<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1997
Registration No. 333-21183
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
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
-----------
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. [_]
-----------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 FEBRUARY 11, 1997
PROSPECTUS
5,000,000 SHARES
D.R. HORTON, INC.
CUSTOM HOMES
COMMON STOCK
--------
Of the 5,000,000 shares of Common Stock offered hereby (the "Offering"),
4,000,000 shares are being sold by D.R. Horton, Inc. (the "Company") and
1,000,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). See "Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling
Stockholders.
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 5/8 per share on February 10, 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.
--------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
- --------------------------------------------------------------------------------
Total(3)...................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting estimated expenses of $ , payable by the Company.
(3) The Company and the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to 750,000 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, Proceeds to
Company and Proceeds to Selling Stockholders 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
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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 26
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 26 markets, as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC REGION MARKETS
----------------- -------
<S> <C>
Mid-Atlantic............ Charlotte, Greensboro, 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 announced the pending 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"). Under the terms of the Stock Purchase
Agreement, the Company will pay total consideration of $39 million, consisting
of $28.5 million in cash, $9.5 million in Common Stock and a contingent payment
estimated at $1 million, for all of the outstanding capital stock of the
entities comprising Torrey. The Company also will assume and refinance
approximately $84 million of indebtedness, other obligations and minority
interests upon consummation of the Torrey Acquisition, which is subject to
customary conditions and regulatory approvals.
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
Common Stock offered by:
The Company............. 4,000,000 shares
The Selling 1,000,000 shares
Stockholders........... -----------
Total Common Stock
offered............
5,000,000 shares
Common Stock to be
outstanding after the
Offering...................
New York Stock Exchange 36,450,729 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. The Company will not
receive any proceeds from the sale of Common
Stock by the Selling Stockholders.
- --------
(1) Does not reflect 2,337,756 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") or shares to be issued in
the Torrey Acquisition.
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 98,282 145,003 21,533 26,345 38,699
Income before income
taxes................. 28,591 32,557 44,432 69,800 8,725 11,159 14,790
Net income............. $ 17,663 $ 20,539 $ 27,379 $ 42,854 $ 5,415 $ 6,807 $ 9,022
Net income per share... $ 0.63 $ 0.74 $ 0.87 $ 1.18 $ 0.19 $ 0.21 $ 0.24
Weighted average number
of common shares (in
thousands)............ 27,845 27,849 31,420 36,271 28,250 33,003 37,854
SELECTED OPERATING DATA:
Gross profit margin.... 17.1% 17.8% 18.0% 18.6% 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 $179,954
Sales backlog at end of
period (homes)(3)..... 773 1,000 1,204 1,833 968 1,208 1,499
Sales backlog at end of
period ($ value)(3)... $140,524 $170,736 $208,888 $320,759 $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.......................................... 445,854 567,303
Total debt............................................ 203,200 258,037
Stockholders' equity.................................. 184,780 235,823
</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, 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 4,000,000 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 4,000,000
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
five homebuilding companies and has entered into an agreement to acquire
Torrey. While a stock purchase agreement has been signed relating to Torrey,
the acquisition is subject to customary conditions and regulatory approvals,
and there can be no assurance this transaction will be consummated. 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
these acquired companies 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 the pending 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
8
<PAGE>
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 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 37.44% of the Company's
outstanding Common Stock after giving effect to the Offering (36.44% 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 32.15% of the Company's
outstanding Common Stock after giving effect to the Offering (31.30% if the
Underwriters' over-allotment options is exercised in full). See "Selling
Stockholders."
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 $43.6 million ($50.2 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%.
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders.
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 FEBRUARY 10, 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 February 10, 1997, the last sale price reported on the New York
Stock Exchange Composite Tape for the Common Stock was $11 5/8.
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 $301,633 $258,037
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 37,295,173 pro
forma as adjusted shares, issued and
outstanding........................... 324 333 373
Additional capital..................... 160,049 167,355 211,043
Retained earnings...................... 24,407 24,407 24,407
-------- -------- --------
Total stockholders' equity........... $184,780 $192,095 $235,823
======== ======== ========
Total capitalization................. $387,980 $493,728 $493,860
======== ======== ========
</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 4,000,000
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 2,337,756 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; and (iii) the
sale of 4,000,000 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 4,000,000 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>
TRIMARK AND PRO FORMA
D.R. SGS TORREY PRO FORMA PRO FORMA AS
HORTON (COMPLETED)(1) (PENDING) 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 (48) 176,192
-------- ------ ------- ------ -------- ----- --------
Gross profit............ 26,345 1,849 9,295 1,162 38,651 48 38,699
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 48 14,566
-------- ------ ------- ------ -------- ----- --------
Other:
Interest (expense)..... (784) -- (192) -- (976) 784 (192)
Other
income/(expense)...... 715 (207) 79 (171)(7) 416 -- 416
-------- ------ ------- ------ -------- ----- --------
(69) (207) (113) (171) (560) 784 224
-------- ------ ------- ------ -------- ----- --------
Income before income
taxes.................. 11,159 1,008 1,651 140 13,958 832 14,790
Provision for income
taxes (4).............. 4,352 392 644 55 5,443 325 5,768
-------- ------ ------- ------ -------- ----- --------
Net income.............. $ 6,807 $ 616 $ 1,007 $ 85 $ 8,515 $ 507 $9,022
======== ====== ======= ====== ======== ===== ========
Net income per share.... $ 0.21 $ 0.25 $ 0.24
======== ======== ========
Weighted average number
of common shares (in
thousands)............. 33,003 844(8) 33,847 4,007 37,854
======== ======= ======== ===== ========
</TABLE>
11
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
TRIMARK AND PRO FORMA
D.R. SGS TORREY PRO FORMA PRO FORMA AS
HORTON (COMPLETED) (PENDING) 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 (1,341) 635,435
--------- -------- -------- ------- -------- ------- --------
Gross profit............ 98,282 12,420 28,235 4,725 143,662 1,341 145,003
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 1,341 68,154
--------- -------- -------- ------- -------- ------- --------
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 2,815 69,800
Provision for income
taxes (4).............. 17,053 2,586 4,489 1,720 25,848 1,098 26,946
--------- -------- -------- ------- -------- ------- --------
Net income.............. $ 27,379 $ 4,047 $ 7,021 $ 2,690 $ 41,137 $ 1,717 $ 42,854
========= ======== ======== ======= ======== ======= ========
Net income per share.... $ 0.87 $ 1.28 $ 1.18
========= ======== ========
Weighted average number
of common shares (in
thousands)............. 31,420 844(8) 32,264 4,007 36,271
========= ======== ======== ======= ========
</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 and the incremental dilution associated with options to be
exercised by certain of the Selling Stockholders. A Common Stock price of
$11.50 per share was assumed. The adjustments reflect reduction of
previously capitalized and expensed interest.
(4) Each of Trimark and SGS operated prior to acquisition by the Company, and
Torrey currently operates, as an S Corporation 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 to be purchased upon
consummation of the Torrey Acquisition.
(8) Common Stock to be issued as consideration in the Torrey Acquisition. A
Common Stock price of $11.25 per share, the maximum valuation under the
terms of the Stock Purchase Agreement, was assumed.
12
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
D.R. HORTON, TORREY PRO FORMA PRO FORMA PRO FORMA
INC. (PENDING) 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 -- 16,800 22,382 -- 22,382
-------- -------- ------- -------- -------- --------
$445,854 $106,231 $15,218 $567,303 $ 0 $567,303
======== ======== ======= ======== ======== ========
LIABILITIES
Accounts payable........ $ 33,434 $ 11,449 $ -- $ 44,883 $ -- $ 44,883
Accrued expenses and
customer deposits...... 24,440 4,252 -- 28,692 (132) 28,560
Notes payable........... 203,200 67,846 30,587 301,633 (43,596) 258,037
-------- -------- ------- -------- -------- --------
261,074 83,547 30,587 375,208 (43,728) 331,480
-------- -------- ------- -------- -------- --------
Minority interests...... -- 5,782 (5,782) 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
37,295,173 pro forma as
adjusted shares, issued
and outstanding........ 324 -- 9 333 40 373
Additional capital...... 160,049 -- 7,306 167,355 43,688 211,043
Retained earnings....... 24,407 16,902 (16,902) 24,407 -- 24,407
-------- -------- ------- -------- -------- --------
184,780 16,902 (9,587) 192,095 43,728 235,823
-------- -------- ------- -------- -------- --------
$445,854 $106,231 $15,218 $567,303 $ 0 $567,303
======== ======== ======= ======== ======== ========
</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 $84 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 assumed, with a discount to reflect its
restricted nature.
(3) To reflect the effects of the sale of 4,000,000 shares of Common Stock
offered hereby by the Company, the application of the estimated net
proceeds therefrom to temporarily reduce indebtedness under the Company's
revolving credit facilities, and the incremental dilution associated with
options to be exercised by certain of the Selling Stockholders, as if such
Common Stock sale and incremental dilution 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 4,000,000 shares of Common Stock offered hereby by
the Company, the application of the estimated net proceeds therefrom to
temporarily reduce indebtedness under the Company's revolving credit
facilities, and the incremental dilution associated with options to be
exercised by certain of the Selling Stockholders, as if such combination,
Common Stock sale and incremental dilution had occurred on December 31,
1996. For the purpose of determining the effects of the Common Stock sale
and incremental dilution, 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>
commitments which will increase its debt capacity to $410 million. However,
the covenants contained in its committed credit facilities are expected to
limit such capacity initially to $356 million. The effectiveness of these
increased credit facilities is expected to occur during the Company's second
fiscal quarter.
In October, 1996, the Company completed the acquisition of the principal
assets (approximately $7.6 million, primarily inventories) of Trimark for
approximately $6.6 million in cash and the assumption of approximately $1.1
million in trade accounts and notes payable associated with the acquired
assets. In December, 1996, the Company purchased the principal assets
(approximately $20.4 million, primarily inventories) of SGS for $11.8 million
in cash and the assumption of $9.7 million in trade accounts and notes payable
associated with the acquired assets.
The Company has announced the pending acquisition of Torrey, which is
expected to be consummated during the Company's second fiscal quarter. Under
the terms of the Stock Purchase Agreement for Torrey, the Company will pay
total consideration of $39 million, consisting of $28.5 million in cash and
$9.5 million in Common Stock (approximately 844,444 shares of Common Stock)
and a contingent payment estimated at $1 million, for all of the outstanding
capital stock of the entities comprising Torrey. The Company also will assume
and refinance approximately $84 million of indebtedness, other obligations and
minority interests upon consummation of the Torrey Acquisition. The Company
anticipates funding this acquisition through borrowings under its unsecured
loan facilities.
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 26 markets. These
markets include Albuquerque, Atlanta, Austin, Birmingham, Charlotte, Chicago,
Cincinnati, Dallas/Fort Worth, Denver, Greensboro, 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
</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 five 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
</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 January 29, 1997, the Company entered into the Stock Purchase Agreement
for the acquisition of the entities comprising Torrey. Under the terms of the
Stock Purchase Agreement, the Company will pay total consideration of $39
million, consisting of $28.5 million in cash, $9.5 million in Common Stock and
a contingent payment estimated at $1 million, for all of the outstanding
capital stock of the entities comprising Torrey. The Company also will assume
approximately $84 million of indebtedness, other obligations and minority
interests upon consummation of the Torrey Acquisition. The Torrey Acquisition
is subject to customary conditions and regulatory approvals.
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 30
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, 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.
SELLING STOCKHOLDERS
The following table and accompanying footnotes set forth certain information
regarding beneficial ownership of the Company's Common Stock by the Selling
Stockholders as of February 4, 1997 and as adjusted to reflect the sale of
4,000,000 shares of Common Stock by the Company and 1,000,000 shares of Common
Stock by the Selling Stockholders in the Offering.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
---------------------- ----------------------
NUMBER OF
SHARES TO BE
NAME OF NUMBER PERCENT SOLD IN THE NUMBER PERCENT
BENEFICIAL HOLDER OF SHARES OF CLASS (1) OFFERING (2) OF SHARES OF CLASS (2)
----------------- --------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
Donald R. Horton (3).... 6,763,060 20.84% 800,000 5,963,060 16.35%
Richard L. Horton (4)... 762,806 2.35% 50,000 712,806 1.95%
Terrill J. Horton (5)... 6,852,744 21.12% 40,000 6,812,744 18.68%
David J. Keller (6)..... 128,694 0.40% 25,000 103,694 0.28%
Scott J. Stone (7)...... 227,757 0.70% 75,000 152,757 0.42%
Donald J. Tomnitz (8)... 89,108 0.27% 10,000 79,108 0.22%
</TABLE>
- --------
(1) Does not give effect to the exercise of any currently outstanding options
under the Stock Option Plan, other than with respect to Messrs. Keller and
Tomnitz.
(2) Does not give effect to any exercise of the Underwriters option to
purchase up to 150,000 additional shares from the Selling Stockholders to
cover over-allotments. Of such shares, Messrs. Donald Horton, Richard
Horton, Terrill Horton, Keller, Stone and Tomnitz have granted an option
to the Underwriters covering 120,000, 7,500, 6,000, 3,750, 11,250 and
1,500 shares, respectively.
(3) These shares of Common Stock include an aggregate of 478,579 shares owned
by Mr. Horton's children. Mr. Horton is the Chairman of the Board and
President of the Company.
(4) Mr. Horton is the Vice President of the Company's Dallas/Ft. Worth East
Division and a Director of the Company.
(5) These shares of Common Stock include an aggregate of 5,763,898 shares,
consisting of 413,254 shares of Common Stock owned of record by the Donald
Ray Horton Trust, 376,893 shares of Common Stock owned of record by the
Martha Elizabeth Horton Trust, 2,069,702 shares of Common Stock owned of
record by the Donald Ray Horton Trust Number Two, 953,811 shares of Common
Stock owned of record by Martha Elizabeth Horton Trust Number Two and
975,119 shares of Common Stock owned of record by each of the Donald Ryan
Horton Trust and the Douglas Reagan Horton Trust. Mr. Horton serves as the
sole trustee for each of the foregoing trusts. These shares of Common
Stock also include 9,159 shares owned by Mr. Horton's son. Mr. Horton is
the Vice President of the Company's Dallas/Ft. Worth North Division and a
Director of the Company.
(6) These shares of Common Stock include 7,732 shares held by Mr. Keller for
the benefit of his children and 120,962 shares issuable upon the exercise
of outstanding stock options. Mr. Keller is an Executive Vice President,
Treasurer, Chief Financial Officer and a Director of the Company.
(7) Mr. Stone is the Vice President of the Company's Atlanta Division and a
Director of the Company.
(8) These shares of Common Stock include 81,774 shares issuable upon the
exercise of outstanding stock options. Mr. Tomnitz is the President--
Homebuilding Division and a Director of the Company.
27
<PAGE>
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 and the Selling Stockholders have 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............................................................... 5,000,000
=========
</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 and the Selling Stockholders have granted to the Underwriters an
option, exercisable for thirty days from the date of this Prospectus, to
purchase up to an aggregate of 750,000 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, of which 600,000 shares would be sold
by the Company and 150,000 shares would be sold by the Selling Stockholders.
See "Selling Stockholders." 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, certain of its executive officers and directors, and the
Selling Stockholders 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, directors and Selling Stockholders
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.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933.
28
<PAGE>
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 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,
29
<PAGE>
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.
30
<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
Selling Stockholders..................................................... 27
Underwriting............................................................. 28
Legal Opinions........................................................... 29
Experts.................................................................. 29
Available Information.................................................... 29
Incorporation of Certain Information by Reference........................ 29
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,000,000 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....................................... **
Printing and engraving fees and expenses......................... **
Accountants' fees and expenses................................... **
Legal fees and expenses.......................................... **
Miscellaneous.................................................... **
----------
Total........................................................ $ **
==========
</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.
** To be completed by amendment.
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, Fort Worth, Texas
**24.1 --Powers of Attorney (See signature page of this Registration
Statement)
</TABLE>
- --------
*To be filed by amendment.
**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 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
FEBRUARY 10, 1997.
D.R. Horton, Inc.
/s/ Donald R. Horton
By: _________________________________
Donald R. Horton
Chairman of the Board and
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS 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
/s/ Donald R. Horton Chairman of the
- ------------------------------------- Board and President February 10, 1997
DONALD R. HORTON (Principal
Executive Officer)
Richard Beckwitt* Director February 10, 1997
- -------------------------------------
RICHARD BECKWITT
Richard I. Galland* Director February 10, 1997
- -------------------------------------
RICHARD I. GALLAND
Richard L. Horton* Director February 10, 1997
- -------------------------------------
RICHARD L. HORTON
Terrill J. Horton* Director February 10, 1997
- -------------------------------------
TERRILL J. HORTON
/s/ David J. Keller Treasurer, Chief February 10, 1997
- ------------------------------------- Financial Officer
DAVID J. KELLER and Director
(Principal
Accounting and
Financial Officer)
II-3
<PAGE>
SIGNATURE TITLE DATE
Director
- -------------------------------------
FRANCINE I. NEFF
Director
Scott J. Stone* February 10, 1997
- -------------------------------------
SCOTT J. STONE
Donald J. Tomnitz* Director February 10, 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, Fort Worth, Texas
**24.1 --Powers of Attorney (See signature page of this
Registration Statement)
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Information" and "Experts" in Amendment No. 1 to the Registration
Statement and related Prospectus of D.R. Horton, Inc. for the registration of
5,750,000 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
February 10, 1997
