage of revenues were due primarily to the
effects of certain tax planning strategies relating to state income taxes.
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
additional aggregate unsecured financing available under debt agreements of
$101.2 million. The Company currently has
19
<PAGE>
debt capacity of $410 million. However, the covenants contained in its credit
facilities currently limit such capacity to $356 million.
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.
On February 27, 1997, the Company completed the Torrey Acquisition. Under
the terms of the Stock Purchase Agreement, the Company paid at closing
consideration consisting of $28.5 million in cash and 844,444 shares of Common
Stock, and agreed to a contingent payment estimated at $1 million, for all of
the outstanding capital stock of the entities comprising Torrey. The Company
also assumed and refinanced approximately $89 million of indebtedness, other
obligations and minority interests.
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 borrowings. 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.
INFLATION
The Company, as well as the homebuilding industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. Inflation also increases the Company's
financing, labor and material costs. In addition, higher mortgage interest
rates significantly affect the affordability of permanent mortgage financing
to prospective homebuyers. The Company attempts to pass through to its
customers any increases in its costs through increased sales prices and, to
date, inflation has not had a material adverse effect on the Company's results
of operations. However, there is no assurance that inflation will not have a
material adverse impact on the Company's future results of operations.
20
<PAGE>
BUSINESS
The Company is engaged primarily in the construction and sale of single-
family homes in metropolitan areas of the Mid-Atlantic, Midwest, Southeast,
Southwest and Western regions of the United States. The Company offers high-
quality homes with custom features, designed principally for the entry-level
and move-up market segments. The Company's homes generally range in size from
1,000 to 5,000 square feet and range in price from $80,000 to $600,000. For
the year ended September 30, 1996, the Company closed homes with an average
sales price approximating $166,600. The average sales price of homes closed in
the three months ended December 31, 1996, was $168,700.
The Company is one of the most geographically diversified homebuilders in
the United States, with operating divisions in 21 states and 27 markets. These
markets include Albuquerque, Atlanta, Austin, Birmingham, Charlotte, Chicago,
Cincinnati, Dallas/Fort Worth, Denver, Greensboro, Greenville, Houston, Kansas
City, Las Vegas, Los Angeles, Minneapolis/St. Paul, Nashville, North Central
New Jersey, Orlando, Pensacola, Phoenix, Raleigh/Durham, Salt Lake City, San
Diego, South Florida, St. Louis and suburban Washington, D.C.
The Company was incorporated in Delaware on July 1, 1991, to acquire all of
the assets and businesses of 25 predecessor companies, which were residential
home construction and development companies owned or controlled by Donald R.
Horton.
The Company's principal executive offices are located at 1901 Ascension
Blvd., Suite 100, Arlington, Texas 76006, and its telephone number is (817)
856-8200.
OPERATING STRATEGY
The Company believes that there are several important elements to its
operating strategy which have enabled it to achieve consistent growth and
profitability. The following are important elements of this strategy:
Geographic Diversification. From 1978 to late 1987, the Company's
homebuilding activities were conducted exclusively in the Dallas/Fort Worth
area. The Company then instituted a policy of diversifying geographically,
entering the following markets in the years indicated:
<TABLE>
<CAPTION>
YEAR ENTERED MARKETS
------------ -------
<S> <C>
1987.................... Phoenix
1988.................... Atlanta, Orlando
1989.................... Charlotte
1990.................... Houston
1991.................... Suburban Washington D.C.
1992.................... Chicago, Cincinnati, Raleigh/Durham, South Florida
1993.................... Austin, Los Angeles, Salt Lake City, San Diego
1994.................... Minneapolis/St. Paul, Kansas City, Las Vegas
1995.................... Birmingham, Denver, Greensboro, St. Louis
1996.................... Albuquerque, Pensacola
1997.................... Nashville, North Central New Jersey, Greenville
</TABLE>
The Company continually monitors the sales and margins achieved in each of
the subdivisions in which it operates as part of an overall evaluation of the
employment of its capital. While the Company believes there are significant
growth opportunities in its existing markets, it intends to continue its
policy of geographic diversification by seeking to enter new markets. The
Company believes that its diversification strategy mitigates the effects of
local and regional economic cycles and enhances its growth potential.
Typically, the Company will not invest material amounts in real estate,
including raw land, developed lots, models and speculative homes, or overhead
in start-up operations in new markets until such markets demonstrate
significant growth potential and acceptance of the Company and its products.
21
<PAGE>
Acquisitions. As an integral component of the Company's operational strategy
of continued expansion and geographic diversification, the Company continually
evaluates opportunities for strategic acquisitions. The Company believes that
the expansion of its operations through the acquisition of existing
homebuilding companies affords it several benefits not found in start-up
operations. Such benefits include established land positions and inventories;
existing relationships with land owners, developers, subcontractors and
suppliers; brand name recognition; and proven product acceptance by homebuyers
in the market. In evaluating potential acquisition candidates, the Company
seeks homebuilding companies that have an excellent reputation, a track record
of profitability and a strong management team with an entrepreneurial
orientation. The Company has limited the risks associated with acquiring a
going concern by conducting extensive operational, financial and legal due
diligence on each acquisition candidate and by only acquiring homebuilding
companies that the Company believes should have an immediate positive impact
on the Company's earnings.
The Company has acquired six homebuilding companies since 1994:
<TABLE>
<CAPTION>
DATE
ACQUIRED ENTITIES ACQUIRED MARKETS
-------- ----------------- -------
<C> <S> <C>
April 1994 Joe Miller Homes, Inc. Minneapolis/St. Paul
and
Argus Development, Inc.
July 1995 Arappco, Inc. Greensboro
September 1995 Regency Development, Inc. Birmingham
October 1996 Trimark Communities, LLC Denver
December 1996 SGS Communities, Inc. North Central New Jersey
February 1997 The Torrey Group of Atlanta, Charlotte, Greenville and
Companies Raleigh/Durham
</TABLE>
In both existing and new markets, the Company anticipates that it will
continue to evaluate potential future acquisition opportunities that satisfy
its acquisition criteria.
On February 27, 1997, the Company completed the Torrey Acquisition. Under
the terms of the Stock Purchase Agreement, the Company paid at closing
consideration consisting of $28.5 million in cash and 844,444 shares of Common
Stock, and agreed to a contingent payment estimated at $1 million, for all of
the outstanding capital stock of the entities comprising Torrey. The Company
also assumed and refinanced approximately $89 million of indebtedness, other
obligations and minority interests.
Torrey has been the leading builder of single-family homes in the large and
growing Atlanta, Georgia market for the past three years as reported in
Builder Magazine. Atlanta has been the largest housing market in the United
States for the past three years based on single-family building permits
issued. Torrey targets both entry-level and first time move-up buyers. For the
twelve months ended September 30, 1996, Torrey delivered 1,442 homes,
generating $183.8 million of revenue. In addition to building homes in the
Atlanta market, Torrey has homebuilding operations in Charlotte and
Raleigh/Durham, North Carolina, and Greenville, South Carolina. Despite
Torrey's leading market share position in the Atlanta market, the Company
believes that it can improve Torrey's operating results by providing
additional and lower cost capital and operating synergies.
The Company believes that the Torrey Acquisition is consistent with its
strategy of selectively pursuing acquisitions of homebuilders that have an
excellent reputation, a track record of profitability, and a strong management
team.
Market Focus--Custom Features. The Company positions itself between large
volume homebuilders and local custom homebuilders by offering a broader
selection of homes that typically have more amenities and greater design
flexibility than homes offered by volume builders, at prices that are
generally more affordable than those charged by local custom builders. The
Company generally offers between five and ten home designs that it believes
will appeal to local homebuyers at each of its subdivisions, but is prepared
to offer additional
22
<PAGE>
building plans and options that may be more suitable or desirable to
homebuyers. The Company also is prepared to customize such designs to the
individual tastes and specifications of its homebuyers. While most design
modifications are significant to homebuyers, such changes typically involve
relatively minor adjustments including, among other things, modifying the
interior or exterior dimensions of the home and changing exterior materials.
Such changes generally improve the Company's gross margins. Consequently, the
Company believes that it is able to maintain the efficiencies of a volume
builder while delivering high-quality, personalized homes to its customers.
The Company believes that its ability to cater to the design tastes and
desires of the prospective homebuyer at competitive prices, even at the entry-
level, distinguishes it from many of its competitors.
Decentralized Operations. The Company's homebuilding activities are
decentralized to give more operating flexibility to its local division
managers. The Company's homebuilding activities are conducted through 34
operating divisions, some of which are in the same general market area.
Generally, each operating division consists of a vice president, an office
manager and staff, a sales manager, one to eleven sales people and one
construction manager, who oversees one to nine construction supervisors. The
Company believes that division managers, who are intimately familiar with
local conditions, make better decisions regarding local operations than do the
centralized, corporate management teams who make such decisions for many of
its competitors. Each operating division is responsible for preliminary site
selection, negotiation of option or similar contracts, and overseeing land
development activities. Site selection and lot acquisition typically involve a
feasibility study by the operating division, including soil and environmental
reviews, a review of existing zoning and other governmental requirements, and
a review of the need for and extent of offsite work and additional lot
preparation required to meet local building codes. Each operating division
also plans its homebuilding schedule, selects the building plans and
architectural scheme for its subdivisions, obtains all necessary building
approvals, and develops a marketing plan for its homes. Division managers
receive performance bonuses based upon achieving targeted operating levels in
their operating divisions.
The Company's corporate office controls key risk elements by retaining
oversight and responsibility for final approval of all land and lot
acquisitions, inventory levels, financing arrangements, accounting and
management reporting, payment of subcontractor invoices, payroll and employee
benefits.
Cost Management. The Company strives to control its overhead costs by
centralizing its administrative and accounting functions and by limiting the
number of field administrative personnel and middle level management
positions. The Company also attempts to minimize advertising costs by
participating in promotional activities, publications and newsletters
sponsored by local real estate brokers, mortgage companies, utility companies
and trade associations, and, in certain instances, by positioning its
subdivisions in conspicuous locations that permit it to take advantage of
local traffic patterns.
The Company attempts to control construction costs through the efficient
design of its homes and by obtaining favorable pricing from certain
subcontractors based on the high volume of work they perform for the Company.
The Company's management information systems, including the purchase order
system, also assist in controlling construction costs by allowing corporate
and division management to monitor expenditures on a home-by-home basis. In
addition, the Company's management information systems allow the Company to
monitor its inventory composition and levels, thereby controlling capital and
overhead costs.
Limited Real Estate Exposure. The Company generally acquires developed
building lots pursuant to lot option and similar contracts after all zoning
and other governmental entitlements and approvals are obtained. By utilizing
lot option contracts, the Company purchases the right, but not the obligation,
to buy building lots at predetermined prices on a takedown schedule
commensurate with anticipated home closings. The lot option contracts are
generally on a nonrecourse basis, thereby limiting the Company's financial
exposure to earnest money deposits given to property sellers. This practice
enables the Company to control significant lot positions with minimal up front
capital and substantially reduces the risks associated with land ownership and
development. The Company attempts to control a two to four year supply of
building lots within each market based on current and expected absorption
rates. At December 31, 1996, the Company held lot option and similar contracts
for 10,928 lots with an estimated aggregate purchase price approximating $350
million. These options are secured by cash deposits approximating $4.4 million
and promissory notes approximating $1.4 million.
23
<PAGE>
MARKETS
The Company's homebuilding activities are conducted in five geographic
regions, comprised of the following markets:
<TABLE>
<CAPTION>
GEOGRAPHIC REGION MARKETS
----------------- -------
<S> <C>
Mid-Atlantic............ Charlotte, Greensboro, Greenville, North Central New Jersey,
Raleigh/Durham, Suburban Washington, D.C.
Midwest................. Chicago, Cincinnati, Kansas City, Minneapolis/St. Paul, St. Louis
Southeast............... Atlanta, Birmingham, Nashville, Orlando, Pensacola, South Florida
Southwest............... Albuquerque, Austin, Dallas/Fort Worth, Houston, Phoenix
Western................. Denver, Las Vegas, Los Angeles, Salt Lake City, San Diego
</TABLE>
The Company's operations in each of its markets differ based on a number of
market-specific factors. These factors include regional economic conditions
and job growth, land availability and the local land development process,
consumer tastes, competition from other builders of new homes and secondary
home sales activity. The Company considers each of these factors when entering
new markets or conducting operations in existing markets.
Revenues for the Company by geographic region are:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
-------------------------- -------------------
1994 1995 1996 1995 1996
-------- -------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mid-Atlantic..................... $121,829 $113,251 $116,452 $ 28,266 $ 24,167
Midwest.......................... 54,072 69,929 88,461 14,957 21,754
Southeast........................ 53,384 49,291 87,181 24,187 22,163
Southwest........................ 139,420 153,074 173,802 41,955 48,901
Western.......................... 24,612 51,843 81,440 11,703 27,396
-------- -------- -------- --------- ---------
Total.......................... $393,317 $437,388 $547,336 $ 121,068 $ 144,381
======== ======== ======== ========= =========
</TABLE>
LAND POLICIES
While the Company expects to continue to rely predominantly on lot option
and similar contracts to secure developed lots, it will pursue selected land
acquisition and development opportunities to augment its inventory of low-
cost, quality building lots and to maximize profit opportunities.
Substantially all of the land acquired by the Company is purchased only after
necessary entitlements have been obtained so that the Company has the right to
begin development or construction. The Company generally limits its
acquisitions to smaller tracts of entitled land that will yield under 150 lots
when developed and, where possible, obtains options to acquire adjacent
parcels for later development. By limiting its acquisition and development
activities to smaller parcels of land, the Company reduces the financial and
market risks associated with holding land during the development period.
Before it acquires tracts of land, the Company will, among other things,
complete a feasibility study, which includes soil tests, independent
environmental studies and other engineering work, and determine that all
necessary zoning and other governmental entitlements required to develop and
use the property for home construction have been acquired. At December 31,
1996, only about 34% of the Company's total lot position of 16,584 lots was
being or had been developed by the Company. Although the Company purchases
land and engages in land development activities primarily to support its own
homebuilding activities, lots and land are occasionally sold to other
developers and homebuilders.
24
<PAGE>
The following table sets forth a summary of the Company's land/lot positions
at December 31, 1996:
<TABLE>
<S> <C>
Finished lots owned by the Company.................................... 1,315
Lots under development owned by the Company........................... 4,341
------
Total lots owned.................................................... 5,656
Lots available under lot option and similar contracts................. 10,928
------
Total land/lot position............................................. 16,584
======
</TABLE>
The Company also seeks to limit its exposure to real estate inventory risks
by (i) generally commencing construction of homes under contract only after
receipt of a satisfactory down payment and, where applicable, the buyer's
receipt of mortgage approval, (ii) limiting the number of speculative homes
(homes started without an executed sales contract) built in each subdivision;
and, (iii) closely monitoring local market and demographic trends, housing
preferences and related economic developments, such as new job opportunities,
local growth initiatives and personal income trends.
CONSTRUCTION
The Company's home designs are prepared by architects in each of the
Company's markets to appeal to the local tastes and preferences of the
community. Optional interior and exterior features also are offered by the
Company to enhance the basic home design and to promote the custom aspect of
the Company's sales efforts.
Substantially all of the Company's construction work is performed by
subcontractors. The Company's construction supervisors monitor the
construction of each home, participate in material design and building
decisions, coordinate the activities of subcontractors and suppliers, subject
the work of subcontractors to quality and cost controls and monitor compliance
with zoning and building codes. Subcontractors typically are retained for a
specific subdivision pursuant to a contract that obligates the subcontractor
to complete construction at a fixed price. Agreements with the Company's
subcontractors and suppliers generally are negotiated for each subdivision.
The Company competes with other homebuilders for qualified subcontractors, raw
materials and lots in the markets where it operates.
Construction time for the Company's homes depends on the weather,
availability of labor, materials and supplies, and other factors. The Company
typically completes the construction of a home within four months.
The Company does not maintain significant inventories of construction
materials, except for work in process materials for homes under construction.
Typically, the construction materials used in the Company's operations are
readily available from numerous sources. The Company does not have any long-
term contracts with suppliers of its building materials. In recent years, the
Company has not experienced any significant delays in construction due to
shortages of materials or labor.
MARKETING AND SALES
The Company markets and sells its homes through commissioned employees and
independent real estate brokers. Home sales are typically conducted from sales
offices located in furnished model homes used in each subdivision. At December
31, 1996, the Company owned 249 model homes. These model homes generally are
not offered for sale until the completion of the respective subdivision. The
Company's sales personnel assist prospective homebuyers by providing them with
floor plans, price information, tours of model homes and the selection of
options and other custom features. Such personnel are trained by the Company
and kept informed as to the availability of financing, construction schedules
and marketing and advertising plans.
In addition to using model homes, the Company typically builds a limited
number of speculative homes in each subdivision to enhance its marketing and
sales activities. Construction of these speculative homes also is necessary to
satisfy the requirements of relocated personnel and independent brokers, who
often represent homebuyers requiring a completed home within 60 days. A
majority of these speculative homes are sold while under construction or
immediately following completion. The number of speculative homes is
influenced by local
25
<PAGE>
market factors, such as new employment opportunities, significant job
relocations, growing housing demand and the length of time the Company has
built in the market. Depending upon the seasonality of each of its markets,
the Company seeks to limit its speculative homes to approximately five homes
per subdivision. At December 31, 1996, the Company was operating in 225
subdivisions and averaged five speculative homes in each subdivision.
The Company advertises on a limited basis in newspapers and in real estate
broker, mortgage company and utility publications, brochures, newsletters and
billboards. To minimize advertising costs, the Company attempts to operate in
subdivisions in conspicuous locations that permit it to take advantage of
local traffic patterns. The Company also believes that model homes play a
significant role in its marketing efforts. Consequently, the Company expends
significant efforts in creating an attractive atmosphere in its model homes.
Sales of the Company's homes generally are made pursuant to a standard sales
contract which requires a down payment of 5% to 10% of the sales price. The
contract includes a financing contingency which permits the customer to cancel
in the event mortgage financing at prevailing interest rates is unobtainable
within a specified period, typically four to six weeks, and may include other
contingencies, such as the sale of an existing home. The Company includes a
home sale in its sales backlog upon execution of the sales contract and
receipt of the initial down payment. The Company does not recognize revenue
upon the sale of a home until the home is closed and title passes. The Company
estimates that the average period between the execution of a sales contract
for a home and closing is approximately three to five months for presold
homes.
CUSTOMER SERVICE AND QUALITY CONTROL
The Company's operating divisions are responsible for pre-closing, quality
control inspections and responding to customers' post-closing needs. The
Company believes that prompt and courteous response to homebuyers' needs
during and after construction reduces post-closing repair costs, enhances the
Company's reputation for quality and service, and ultimately leads to
significant repeat and referral business from the real estate community and
homebuyers. The Company provides its homebuyers with a limited one-year
warranty on workmanship and building materials. The subcontractors who perform
most of the actual construction in turn provide warranties of workmanship to
the Company, and generally are prepared to respond to the Company and
homeowner promptly upon request. In most cases, the Company supplements its
one-year warranty by purchasing a ten-year limited warranty from a third
party. To cover its potential warranty obligations, the Company accrues an
estimated amount for future warranty costs.
CUSTOMER FINANCING
In 1996, the Company formed D.R. Horton Mortgage Company, Ltd., a joint
venture with a third party, to provide mortgage financing services,
principally to purchasers of homes built and sold by the Company. D.R. Horton
Mortgage presently provides services in Dallas/Fort Worth, Austin, Houston and
Phoenix.
In its other markets, the Company does not provide mortgage financing but
works with a variety of mortgage lenders that make available to homebuyers a
range of conventional mortgage financing programs. By making information about
these programs available to prospective homebuyers and maintaining a
relationship with such mortgage lenders, the Company is able to coordinate and
expedite the entire sales transaction by ensuring that mortgage commitments
are received and that closings take place on a timely and efficient basis.
TITLE SERVICES
Through its wholly owned subsidiaries, DRH Title Company of Texas, Ltd. and
DRH Title Company of Florida, Inc., the Company serves as a title insurance
agent by providing title insurance policies and closing services to purchasers
of homes built and sold by the Company in the Dallas/Fort Worth, Austin and
Florida markets. The Company assumes no underwriting risk associated with
these title policies.
26
<PAGE>
EMPLOYEES
At December 31, 1996, the Company employed 765 persons, of whom 232 were
sales and marketing personnel, 266 were executive, administrative and clerical
personnel, 256 were involved in construction, and 11 worked in title
operations. Fewer than 10 of the Company's employees are covered by collective
bargaining agreements. Certain of the subcontractors which the Company engages
are represented by labor unions or are subject to collective bargaining
agreements. The Company believes that its relations with its employees and
subcontractors are good.
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company has agreed to sell to such Underwriter,
the number of shares of Common Stock set forth opposite the name of such
Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Smith Barney Inc......................................................
Donaldson, Lufkin & Jenrette Securities Corporation...................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................................
Salomon Brothers Inc..................................................
---------
Total............................................................... 3,400,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters propose to offer part of the shares directly to the public
at the public offering price set forth on the cover page of this Prospectus
and part of the shares to certain dealers at a price which represents a
concession not in excess of $ per share under the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the initial offering
of the shares to the public, the public offering price and such concessions
may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for
thirty days from the date of this Prospectus, to purchase up to an aggregate
of 510,000 additional shares of Common Stock at the price to the public set
forth on the cover page of this Prospectus less underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose
of covering over-allotments, if any, in connection with the offering of the
shares offered hereby. To the extent such option is exercised, each
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.
The Company and certain of its executive officers and directors have agreed
that, for a period of 90 days from the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., offer, sell, contract
to sell, or otherwise dispose of, any shares of Common Stock of the Company
(other than up to an aggregate of 150,000 shares by executive officers and
directors subsequent to the completion of the distribution of the shares
offered hereby) or any securities convertible into, or exercisable or
exchangeable for, Common Stock of the Company.
27
<PAGE>
In connection with the Offering and in compliance with applicable law, the
Underwriters may overallot or effect transactions which stabilize, maintain or
otherwise affect the price of the Common Stock at a level above that which
might otherwise prevail in the open market, including by entering stabilizing
bids, effecting syndicate covering transactions or imposing penalty bids. A
stabilizing bid means the placing of any bid, or the effecting of any purchase,
for the purpose of pegging, fixing or maintaining the price of a security. A
syndicate covering transaction means the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to reduce a short
position created in connection with the Offering. A penalty bid means an
arrangement that permits Smith Barney Inc., as managing underwriter, to reclaim
a selling concession from a syndicate member in connection with the Offering
when shares of Common Stock originally sold by such syndicate member are
purchased in stabilizing or syndicate covering transactions. Such transactions
may be effected on the New York Stock Exchange, in the over-the-counter market
or otherwise. The Underwriters are not required to engage in any of these
activities. Any such activities, if commenced, may be discontinued at any time.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933.
LEGAL OPINIONS
Gibson, Dunn & Crutcher LLP, Dallas, Texas has rendered an opinion (filed as
an exhibit to the Registration Statement (as defined)) with respect to the
validity of the shares of Common Stock being offered hereby. Certain legal
matters are being passed upon for the Underwriters by Cahill Gordon & Reindel
(a partnership including a professional corporation), New York, New York.
EXPERTS
The consolidated financial statements of D.R. Horton, Inc. appearing in D.R.
Horton, Inc.'s Annual Report (Form 10-K) for the year ended September 30, 1996,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements filed
by the Company with the Commission pursuant to the informational requirements
of the Exchange Act may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York
10048; and Chicago Regional Office, Northwest Atrium Center, 500 West Madison
Street, Room 3190, Chicago, Illinois 60661. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material is
also available for inspection at the offices of The New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005. The Commission also maintains
a Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants such as the Company
which file electronically with the Commission.
The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement
and the exhibits and schedules thereto, to which reference is hereby made. For
further
28
<PAGE>
information with respect to the Company and such Common Stock, reference is
made to the Registration Statement, including the documents and exhibits filed
or incorporated as a part thereof. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement or to a document
incorporated by reference herein, reference is hereby made to the exhibitor for
a more complete description of the matter involved and each such statement
shall be deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1996, the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1996, the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A filed on
December 7, 1995, and pages two through seven ("Election of Directors" through
"Executive Compensation-Compensation Committee Interlocks and Insider
Participation") and page ten ("Executive Compensation-Transactions with
Management") contained in the Company's Proxy Statement dated December 20,
1996, relating to the 1997 Annual Meeting of Stockholders are incorporated in
this Prospectus by reference. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the Offering shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing such documents.
Any statement in a document incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed document which is
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
herein by reference (not including exhibits to such documents unless such
exhibits are specifically incorporated by reference in the information
contained in this Prospectus). All such requests should be addressed to: D.R.
Horton, Inc., 1901 Ascension Blvd., Suite 100, Arlington, Texas 76006.
29
<PAGE>
Map depicting the states of the United States of America in which the Company
conducts its operations and a listing of each of the Company's operating
divisions, with telephone numbers, arranged by geographic region.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY
OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Use of Proceeds.......................................................... 9
Price Range of Common Stock.............................................. 9
Dividend Policy.......................................................... 9
Capitalization........................................................... 10
Unaudited Pro Forma Financial Data....................................... 11
Selected Financial Information........................................... 14
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... 15
Business................................................................. 21
Underwriting............................................................. 27
Legal Opinions........................................................... 28
Experts.................................................................. 28
Available Information.................................................... 28
Incorporation of Certain Information by Reference........................ 28
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,400,000 SHARES
D.R. HORTON, INC.
CUSTOM HOMES
COMMON STOCK
--------
PROSPECTUS
, 1997
--------
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 18,948.86
NASD filing fee................................................. 6,753.00
Blue Sky fees and expenses...................................... 25,000.00
Printing and engraving fees and expenses........................ 50,000.00
Accountants' fees and expenses.................................. 45,000.00
Legal fees and expenses......................................... 75,000.00
Miscellaneous................................................... 109,298.14
-----------
Total....................................................... $330,000.00
===========
</TABLE>
- --------
* All fees and expenses will be paid by the Company. All fees and expenses
other than the Securities and Exchange Commission and NASD filing fees are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Certificate of Incorporation, as amended,
provides that the Company shall, to the full extent permitted by the General
Corporation Law of the State of Delaware (the "DGCL") or other applicable laws
presently or hereafter in effect, indemnify each person who is or was or had
agreed to become a director or officer of the Company, or each such person who
is or was serving or who had agreed to serve at the written request of the
Board of Directors or an officer of the Company as an employee or agent of the
Company or as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, in any such case owned
or controlled by the Company, including the heirs, executors, administrators
or estate of such person, and eliminates the personal liability of its
directors to the full extent permitted by the DGCL or other applicable laws
presently or hereafter in effect. The Company has entered into an
indemnification agreement with each of its directors and executive officers.
Section 145 of the DGCL permits a corporation to indemnify its directors and
officers against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties, if
such directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. In a derivative action, i.e., one by or in
the right of the corporation, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable for negligence or misconduct in the performance of
his respective duties to the corporation, although the court in which the
action or suit was brought may determine upon application that the defendant
officers or directors are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
Section 102(b)(7) of the DGCL provides that a corporation may eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provisions shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL, or (iv) for any transaction from which the
director derived an improper personal benefit. No such provision shall
eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective.
II-1
<PAGE>
The Underwriting Agreement, which is Exhibit 1.1 hereto, provides that the
Underwriters named therein will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against
certain liabilities, including liabilities under the Securities Act.
The Company also has obtained Directors and Officers Liability Insurance
that provides insurance coverage for certain liabilities which may be incurred
by the Company's directors and officers in their capacity as such.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
------- --------
<C> <S>
1.1 --Form of Underwriting Agreement
5.1 --Opinion of Gibson, Dunn & Crutcher LLP, Dallas, Texas, as to the
validity of the shares of Common Stock being registered
23.1 --Consent of Gibson, Dunn & Crutcher LLP, Dallas, Texas (See
Exhibit 5.1)
23.2 --Consent of Ernst & Young LLP, Fort Worth, Texas
*24.1 --Powers of Attorney (See signature page of this Registration
Statement)
</TABLE>
- --------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities Act
of 1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(c) The undersigned Company undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
under the Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS POST EFFECTIVE
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ARLINGTON, STATE OF
TEXAS, ON MARCH 6, 1997.
D.R. Horton, Inc.
By:
/s/ Donald R. Horton
-----------------------------------
Donald R. Horton
Chairman of the Board and
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST
EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Chairman of the
Donald R. Horton Board and President
- ------------------------------------- (Principal March 6, 1997
DONALD R. HORTON Executive Officer)
Richard Beckwitt* Director
- ------------------------------------- March 6, 1997
RICHARD BECKWITT
Richard I. Galland* Director
- ------------------------------------- March 6, 1997
RICHARD I. GALLAND
Richard L. Horton* Director
- ------------------------------------- March 6, 1997
RICHARD L. HORTON
Terrill J. Horton* Director
- ------------------------------------- March 6, 1997
TERRILL J. HORTON
Treasurer, Chief
/s/ David J. Keller* Financial Officer
- ------------------------------------- and Director March 6, 1997
DAVID J. KELLER (Principal
Accounting and
Financial Officer)
II-3
<PAGE>
SIGNATURE TITLE DATE
Director
- -------------------------------------
FRANCINE I. NEFF
Scott J. Stone* Director
- ------------------------------------- March 6, 1997
SCOTT J. STONE
Donald J. Tomnitz* Director
- ------------------------------------- March 6, 1997
DONALD J. TOMNITZ
*By: /s/ Donald R. Horton
----------------------------------
DONALD R. HORTON
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBITS NUMBERED PAGE
------- -------- -------------
<C> <S> <C>
1.1 --Form of Underwriting Agreement
5.1 --Opinion of Gibson, Dunn & Crutcher LLP, Dallas,
Texas, as to the validity of the shares of Common
Stock being registered
23.1 --Consent of Gibson, Dunn & Crutcher LLP, Dallas,
Texas (See Exhibit 5.1)
23.2 --Consent of Ernst & Young LLP, Fort Worth, Texas
*24.1 --Powers of Attorney (See signature page of this
Registration Statement)
</TABLE>
- --------
* Previously filed.
<PAGE>
EXHIBIT 1.1
__________ Shares
D.R. HORTON, INC.
Common Stock
UNDERWRITING AGREEMENT
-----c-----------------
March 10, 1997
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SALOMON BROTHERS INC
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
D.R. Horton, Inc., a Delaware corporation (the "Company"), proposes to
-------
issue and sell an aggregate of shares of its common stock, $0.01 par value per
share (the "Common Stock"), to you ("you" or the "Underwriters"). The shares
------------ --- ------------
of Common Stock to be issued and sold to the Underwriters by the Company are
hereinafter referred to as the "Firm Shares". The Company also proposes to sell
-----------
to the Underwriters, upon the terms and conditions set forth in Section 2
hereof, up to an additional shares (the "Additional Shares") of Common Stock.
-----------------
The Firm Shares and the Additional Shares are hereinafter collectively referred
to as the "Shares".
------
The Company wishes to confirm as follows its agreements with you in
connection with the several purchases of the Shares by the Underwriters.
Registration Statement and Prospectus. The Company has prepared and
-------------------------------------
filed with the Securities and Exchange Commission (the "Commission") in
----------
accordance with the provisions of the Securities Act of 1933, as amended, and
the published rules and regulations of the Commission thereunder (collectively,
the "Act"), a registration statement on Form S-3 under the Act (the
---
"registration statement"), including a prospectus subject to completion relating
- -----------------------
to the Shares. The term "Registration Statement" as used in this Agreement
----------------------
means the
<PAGE>
-2-
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes effective, or, if the registration statement
became effective prior to the execution of this Agreement, as amended prior to
the execution of this Agreement, and any registration statement filed pursuant
to Rule 462(b) under the Act increasing the size of the offering registered
under the Act. If it is contemplated, at the time this Agreement is executed,
that a post-effective amendment to the registration statement will be filed and
must be declared effective before the offering of the Shares may commence, the
term "Registration Statement" as used in this Agreement means the registration
----------------------
statement as amended by said post-effective amendment. The term "Prospectus"
----------
as used in this Agreement means the prospectus in the form included in
the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
----------
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
- ----------------------
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. Any reference in this Agreement to the registration statement,
the Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of the
registration statement, the Registration Statement, such Prepricing Prospectus
or the Prospectus, as the case may be, and any reference to any amendment or
supplement to the registration statement, the Registration Statement, any
Prepricing Prospectus or the Prospectus shall be deemed to refer to and include
any documents filed after such date under the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act"), which, upon filing, are incorporated by
------------
reference therein, as required by paragraph (b) of Item 12 of Form S-3. As used
herein, the term "Incorporated Documents" means the documents which at the time
----------------------
are incorporated by reference in the registration statement, the Registration
Statement, any Prepricing Prospectus, the Prospectus, or any amendment or
supplement thereto.
<PAGE>
-3-
2. Agreements to Sell and Purchase. Subject to such adjustments as you
-------------------------------
may determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $[ ] per Share (the
"purchase price per share"), the number of Firm Shares which bears the same
- -------------------------
proportion to the aggregate number of Firm Shares to be issued and sold by the
Company as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares increased as set
forth in Section 12 hereof) bears to the aggregate number of Firm Shares to be
sold by the Company.
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company and subject to all the
terms and conditions set forth herein, the Underwriters shall have the right to
purchase from the Company, at the purchase price per share, pursuant to an
option (the "over-allotment option") which may be exercised at any time and from
---------------------
time to time prior to 9:00 P.M., New York City time, on the 30th day after the
date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a
holiday, on the next business day thereafter when the New York Stock Exchange is
open for trading), up to an aggregate of Additional Shares from the Company.
Additional Shares may be purchased only for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. The number
of Additional Shares which the Underwriters elect to purchase upon any exercise
of the over-allotment option shall be provided by the Company. Upon any
exercise of the over-allotment option, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments as you may determine in order to avoid fractional
shares) which bears the same proportion to the number of Additional Shares to be
sold by the Company as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule I hereto (or such number of Firm Shares increased
as set forth in Section 12 hereof) bears to the aggregate number of Firm Shares
to be sold by the Company.
<PAGE>
-4-
3. Terms of Public Offering. The Company has been advised by you that
------------------------
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable upon the terms set forth in
the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
-------------------------------------------
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on March [ ], 1997 (the "Closing Date"). The place of closing
------------
for the Firm Shares and the Closing Date may be varied by agreement among you
and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the aforementioned office
of Smith Barney Inc. at such time on such date (the "Option Closing Date"),
-------------------
which may be the same as the Closing Date but shall in no event be earlier than
the Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Shares. The place of closing for any Additional Shares and the
Option Closing Date for such Shares may be varied by agreement between you and
the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor by wire transfer of immediately available funds to accounts
specified by each of the Company and the Custodian not later than two business
days before the Closing Date or the Option Closing Date, as the case may be.
<PAGE>
-5-
5. Agreements of the Company. The Company agrees with the several
-------------------------
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-
effective amendment to become effective as soon as possible and will advise
you promptly and, if requested by you, will confirm such advice in writing,
when the Registration Statement or such post-effective amendment has become
effective.
(b) The Company will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or any order preventing or suspending the use of
any Prepricing Prospectus or the Prospectus or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation or the threatening of any proceeding for such purpose; and (iii)
within the period of time referred to in paragraph (f) below, of any change in
the Company's condition (financial or other), business, prospects, properties,
net worth or results of operations, or of the happening of any event, which
makes any statement of a material fact made in the Registration Statement or
the Prospectus (as then amended or supplemented) untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, or of the necessity to amend or supplement the
Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time any stop order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
Prepricing Prospectus or the Prospectus or suspending any such qualification,
the Company will promptly use its best efforts to obtain the withdrawal of
such order at the earliest possible time.
<PAGE>
-6-
(c) The Company will furnish to you, without charge (i) five copies of the
registration statement as originally filed with the Commission and of each
amendment thereto, including all exhibits thereto, (ii) each PrePricing
Prospectus, the Prospectus and any amended or supplemented Prospectus, (iii)
such number of copies of the registration statement as originally filed and of
each amendment thereto, but without exhibits, as you may request, (iv) such
number of copies of the Incorporated Documents, without exhibits, as you may
request, and (v) five copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the Registration Statement
or make any amendment or supplement to the Prospectus or, prior to the end of
the period of time referred to in paragraph (f) below, file any document
which, upon filing becomes an Incorporated Document, of which you shall not
previously have been advised or to which, after you shall have received a copy
of the document proposed to be filed, you shall reasonably object.
(e) Prior to the execution and delivery of this Agreement, the Company has
delivered to you, without charge, in such quantities as you have requested,
copies of each form of the Prepricing Prospectus. The Company consents to the
use, in accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Shares are offered by the
several Underwriters and by dealers, prior to the date of the Prospectus, of
each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as possible
and thereafter from time to time for such period as in the opinion of counsel
for the Underwriters a prospectus is required by the Act to be delivered in
connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
<PAGE>
-7-
Shares and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer.
If during such period of time any event shall occur that in the judgment of
the Company or in the opinion of counsel for the Underwriters is required to
be set forth in the Prospectus (as then amended or supplemented) or should be
set forth therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary to supplement or amend the Prospectus (or to file under the Exchange
Act any document which, upon filing, becomes an Incorporated Document) in
order to comply with the Act or any other law, the Company will forthwith
prepare and, subject to the provisions of paragraph (d) above, file with the
Commission an appropriate supplement or amendment thereto (or to such
document), and will expeditiously furnish to the Underwriters and dealers a
reasonable number of copies thereof. In the event that the Company and you
agree that the Prospectus should be amended or supplemented, the Company, if
requested by you, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate and
will file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided
--------
that in no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising out
of the offering or sale of the Shares, in any jurisdiction where it is not now
so subject.
(h) The Company will make generally available to its security holders a
consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the date the Registration Statement is declared
effective by the Commission (the "Effective Date") and ending not later than
--------------
15 months thereafter, as soon as practicable after the end of such period,
which consolidated
<PAGE>
-8-
earnings statement shall satisfy the provisions of Section ll(a) of the Act.
(i) During the period of five years hereafter, the Company will furnish to
you as soon as available, a copy of all public materials furnished by the
Company to its stockholders and all public reports and financial statements
furnished by the Company to the principal national securities exchange upon
which the Common Stock may be listed pursuant to requirements of or agreements
with such exchange or to the Commission.
(j) If, prior to the Closing Date, this Agreement shall be terminated by
the Underwriters because of any failure or refusal on the part of the Company
to perform any agreement on its part to be performed, or because any condition
set forth in Section 8 hereof is not fulfilled, the Company agrees to
reimburse you for all reasonable out-of-pocket expenses (including fees and
expenses of your counsel) incurred by you in connection herewith (it being
understood that the Company shall have no such reimbursement obligation if
this Agreement is terminated pursuant to the second paragraph of Section 10
hereof or by notice given by you terminating this Agreement pursuant to
Section 10 or Section 11 hereof).
(k) The Company will apply the net proceeds from the sale of the Shares to
be sold by it hereunder in accordance with the description set forth in the
Prospectus.
(l) If Rule 430A of the Act is employed, the Company will timely file the
Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(m) The Company will not sell, contract to sell or otherwise dispose of any
Common Stock (other than the Shares) or any securities convertible into or
exercisable or exchangeable for Common Stock, or grant any options, warrants
or other rights to purchase Common Stock, for a period of 90 days after the
date of the Prospectus, without the prior written consent of Smith Barney
Inc.; provided, however, that the foregoing shall not prohibit (i) the grant
-------- -------
of options pursuant to stock option plans existing on the date hereof, (ii)
the issuance of Common Stock upon exercise of options granted under stock
option
<PAGE>
-9-
plans referred to in clause (i) or pursuant to employee benefit plans existing
on the date hereof or (iii) the issuance of Common Stock or options, warrants
or other rights to purchase Common Stock in connection with the acquisition of
a business by the Company, provided that the entity that receives such Common
--------
Stock or such options, warrants or rights agrees to be bound by this Section
5(m).
(n) The Company has furnished or will furnish to you "lock-up" letters
described in the Prospectus in form and substance satisfactory to you, signed
by certain of its executive officers and directors previously designated by
you.
(o) Except as stated in this Agreement and in the Prepricing Prospectus and
Prospectus, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(p) The Company will take all steps necessary to effect the listing of the
Shares, subject to notice of issuance, on the New York Stock Exchange.
6. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement
thereto, or filed pursuant to Rule 424 under the Act, complied when so filed
in all material respects with the provisions of the Act. The Commission has
not issued any order preventing or suspending the use of any Prepricing
Prospectus.
(b) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus
will, when they become effective or are filed with the Commission, as the case
may be, conform in all material respects to the requirements of the Act and do
not and will not, as of the applicable effective date (as to the Registration
Statement and any amendment thereto) and as of the applicable
<PAGE>
-10-
filing date (as to the Prospectus and any amendment or supplement thereto)
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in light of the circumstances
under which they were made); provided that no representation or warranty is
--------
made as to information contained in or omitted from the Registration Statement
or the Prospectus in reliance upon and in conformity with written information
furnished to the Company through you with respect to any Underwriter
specifically for inclusion therein.
(c) The Incorporated Documents, when they were or are filed with the
Commission, conformed or will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and none of such
documents contained or will contain an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(d) The financial statements (including the related notes and supporting
schedules) filed as part of the Registration Statement or incorporated by
reference in the Prospectus present fairly the consolidated financial position
and results of operations of the entities purported to be shown thereby, at
the dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(e) Ernst & Young, LLP, who have reported on the audited financial
statements of the Company, whose report is incorporated by reference in the
Prospectus and who have delivered the initial letter referred to in Section
10(g) hereof, are independent public accountants as required by the Act.
(f) The pro forma financial statements and other pro forma financial
information (including the notes thereto) included in the Prospectus have been
prepared in all material respects in accordance with applicable requirements
of Regulation S-X promulgated under the Exchange Act and have been properly
computed on the bases described therein. The material assumptions used in the
preparation
<PAGE>
-11-
of the pro forma financial statements and other pro forma information in the
Prospectus are set forth therein and are reasonable, and the adjustments used
therein are appropriate to give pro forma effect to the transactions or
circumstances referred to therein.
(g) The Company and each of its subsidiaries (as defined in Section 16)
have been duly formed and are validly existing in good standing under the laws
of their respective jurisdictions of organization, are duly qualified to do
business and are in good standing in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification except where the failure to so qualify
would not have a material adverse effect on the financial condition, results
of operations, business or prospects of the Company and its subsidiaries taken
as a whole (a "Material Adverse Effect"), and have all power and authority
-----------------------
necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged.
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and non-assessable and
conform to the description thereof contained in or incorporated by reference
in the Prospectus; and all of the issued equity securities of each subsidiary
of the Company have been duly authorized and validly issued and, as to shares
of capital stock of any corporation constituting a subsidiary, are fully paid
and non-assessable and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims other than restrictions on transfer imposed
by applicable securities laws.
(i) The unissued shares of the Common Stock to be issued and sold by the
Company to the Underwriters hereunder have been duly authorized and, when
issued and delivered against payment therefor as provided herein, will be
validly issued, fully paid and non-assessable and such shares will conform to
the description thereof contained in or incorporated by reference in the
Prospectus.
(j) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or
<PAGE>
-12-
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the organizational documents of the Company or
any of its subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties or assets; and except for
such consents, approvals, authorizations, registrations or qualifications as
may be required under the Act or applicable state or foreign securities laws
in connection with the purchase and distribution of the Shares by the
Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required
for the execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby.
(k) Neither the Company nor any of its subsidiaries has sustained, since
the date of the latest audited financial statements incorporated by reference
in the Prospectus, any loss or interference with the business of the Company
and its subsidiaries taken as a whole from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, resulting in a Material Adverse Effect; and,
since such date, there has not been any change in the capital stock or long-
term debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus.
(l) Other than with respect to the offering contemplated hereby and the
shares of Common Stock received in connection with the acquisition (The
"Torrey Acquisition") of the Torrey Group of Companies ("Torrey"), there are
------------------ ------
no
<PAGE>
-13-
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other registration
statement filed by the Company under the Act.
(m) The Company has not sold or issued any shares of Common Stock during
the six-month period preceding the date of the Prospectus, including any sales
pursuant to an exemption from the registration requirements of the Act other
than shares issued pursuant to stock options plans or other employee benefit
plans and shares issued in connection with the Torrey Acquisition.
(n) This Agreement has been duly authorized, executed and delivered by the
Company.
(o) The Company and its subsidiaries own the items of real property and
personal property purported to be owned by them which are material to the
conduct of the business of the Company and its subsidiaries taken as a whole,
free and clear of all liens, encumbrances and defects, except such as are
described or incorporated by reference in the Prospectus or such as would not
have a Material Adverse Effect. All real property held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases, with such exceptions as are described in the Prospectus or
such as would not have a Material Adverse Effect.
(p) Except as described or incorporated by reference in the Prospectus,
there are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which are reasonably likely
to have a Material Adverse Effect; and to the best of the Company's knowledge,
no such proceedings are threatened by governmental authorities or by others.
The conditions for use of Form S-3, as set forth in the General Instructions
thereto, have been satisfied.
(q) To the knowledge of the Company, all real property owned (either
presently or at any time in the past), or presently leased by the Company and
<PAGE>
-14-
its subsidiaries in connection with the operation of its business, including,
without limitation, any subsurface soils and ground water (collectively, the
"Realty"), is free of contamination from any substance or material presently
known to be toxic or hazardous, including, without limitation, any radioactive
substance, methane, volatile hydrocarbons or industrial solvents (each a
"Hazardous Substance"), which could reasonably be expected to materially
-------------------
impair the beneficial use thereof by the Company and its subsidiaries or
constitute or cause a significant health, safety or other environmental hazard
to occupants or users (except for contaminations which would not have a
Material Adverse Effect); and to the knowledge of the Company, the Realty does
not contain any underground storage or treatment tanks, active or abandoned
water, gas or oil wells, or any other underground improvements or structures,
other than the foundations, footings or other supports for the improvements
located thereon, the presence of which would have a Material Adverse Effect.
Notwithstanding the foregoing, Hazardous Substances shall be deemed not to
include any supplies or substances maintained, used, stored or held on the
Realty which are (i) naturally occurring, (ii) installed by public utilities
or (iii) used in the ordinary course of the Company's or its subsidiaries'
business, provided that such supplies or substances are stored, used,
maintained and held in all material respects in accordance with any applicable
governmental requirements and with restrictions, conditions and standards
suggested by the manufacturer and the Company's insurance carriers.
(s) The Company has not taken and shall not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation
of the price of the Common Stock.
(t) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses.
(u) The Company and each of its subsidiaries own or possess adequate rights
to use all material patents, patent
<PAGE>
-15-
applications, trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights and licenses necessary for the conduct
of their respective businesses the absence of which would have a Material
Adverse Effect and have no reason to believe that the conduct of their
respective businesses will conflict with, and have not received any notice of
any claim of conflict with, any such rights of others.
(v) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Act which have not been described or incorporated by reference in the
Prospectus or filed as exhibits to the Registration Statement or incorporated
therein by reference as permitted by the Act.
(w) No labor disturbance by the employees of the Company exists or, to the
knowledge of the Company, is imminent which could reasonably be expected to
have a Material Adverse Effect.
(x) The Company has filed all federal, state and local income and franchise
tax returns required to be filed through the date hereof and has paid all
taxes due thereon, and no tax deficiency has been determined adversely to the
Company or any of its subsidiaries which has had (nor does the Company have
any knowledge of any tax deficiency which would reasonably likely have) a
Material Adverse Effect.
(y) Since the date as of which information is given in the Prospectus and
through the date hereof, and except as may otherwise be disclosed or
incorporated by reference in the Prospectus, the Company has not (i) issued or
granted any securities other than shares of Common Stock issued pursuant to
stock option plans or other employee benefit plans existing on the date hereof
or the grant of options pursuant to option plans existing on the date hereof,
(ii) entered into any material transaction not in the ordinary course of
business or (iii) declared or paid any dividend on its capital stock, and,
from the date of the Prospectus, the Company has not incurred any material
liability other than in the ordinary course of business.
(z) The Company is in full compliance with Section 13(b)(2) of the
Exchange Act.
<PAGE>
-16-
(aa) Neither the Company nor any of its subsidiaries (i) is in
violation of its organizational documents, (ii) is in default in any
material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which it is a party or by which it is bound or to which any
of its properties or assets is subject as a result of which default there
would be a Material Adverse Effect or (iii) is in violation of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property or assets may be subject or has failed to obtain any license,
permit, certificate, franchise or other governmental authorization or
permit necessary to the ownership of its property or to the conduct of its
business which violation or failure would have a Material Adverse Effect.
(bbb) Neither the Company nor any subsidiary is an "investment
company" within the meaning of such term under the United States Investment
Company Act of 1940 and the rules and regulations of the Commission
thereunder.
(7) Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Underwriter, its officers and employees and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or in
the Registration Statement or the Prospectus or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Underwriter furnished in writing to the Company by
or on behalf of any Underwriter expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph (a) with
- -------- -------
respect to any Prepricing Prospectus shall not inure to the benefit of any
<PAGE>
-17-
Underwriter (or to the benefit of any officer or employee of such Underwriter or
any person controlling such Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of the Shares by such
Underwriter to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act, and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such Prepricing Prospectus was corrected in the
Prospectus, provided that the Company has delivered the Prospectus to the
several Underwriters in requisite quantity on a timely basis to permit such
delivery or sending. Notwithstanding anything to the contrary herein, no
Underwriter shall be obligated to send or give any Incorporated Document, or any
amendment or supplement thereto, to any person in order to benefit from the
indemnification provisions herein or otherwise. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
--------------------
indemnifying parties shall be entitled to assume the defense thereof,
including the employment of counsel and payment of all fees and expenses.
Such Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Underwriter or such controlling person unless
(i) the indemnifying parties have agreed in writing to pay such fees and
expenses, (ii) the indemnifying parties have failed to assume the defense and
employ counsel, or (iii) the named parties to any such action, suit or
proceeding (including any impleaded parties) include both such Underwriter or
such controlling person and the indemnifying parties and such Underwriter or
such controlling person shall have been advised by its counsel that
representation of such indemnified party and any indemnifying party by the
same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between
them (in which case the indemnifying party shall not have the right to assume
the defense of such action, suit or proceeding on behalf of such Underwriter
or such controlling person).
<PAGE>
-18-
is understood, however, that the indemnifying parties shall, in connection
with any one such action, suit or proceeding or separate but substantially
similar or related actions, suits or proceedings arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such Underwriters and controlling persons, which
firm shall be designated in writing by Smith Barney Inc., and that all such
fees and expenses shall be reimbursed as they are incurred. The indemnifying
parties shall not be liable for any settlement of any such action, suit or
proceeding effected without their written consent, but if settled with such
written consent, or if there be a final judgment for the plaintiff in any such
action, suit or proceeding, the indemnifying parties agree to indemnify and
hold harmless any Underwriter, to the extent provided in the preceding
paragraph, and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the
Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Underwriter,
but only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any
such controlling person based on the Registration Statement, the Prospectus or
any Prepricing Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter pursuant to
this paragraph (c), such Underwriter shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such
Underwriter's expense), and the Company, its directors, any such officer, and
any such controlling person shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement
<PAGE>
-19-
shall be in addition to any liability which any Underwriter may otherwise
have.
(d) If the indemnification provided for in this Section 7 is unavailable to
an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Shares, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus; provided that, in the
event that the Underwriters shall have purchased any Additional Shares
hereunder, any determination of the relative benefits received by the Company
or the Underwriters from the offering of the Shares shall include the net
proceeds (before deducting expenses) received by the Company, and the
underwriting discounts and commissions received by the Underwriters, from the
sale of such Additional Shares, in each case computed on the basis of the
respective amounts set forth in the notes to the table on the cover page of
the Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the Underwriters on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
<PAGE>
-20-
(e) The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by a pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds
the amount of any damages which such Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. Notwithstanding the provisions of paragraph (d) above or
this paragraph (e), the Company shall not be required to contribute an amount
in excess of the amount for which such party would have been liable if the
provision of paragraph (a) had been available. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 7 are several in proportion to the respective numbers of Firm
Shares set forth opposite their names in Schedule I hereto (or such numbers of
Firm Shares increased as set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be
<PAGE>
-21-
paid by the indemnifying party to the indemnified party as such losses,
claims, damages, liabilities or expenses are incurred. The indemnity and
contribution agreements contained in this Section 7 and the representations
and warranties of the Company set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation
made by or on behalf of any Underwriter or any person controlling any
Underwriter, the Company, its directors or officers or any person controlling
the Company, (ii) acceptance of any Shares and payment therefor hereunder, and
(iii) any termination of this Agreement. A successor to any Underwriter or any
person controlling any Underwriter, or to the Company, its directors or
officers, or any person controlling the Company, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 7.
(h) The Underwriters severally confirm and the Company acknowledges that
the statements with respect to the public offering of the Common Stock by the
Underwriters set forth on the cover page of, the legend concerning over-
allotments on the inside front cover page of, the concession and reallowance
figures appearing under the caption "Underwriting" in, the Prospectus are
correct and constitute the only information concerning such Underwriters
furnished in writing to the Company by or on behalf of the Underwriters
specifically for inclusion in the Registration Statement and the Prospectus.
8. Conditions of Underwriters' Obligations. The several obligations of the
---------------------------------------
Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and
all filings, if any, required by Rules 424 and 430A under the Act shall have
been timely made; no stop order suspending the effectiveness of the
registration statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Company or any
Underwriter, threatened by the Commission,
<PAGE>
-22-
and any request of the Commission
for additional information (to be included in the registration statement or
the prospectus or otherwise) shall have been complied with to your
satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company and its
Subsidiaries not contemplated by the Prospectus, which in your opinion would
materially adversely affect the market for the Shares, or (ii) any event or
development relating to or involving the Company which makes any statement
made in the Prospectus untrue or which, in the opinion of the Company and its
counsel or the Underwriters and their counsel, requires the making of any
addition to or change in the Prospectus in order to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, if amending or supplementing the Prospectus to reflect
such event or development would, in your opinion materially adversely affect
the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of Gibson Dunn
& Crutcher LLP, special counsel for the Company, dated the Closing Date and
addressed to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the business, operations or financial condition of the Company
and its subsidiaries taken as a whole, and has all corporate power and
authority necessary to own or hold its properties and conduct its business
as described or incorporated by reference in the Prospectus;
(ii) The Company has authorized and outstanding capital stock as set
forth in the Prospectus, and all of the issued shares of capital stock of
the Company
<PAGE>
-23-
have been duly authorized and validly issued, are fully paid and non-
assessable and conform in all material respects to the description thereof
incorporated by reference in the Prospectus; the shares of Common Stock
being delivered and which are being issued by the Company are duly
authorized and, when issued upon payment therefor in accordance with this
Agreement, will be validly issued, fully paid and non-assessable;
(iii) There are no preemptive rights, nor any restriction upon the
voting or transfer of, any shares of the Common Stock provided for in the
Company's Certificate of Incorporation or bylaws, or to the knowledge of
such counsel, any other agreement to which the Company is a party;
(iv) To such counsel's knowledge and other than as described or
incorporated by reference in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company
or any of its subsidiaries is the subject which is of a character which is
required to be disclosed in the Prospectus; and, to such counsel's
knowledge, no such proceedings are threatened by governmental authorities
or by others.
(v) The Registration Statement was declared effective under the Act
as of the date and time specified in such opinion, the Prospectus was filed
with the Commission pursuant to the subparagraph of Rule 424(b) under the
Act on the date specified therein, and, to such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose is pending or threatened by
the Commission;
(vi) The Registration Statement and the Prospectus and any further
amendments or supplements thereto made by the Company prior to the Closing
Date (other than the financial and pro forma data (and the related notes
thereto) and statistical data and the financial statements and related
schedules therein, as to which such counsel need express no opinion) appear
on their face to comply as to form in all material respects with the
requirements of the Act; the docu-
<PAGE>
-24-
ments incorporated by reference in the Prospectus and any further amendment
or supplement to any such incorporated document made by the Company prior
to the Closing Date (other than the financial and pro forma data (and the
related notes thereto) and statistical data and the financial statements,
and related schedules therein, as to which such counsel need express no
opinion), when they were filed with the Commission appear on their face to
have been appropriately responsive in all material respects to the
requirements of the Act and the Exchange Act;
(vii) To such counsel's knowledge, there are no contracts or other
documents of a character which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by the Act
which have not been described or filed as exhibits to the Registration
Statement or incorporated therein by reference as permitted by the Act;
(viii) This Agreement has been duly authorized, executed and delivered
by the Company; and
(ix) The issue and sale of the shares of Common Stock being delivered
on the Closing Date by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation by the Company
of the transactions contemplated hereby and thereby will not, to such
counsel's knowledge, conflict with or result in a material breach or
violation of any of the terms or provisions of, or constitute a material
default under, any indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument filed (including by incorporation by
reference) by the Company as an Exhibit to its Annual Report on Form 10-K
for the fiscal year ended September 30, 1996, nor will such actions result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of the Company or any statute or, to such counsel's knowledge, any
order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries set forth on Schedule II hereto or any of their properties
or assets; and, except for such consents, approvals, authorizations,
registrations or qualifications as may be required under the
<PAGE>
-25-
Act, and applicable state or foreign securities laws in connection with the
purchase and distribution of the Common Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by the Company and
the valid issuance and sale of the Common Stock by the Company.
In rendering such opinion, such counsel may state that its opinion is
limited to the Federal laws of the United States of America, the laws of the
States of Texas and New York and the General Corporation Law of the State of
Delaware. Such counsel shall also have furnished to the Underwriters a written
statement, addressed to the Underwriters and dated the Closing Date, in form
and substance satisfactory to the Underwriters and counsel for the
Underwriters, to the effect that (x) such counsel has acted as special counsel
to the Company in connection with the preparation of the Registration
Statement and during the course of the preparation of the Registration
Statement and Prospectus, such counsel participated in conferences with
representatives of the Company, the Company's corporate counsel, and its
accountants and the representatives of the Underwriters and at which
conferences the contents of the Registration Statement and the Prospectus and
related matters were discussed, and (y) based on the foregoing, no facts have
come to the attention of such counsel which lead it to believe that (I) the
Registration Statement (except as to financial and pro forma data (and related
notes thereto) and statistical data and the financial statements and related
schedules contained or incorporated by reference therein), as of the date the
Registration Statement became effective, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
or that the Prospectus (except as to financial and pro forma data (and related
notes thereto) and statistical data and the financial statements and related
schedules contained or incorporated by reference therein) contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading or (II) any
Incorporated Document or any amendment or supplement
<PAGE>
-26-
thereto made by the Company prior to such Closing Date, when they were filed
with the Commission, as the case may be, contained (except as to financial and
pro forma data (and related notes thereto) and statistical data and the
financial statements and related schedules contained or incorporated by
reference therein) an untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The foregoing
opinion and statement may be qualified by a statement to the effect that such
counsel has not independently verified the accuracy, completeness or fairness
of the statements contained in the Registration Statement or Prospectus or
incorporated by reference therein, and such counsel is not passing upon and
such counsel does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement or the
Prospectus other than the description of the Company's capital stock
incorporated by reference into the Prospectus.
(d) You shall have received on the Closing Date, an opinion of Charles N.
Warren, Esq., General Counsel of the Company, dated the Closing Date and
addressed to you, to the effect that:
(i) The issue and sale of the shares of Common Stock being delivered
on the Closing Date by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation by the Company
of the transactions contemplated hereby will not, to the knowledge of such
counsel, conflict with or result in a material breach or violation of any
of the terms or provisions of, or constitute a material default under, any
indenture, mortgage, deed or trust, loan agreement or other material
agreement or instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such actions result
in any violation of the provisions of the charter or by-laws of any of the
Company's subsidiaries set forth on Schedules II and III hereto or any
order,------------ ---rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over any
<PAGE>
-27-
of the Company's subsidiaries set forth on Schedule III hereto or any of
their properties or assets; and
(ii) Each subsidiary of the Company set forth on Schedules II and III
------------ ---
which is a corporation has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its state of
incorporation, is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which its ownership or lease
of its property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the business, operations or financial condition of the
Company and its subsidiaries taken as a whole, and has all corporate power
and authority necessary to own or hold its properties and conduct its
business as described in the Prospectus. The outstanding shares of capital
stock of each such subsidiary is duly authorized, validly issued, fully
paid and nonassessable and (except for directors' qualifying shares) are
owned of record, directly or indirectly by the Company. Each subsidiary of
the Company set forth on Schedules II and III which is a limited
------------ ---
partnership has been duly formed and is validly existing as a limited
partnership in good standing under the laws of the state of its
organization, is duly qualified to do business and is in good standing as a
foreign limited partnership in each jurisdiction in which its ownership or
lease of its property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, operation or financial condition
of the Company and its subsidiaries taken as a whole, and has all
partnership power and authority necessary to own or hold its properties and
conduct its business as described in the Prospectus. The subsidiaries
listed on Schedules II and III constitute all of the material subsidiaries
------------ ---
of the Company.
(e) The Underwriters shall have received from Cahill Gordon & Reindel,
special counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Common Stock, the
Registration Statement, the Prospectus and other re-
<PAGE>
-28-
lated matters as the Underwriters may reasonably require, and the Company
shall have furnished to such counsel such documents as they reasonably request
for the purpose of enabling them to pass upon such matters.
(f) At the time of execution of this Agreement, the Underwriters shall have
received from Ernst & Young LLP a letter, in form and substance satisfactory
to the Underwriters, addressed to the Underwriters and dated the date hereof
(i) confirming that they are independent public accountants within the meaning
of the Act and are in compliance with the applicable requirements relating to
the qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date hereof (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters
ordinarily covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
(g) With respect to the letter of Ernst & Young LLP referred to in the
preceding paragraph and delivered to you concurrently with the execution of
this Agreement (the "initial letter"), the Company shall have furnished to the
--------------
Underwriters a letter (the "bring-down letter") of such accountants, addressed
-----------------
to the Underwriters and dated the Closing Date (i) confirming that they are
independent public accountants within the meaning of the Act and are in
compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating,
as of the date of the bring-down letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not more than
five days prior to the date of the bring-down letter), the conclusions and
findings of such firm with respect to the financial information and other
matters covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(h) The Company shall have furnished to the Underwriters its certificate,
dated such Closing Date executed
<PAGE>
-29-
by its Chairman of the Board, its President or a Vice President and its chief
financial officer stating that:
(i) The representations and warranties of the Company in this
Agreement are true and correct as of the Closing Date as if made on such
date; the Company has complied with all its agreements contained herein to
be performed by it at or prior to the Closing Date; and the conditions set
forth in Sections 8(a) and 8(i) have been fulfilled;
----
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose has been
initiated or threatened; and
(iii) All filings required by Rule 424(b) and Rule 430A under the Act
have been made.
(i) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus or
(ii) since such date there shall not have been any change in the capital
stock, net revenues, per share or total amounts of income before extraordinary
income or of net income or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus,
the effect of which, in any such case described in clause (i) or (ii), is, in
the judgment of Smith Barney Inc. and/or a majority in interest of the several
Underwriters, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Common
Stock being delivered on the Closing Date on the terms and in the manner
contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the
<PAGE>
-30-
rating accorded the Company's debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the Act and (ii) no such organization
shall have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's debt
securities.
(k) The Company shall have furnished to you such other documents and
certificates as to the accuracy and completeness of any statement in the
Registration Statement or the Prospectus as you reasonably may request.
(l) The Company shall have performed such of its obligations under this
Agreement as are to be performed by the terms hereof.
(m) You shall have been furnished with such additional documents and
certificates as you or counsel for the Underwriters may reasonably request.
(n) The Common Stock to be purchased on the Closing Date by the
Underwriters shall be approved for listing on the New York Stock Exchange.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company and
delivered to you or to your counsel shall be deemed a representation and
warranty by the Company to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the satisfaction on and as of any Option Closing Date
of the conditions set forth in this Section 8, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (h) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c) and (d)
---
shall be revised to reflect the sale of Additional Shares.
9. Expenses. As between the Company, on the one hand, and the Underwriters
--------
on the other hand, the Company
<PAGE>
-31-
shall pay the following costs and expenses and all other costs and expenses
incident to the performance by the Company of their obligations hereunder: (i)
the preparation, printing or reproduction, and filing with the Commission of the
registration statement (including financial statements and exhibits thereto),
each Prepricing Prospectus, the Prospectus, and each amendment or supplement to
any of them; (ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of such
copies of the registration statement, each Prepricing Prospectus, the
Prospectus, the Incorporated Documents, and all amendments or supplements to any
of them, as may be reasonably requested for use in connection with the offering
and sale of the Shares; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Shares, including any stamp taxes
in connection with the original issuance and sale of the Shares; (iv) the
printing (or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Shares; (v)
the listing of the Shares on the New York Stock Exchange; (vi) the registration
or qualification of the Shares for offer and sale under the securities or Blue
Sky laws of the several states as provided in Section 5(g) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of the
preliminary and supplemental Blue Sky Memoranda and such registration and
qualification); (vii) the filing fees and the fees and expenses of counsel for
the Underwriters in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.; (viii) the transportation and
other expenses incurred by or on behalf of Company representatives (but not
Underwriters' representatives) in connection with presentations to prospective
purchasers of the Shares; and (ix) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company.
10. Effective Date of Agreement. This Agreement shall become effective:
---------------------------
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement
<PAGE>
-32-
shall have become effective, it may be terminated by the Company, by notifying
you, or by you, by notifying the Company.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
----------
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or
refuse to purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
--
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement. The
term "Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule I hereto who, with your approval and
----------
the approval of the Company, purchases Shares which a defaulting Underwriter is
obligated, but fails or refuses, to purchase.
<PAGE>
-33-
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
------------------------
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market shall have been suspended or materially limited, (ii) a
general moratorium on commercial banking activities in New York or Texas shall
have been declared by either federal or state authorities, or (iii) there shall
have occurred any outbreak or escalation of hostilities or other international
or domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in your judgment, impracticable or inadvisable to commence
or continue the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the resale
of the Shares by the Underwriters. Notice of such termination may be given to
the Company by telegram, telecopy or telephone and shall be subsequently
confirmed by letter.
12. Miscellaneous. Except as otherwise provided in Sections 5, 10 and 11
-------------
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 1901 Ascension Blvd., Suite 100, Arlington, TX 76006, Attention:
Donald R. Horton; or (ii) if to you, care of Smith Barney Inc., 388 Greenwich
Street, New York, New York 10013, Attention: Manager, Investment Banking
Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
<PAGE>
-34-
13. Applicable Law; Counterparts. This Agreement shall be governed by and
----------------------------
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
14. Definition of the Terms "Business Day" and "Subsidiary". For purposes
-------------------------------------------------------
of this Agreement, (a) "business day" means any day on which the New York Stock
Exchange Inc. is open for trading and (b) "subsidiary" has the meaning set forth
in Rule 405 under the Act.
<PAGE>
-35-
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
D.R. HORTON, INC.
By:
Name:
Title:
Confirmed as of the date first
above mentioned:
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SALOMON BROTHERS INC
By: SMITH BARNEY INC.
By:
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
D.R. HORTON, INC.
<TABLE>
<CAPTION>
Number of Number of
Underwriter Firm Shares Additional Shares
----------- ----------- -----------------
<S> <C> <C>
Smith Barney Inc.
Donaldson, Lufkin &
Jenrette Securities
Corporation
Merrill Lynch, Pierce,
Fenner & Smith Incor-
porated
Salomon Brothers Inc
Total ............... _________ _______
</TABLE>
2
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP APPEARS HERE]
March 7, 1997
D. R. Horton, Inc.
1901 Ascension Blvd., Suite 100
Arlington, Texas 76006
Re: D. R. Horton, Inc. Public Offering of 3,400,000 Shares of Common
Stock
Ladies and Gentlemen:
We have acted as special counsel for D. R. Horton, Inc., a Delaware
corporation (the "Company), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of 3,400,000 shares of common
stock, par value $.01 per share, of the Company (the "Common Stock") for sale by
the Company (plus up to an additional 510,000 shares of Common Stock (the
"Option Shares") issuable upon exercise of the over-allotment option described
in the Registration Statement as such term is defined below) pursuant to a
Registration Statement on Form S-3 (No. 333-21183) (as amended, the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission") (all of such 3,910,000 shares of Common Stock are herein
collectively referred to as the "Shares").
In connection with our examination of documents as hereinafter
described, we have assumed the genuineness of all signatures on, and the
authenticity of, all documents submitted to us as originals and the conformity
to original documents of all documents submitted to us as copies. With respect
to agreements and instruments executed by natural persons, we have assumed the
legal competency of such persons.
For the purpose of rendering this opinion, we have made such factual
and legal examination as we deemed necessary under the circumstances, and in
that connection we have examined, among other things, originals or copies of the
following:
<PAGE>
GIBSON, DUNN & CRUTCHER LLP
D.R. Horton, Inc.
March 4, 1997
Page 2
(1) The Certificate of Incorporation of the Company, as amended to
date;
(2) The Bylaws of the Company, as amended to date;
(3) Minutes of meetings of the Company's Board of Directors at which
action was taken with respect to the transactions covered by this
opinion and minutes of other corporate proceedings; and
(4) Such other certificates and assurances from public officials,
officers and representatives of the Company and the Selling
Stockholders that we considered necessary or appropriate for the
purpose of rendering this opinion.
On the basis of the foregoing examination, and in reliance thereon, we
are of the opinion that, assuming that the Executive Committee of the Board of
Directors duly approves the number of shares to be issued and the price of such
shares, the Shares when issued and delivered to and paid for by the Underwriters
as described in the Registration Statement will be validly issued, fully paid
and nonassessable.
This opinion is limited to the present corporate laws of the State of
Delaware, the present federal laws of the United States and to the present
judicial interpretations thereof and to the facts as they presently exist. We
undertake no obligation to advise you as a result of developments occurring
after the date hereof or as a result of facts or circumstances brought to our
attention after the date hereof. This opinion may be filed as an exhibit to the
Registration Statement. Consent is also given to the reference to this firm
under the caption "Legal Opinions" in the prospectus contained in the
Registration Statement. In giving this consent, we do not admit we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Gibson, Dunn & Crutcher LLP
GIBSON, DUNN & CRUTCHER LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Information" and "Experts" in Post-Effective Amendment No. 1 to the
Registration Statement and related Prospectus of D.R. Horton, Inc. for the
registration of 3,910,000 shares of its common stock and to the incorporation
by reference therein of our report dated November 8, 1996, with respect to the
consolidated financial statements of D.R. Horton, Inc. included in its Annual
Report (Form 10-K) for the year ended September 30, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Fort Worth, Texas
March 7, 1997
