UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From To

Commission File Number: 1-14122

D.R. Horton, Inc.

(Exact name of registrant as specified in its charter)


			Delaware			75-2386963
			(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1341 Horton Circle

Arlington, Texas 76011

(Address of principal executive offices) (Zip code)

(817) 390-8200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $.01 per share

DHI

New York Stock Exchange

5.750% Senior Notes due 2023

DHI 23A

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of ~~July 20, 2021,~~April 22, 2022, there were ~~358,183,972~~352,030,251 shares of the registrant’s common stock, par value $.01 per share, outstanding.

D.R. HORTON, INC. AND SUBSIDIARIES

FORM 10-Q

INDEX


			Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020~~2021			3
Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~			4
Consolidated Statements of Total Equity for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~			5
Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~June~~ 3 0 ,March 31, 2022 and 2021 ~~and 2020~~			7
Notes to Consolidated Financial Statements			98
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3331
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			6263
ITEM 4. Controls and Procedures			6364
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings			6465
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			6465
ITEM 6. Exhibits			6566
SIGNATURES			6667

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		June 30, 2021		September 30, 2020			March 31, 2022		September 30, 2021
		(In millions) (Unaudited)					(In millions) (Unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	1,942.7	$	3,018.5	Cash and cash equivalents	$	1,663.9	$	3,210.4
Restricted cash	Restricted cash	26.4		21.6		Restricted cash	25.2		26.8
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	1,969.1		3,040.1		Total cash, cash equivalents and restricted cash	1,689.1		3,237.2
Inventories:	Inventories:					Inventories:
Construction in progress and finished homes	Construction in progress and finished homes	7,744.1		5,984.1		Construction in progress and finished homes	9,876.6		7,739.2
Residential land and lots — developed and under development	Residential land and lots — developed and under development	7,407.9		6,171.8		Residential land and lots — developed and under development	8,346.1		7,781.8
Land held for development	Land held for development	113.9		53.2		Land held for development	124.8		110.9
Land held for sale	Land held for sale	23.5		28.3		Land held for sale	21.6		25.4
Rental properties	Rental properties	722.3		0		Rental properties	1,477.4		821.8
Total inventory	Total inventory	16,011.7		12,237.4		Total inventory	19,846.5		16,479.1
Mortgage loans held for sale	Mortgage loans held for sale	1,644.1		1,529.0		Mortgage loans held for sale	2,242.8		2,027.3
Deferred income taxes, net of valuation allowance of $7.3 million and $7.5 million at June 30, 2021 and September 30, 2020, respectively		147.1		144.9
Deferred income taxes, net of valuation allowance of $4.0 million and $4.2 million at March 31, 2022 and September 30, 2021, respectively						Deferred income taxes, net of valuation allowance of $4.0 million and $4.2 million at March 31, 2022 and September 30, 2021, respectively	131.7		155.3
Property and equipment, net	Property and equipment, net	367.0		683.7		Property and equipment, net	434.0		392.9
Other assets	Other assets	1,491.0		1,113.7		Other assets	2,177.7		1,560.6
Goodwill	Goodwill	163.5		163.5		Goodwill	163.5		163.5
Total assets	Total assets	$	21,793.5	$	18,912.3	Total assets	$	26,685.3	$	24,015.9
LIABILITIES	LIABILITIES					LIABILITIES
Accounts payable	Accounts payable	$	1,250.9	$	900.5	Accounts payable	$	1,378.6	$	1,177.0
Accrued expenses and other liabilities	Accrued expenses and other liabilities	2,001.3		1,607.0		Accrued expenses and other liabilities	2,618.9		2,210.3
Notes payable	Notes payable	4,416.3		4,283.3		Notes payable	5,570.0		5,412.4
Total liabilities	Total liabilities	7,668.5		6,790.8		Total liabilities	9,567.5		8,799.7
Commitments and contingencies (Note L)		0		0
Commitments and contingencies (Note K)						Commitments and contingencies (Note K)	0		0
EQUITY	EQUITY					EQUITY
Preferred stock, $.10 par value, 30,000,000 shares authorized, 0 shares issued		0		0
Common stock, $.01 par value, 1,000,000,000 shares authorized, 396,959,567 shares issued and 358,124,810 shares outstanding at June 30, 2021 and 394,741,349 shares issued and 363,999,982 shares outstanding at September 30, 2020		4.0		3.9
Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued						Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued	—		—
Common stock, $.01 par value, 1,000,000,000 shares authorized, 398,939,929 shares issued and 351,955,435 shares outstanding at March 31, 2022 and 397,190,100 shares issued and 356,015,843 shares outstanding at September 30, 2021						Common stock, $.01 par value, 1,000,000,000 shares authorized, 398,939,929 shares issued and 351,955,435 shares outstanding at March 31, 2022 and 397,190,100 shares issued and 356,015,843 shares outstanding at September 30, 2021	4.0		4.0
Additional paid-in capital	Additional paid-in capital	3,246.0		3,240.9		Additional paid-in capital	3,288.7		3,274.8
Retained earnings	Retained earnings	12,376.9		9,757.8		Retained earnings	16,063.0		13,644.3
Treasury stock, 38,834,757 shares and 30,741,367 shares at June 30, 2021 and September 30, 2020, respectively, at cost		(1,824.0)		(1,162.6)
Treasury stock, 46,984,494 shares and 41,174,257 shares at March 31, 2022 and September 30, 2021, respectively, at cost						Treasury stock, 46,984,494 shares and 41,174,257 shares at March 31, 2022 and September 30, 2021, respectively, at cost	(2,580.8)		(2,036.6)
Stockholders’ equity	Stockholders’ equity	13,802.9		11,840.0		Stockholders’ equity	16,774.9		14,886.5
Noncontrolling interests	Noncontrolling interests	322.1		281.5		Noncontrolling interests	342.9		329.7
Total equity	Total equity	14,125.0		12,121.5		Total equity	17,117.8		15,216.2
Total liabilities and equity	Total liabilities and equity	$	21,793.5	$	18,912.3	Total liabilities and equity	$	26,685.3	$	24,015.9

See accompanying notes to consolidated financial statements.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended March 31,				Six Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions, except per share data) (Unaudited)									(In millions, except per share data) (Unaudited)
Revenues	Revenues	$	7,284.6	$	5,390.0	$	19,664.9	$	13,910.8	Revenues	$	7,999.0	$	6,446.9	$	15,052.4	$	12,380.3
Cost of sales	Cost of sales	5,212.6		4,084.7		14,196.0		10,619.7		Cost of sales	5,429.9		4,650.9		10,335.6		8,983.5
Selling, general and administrative expense	Selling, general and administrative expense	655.7		527.5		1,863.2		1,450.1		Selling, general and administrative expense	695.1		621.5		1,361.0		1,207.4
Gain on sale of assets	Gain on sale of assets	0		0		(14.0)		(59.5)		Gain on sale of assets	—		—		—		(14.0)
Loss on extinguishment of debt		18.1		0		18.1		0
Other (income) expense	Other (income) expense	(17.4)		(4.6)		(28.2)		(26.4)		Other (income) expense	(9.3)		(5.4)		(24.8)		(10.8)
Income before income taxes	Income before income taxes	1,415.6		782.4		3,629.8		1,926.9		Income before income taxes	1,883.3		1,179.9		3,380.6		2,214.2
Income tax expense	Income tax expense	299.1		149.5		784.1		377.6		Income tax expense	441.0		246.0		792.5		485.1
Net income	Net income	1,116.5		632.9		2,845.7		1,549.3		Net income	1,442.3		933.9		2,588.1		1,729.1
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1.0		2.2		8.9		4.6		Net income attributable to noncontrolling interests	6.0		4.4		10.2		7.8
Net income attributable to D.R. Horton, Inc.	Net income attributable to D.R. Horton, Inc.	$	1,115.5	$	630.7	$	2,836.8	$	1,544.7	Net income attributable to D.R. Horton, Inc.	$	1,436.3	$	929.5	$	2,577.9	$	1,721.3

Basic net income per common share attributable to D.R. Horton, Inc.	Basic net income per common share attributable to D.R. Horton, Inc.	$	3.10	$	1.73	$	7.83	$	4.22	Basic net income per common share attributable to D.R. Horton, Inc.	$	4.07	$	2.57	$	7.27	$	4.74
Weighted average number of common shares	Weighted average number of common shares	359.7		363.8		362.2		366.0		Weighted average number of common shares	353.1		362.3		354.6		363.4

Diluted net income per common share attributable to D.R. Horton, Inc.	Diluted net income per common share attributable to D.R. Horton, Inc.	$	3.06	$	1.72	$	7.73	$	4.17	Diluted net income per common share attributable to D.R. Horton, Inc.	$	4.03	$	2.53	$	7.20	$	4.67
Adjusted weighted average number of common shares	Adjusted weighted average number of common shares	364.0		367.7		367.1		370.4		Adjusted weighted average number of common shares	356.3		367.2		358.2		368.6

See accompanying notes to consolidated financial statements.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF TOTAL EQUITY

Common
Stock Additional
Paid-in
Capital Retained
Earnings Treasury
Stock Non-controlling
Interests Total
Equity
(In millions, except common stock share data)
(Unaudited)
Balances at September 30, 2020 (363,999,982 shares) $ 3.9 $ 3,240.9 $ 9,757.8 $ (1,162.6) $ 281.5 $ 12,121.5
Net income 0 0 791.8 0 3.4 795.2
Exercise of stock options (42,950 shares) 0 0.9 — — — 0.9
Stock issued under employee benefit plans (604,947 shares) 0.1 0 — — — 0.1
Cash paid for shares withheld for taxes 0 (26.3) 0 0 0 (26.3)
Stock-based compensation expense — 21.7 — — — 21.7
Cash dividends declared ($0.20 per share) — — (72.9) — — (72.9)
Repurchases of common stock (1,000,000 shares) — — — (69.8) — (69.8)
Distributions to noncontrolling interests — — — — (0.1) (0.1)
Change of ownership interest in Forestar — (0.3) — — 0.3 0
Balances at December 31, 2020 (363,647,879 shares) $ 4.0 $ 3,236.9 $ 10,476.7 $ (1,232.4) $ 285.1 $ 12,770.3
Net income 0 0 929.5 0 4.4 933.9
Exercise of stock options (391,047 shares) 0 1.4 — — — 1.4
Stock issued under employee benefit plans (916,209 shares) — 3.2 — — — 3.2
Cash paid for shares withheld for taxes 0 (56.6) 0 0 0 (56.6)
Stock-based compensation expense — 25.4 — — — 25.4
Cash dividends declared ($0.20 per share) — — (72.7) — — (72.7)
Repurchases of common stock (4,475,624 shares) — — — (350.4) — (350.4)
Change of ownership interest in Forestar and other — (1.9) — — 23.4 21.5
Balances at March 31, 2021 (360,479,511 shares) $ 4.0 $ 3,208.4 $ 11,333.5 $ (1,582.8) $ 312.9 $ 13,276.0
Net income 0 0 1,115.5 0 1.0 1,116.5
Exercise of stock options (152,119 shares) 0 1.4 — — — 1.4
Stock issued under employee benefit plans (110,946 shares) — 8.5 — — — 8.5
Cash paid for shares withheld for taxes and other 0 4.4 0 0 0 4.4
Stock-based compensation expense — 22.6 — — — 22.6
Cash dividends declared ($0.20 per share) — — (72.1) — — (72.1)
Repurchases of common stock (2,617,766 shares) — — — (241.2) — (241.2)
Change of ownership interest in Forestar — 0.7 — — 8.2 8.9
Balances at June 30, 2021 (358,124,810 shares) $ 4.0 $ 3,246.0 $ 12,376.9 $ (1,824.0) $ 322.1 $ 14,125.0


	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Non-controlling Interests		Total Equity
	(In millions, except common stock share data) (Unaudited)
Balances at September 30, 2021 (356,015,843 shares)	$	4.0	$	3,274.8	$	13,644.3	$	(2,036.6)	$	329.7	$	15,216.2
Net income	—		—		1,141.6		—		4.2		1,145.8
Exercise of stock options (244,182 shares)	—		5.8		—		—		—		5.8
Stock issued under employee benefit plans (727,813 shares)	—		11.4		—		—		—		11.4
Cash paid for shares withheld for taxes	—		(33.0)		—		—		—		(33.0)
Stock-based compensation expense	—		23.7		—		—		—		23.7
Cash dividends declared ($0.225 per share)	—		—		(80.1)		—		—		(80.1)
Repurchases of common stock (2,710,237 shares)	—		—		—		(278.2)		—		(278.2)
Change of ownership interest in Forestar	—		—		—		—		1.8		1.8
Balances at December 31, 2021 (354,277,601 shares)	$	4.0	$	3,282.7	$	14,705.8	$	(2,314.8)	$	335.7	$	16,013.4
Net income	—		—		1,436.3		—		6.0		1,442.3
Exercise of stock options (4,533 shares)	—		0.1		—		—		—		0.1
Stock issued under employee benefit plans (773,301 shares)	—		4.9		—		—		—		4.9
Cash paid for shares withheld for taxes	—		(28.7)		—		—		—		(28.7)
Stock-based compensation expense	—		30.9		—		—		—		30.9
Cash dividends declared ($0.225 per share)	—		—		(79.1)		—		—		(79.1)
Repurchases of common stock (3,100,000 shares)	—		—		—		(266.0)		—		(266.0)
Change of ownership interest in Forestar	—		(1.2)		—		—		1.2		—
Balances at March 31, 2022 (351,955,435 shares)	$	4.0	$	3,288.7	$	16,063.0	$	(2,580.8)	$	342.9	$	17,117.8

See accompanying notes to consolidated financial statements.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (Continued)

Common
Stock Additional
Paid-in
Capital Retained
Earnings Treasury
Stock Non-controlling
Interests Total
Equity
(In millions, except common stock share data)
(Unaudited)
Balances at September 30, 2019 (368,431,454 shares) $ 3.9 $ 3,179.1 $ 7,640.1 $ (802.2) $ 274.2 $ 10,295.1
Net income 0 0 431.3 0 1.2 432.5
Exercise of stock options (258,800 shares) 0 4.1 — — — 4.1
Stock issued under employee benefit plans (582,936 shares) — 0 — — — —
Cash paid for shares withheld for taxes 0 (17.3) 0 0 0 (17.3)
Stock-based compensation expense — 16.6 — — — 16.6
Cash dividends declared ($0.175 per share) — — (64.6) — — (64.6)
Repurchases of common stock (3,000,000 shares) — — — (163.1) — (163.1)
Distributions to noncontrolling interests — — — — (0.4) (0.4)
Change of ownership interest in Forestar — (0.5) — — 0.5 0
Balances at December 31, 2019 (366,273,190 shares) $ 3.9 $ 3,182.0 $ 8,006.8 $ (965.3) $ 275.5 $ 10,502.9
Net income 0 0 482.7 0 1.3 484.0
Exercise of stock options (310,032 shares) 0 6.2 — — — 6.2
Stock issued under employee benefit plans (954,588 shares) — 2.6 — — — 2.6
Cash paid for shares withheld for taxes 0 (20.8) 0 0 0 (20.8)
Stock-based compensation expense — 21.3 — — — 21.3
Cash dividends declared ($0.175 per share) — — (64.1) — — (64.1)
Repurchases of common stock (4,000,000 shares) — — — (197.3) — (197.3)
Balances at March 31, 2020 (363,537,810 shares) $ 3.9 $ 3,191.3 $ 8,425.4 $ (1,162.6) $ 276.8 $ 10,734.8
Net income 0 0 630.7 0 2.2 632.9
Exercise of stock options (93,491 shares) 0 2.1 — — — 2.1
Stock issued under employee benefit plans (1,907 shares) — 0 — — — —
Cash paid for shares withheld for taxes 0 (0.1) 0 0 0 (0.1)
Stock-based compensation expense — 21.3 — — — 21.3
Cash dividends declared ($0.175 per share) — — (63.6) — — (63.6)
Distributions to noncontrolling interests — — — — (0.3) (0.3)
Changes of ownership interest in Forestar — (0.4) — — 0.4 0
Balances at June 30, 2020 (363,633,208 shares) $ 3.9 $ 3,214.2 $ 8,992.5 $ (1,162.6) $ 279.1 $ 11,327.1


	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Non-controlling Interests		Total Equity
	(In millions, except common stock share data) (Unaudited)
Balances at September 30, 2020 (363,999,982 shares)	$	3.9	$	3,240.9	$	9,757.8	$	(1,162.6)	$	281.5	$	12,121.5
Net income	—		—		791.8		—		3.4		795.2
Exercise of stock options (42,950 shares)	—		0.9		—		—		—		0.9
Stock issued under employee benefit plans (604,947 shares)	0.1		—		—		—		—		0.1
Cash paid for shares withheld for taxes	—		(26.3)		—		—		—		(26.3)
Stock-based compensation expense	—		21.7		—		—		—		21.7
Cash dividends declared ($0.20 per share)	—		—		(72.9)		—		—		(72.9)
Repurchases of common stock (1,000,000 shares)	—		—		—		(69.8)		—		(69.8)
Distributions to noncontrolling interests	—		—		—		—		(0.1)		(0.1)
Change of ownership interest in Forestar	—		(0.3)		—		—		0.3		—
Balances at December 31, 2020 (363,647,879 shares)	$	4.0	$	3,236.9	$	10,476.7	$	(1,232.4)	$	285.1	$	12,770.3
Net income	—		—		929.5		—		4.4		933.9
Exercise of stock options (391,047 shares)	—		1.4		—		—		—		1.4
Stock issued under employee benefit plans (916,209 shares)	—		3.2		—		—		—		3.2
Cash paid for shares withheld for taxes	—		(56.6)		—		—		—		(56.6)
Stock-based compensation expense	—		25.4		—		—		—		25.4
Cash dividends declared ($0.20 per share)	—		—		(72.7)		—		—		(72.7)
Repurchases of common stock (4,475,624) shares)	—		—		—		(350.4)		—		(350.4)
Change of ownership in Forestar and other	—		(1.9)		—		—		23.4		21.5
Balances at March 31, 2021 (360,479,511 shares)	$	4.0	$	3,208.4	$	11,333.5	$	(1,582.8)	$	312.9	$	13,276.0

See accompanying notes to consolidated financial statements.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended June 30,
2021 2020
(In millions)
(Unaudited)
OPERATING ACTIVITIES
Net income $ 2,845.7 $ 1,549.3
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 56.7 57.4
Amortization of discounts and fees 6.9 7.8
Stock-based compensation expense 69.7 59.2
Equity in earnings of unconsolidated entities (1.0) (0.6)
Deferred income taxes (2.1) 1.0
Inventory and land option charges 17.6 17.8
Gain on sale of assets (14.0) (59.5)
Loss on extinguishment of debt 18.1 0
Changes in operating assets and liabilities:
Increase in construction in progress and finished homes (1,739.7) (602.3)
Increase in residential land and lots –
developed, under development, held for development and held for sale
(1,349.8) (361.9)
Increase in rental properties (196.0) 0
Increase in other assets (367.2) (62.2)
Net increase in mortgage loans held for sale (115.1) (430.7)
Increase in accounts payable, accrued expenses and other liabilities 735.7 413.6
Net cash (used in) provided by operating activities (34.5) 588.9
INVESTING ACTIVITIES
Expenditures for property and equipment (46.0) (66.8)
Proceeds from sale of assets 37.6 129.8
Expenditures related to rental properties (173.9) (153.6)
Return of investment in unconsolidated entities 2.2 2.4
Net principal increase of other mortgage loans and real estate owned (2.4) (3.7)
Payments related to business acquisitions (24.4) (8.5)
Net cash used in investing activities (206.9) (100.4)
FINANCING ACTIVITIES
Proceeds from notes payable 914.1 2,346.3
Repayment of notes payable (792.8) (1,679.5)
(Payments) advances on mortgage repurchase facility, net (39.0) 284.0
Proceeds from stock associated with certain employee benefit plans 15.5 15.0
Cash paid for shares withheld for taxes (78.5) (38.2)
Cash dividends paid (217.7) (192.3)
Repurchases of common stock (661.4) (360.4)
Distributions to noncontrolling interests, net (0.1) (0.7)
Net proceeds from issuance of Forestar common stock 32.6 0
Other financing activities (2.3) (4.0)
Net cash (used in) provided by financing activities (829.6) 370.2
Net (decrease) increase in cash, cash equivalents and restricted cash (1,071.0) 858.7
Cash, cash equivalents and restricted cash at beginning of period 3,040.1 1,514.0
Cash, cash equivalents and restricted cash at end of period $ 1,969.1 $ 2,372.7

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D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Nine Months Ended June 30,
2021 2020
(In millions)
(Unaudited)
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Notes payable issued for inventory $ 12.5 $ 2.8
Stock issued under employee incentive plans $ 124.7 $ 84.4
Accrual for holdback payments related to acquisitions $ 1.2 $ 1.9


	Six Months Ended March 31,
	2022		2021
	(In millions) (Unaudited)
OPERATING ACTIVITIES
Net income	$	2,588.1	$	1,729.1
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	39.3		44.1
Stock-based compensation expense	54.6		47.1
Deferred income taxes	23.6		2.6
Inventory and land option charges	20.0		12.1
Gain on sale of assets	—		(14.0)

Changes in operating assets and liabilities:
Increase in construction in progress and finished homes	(2,137.4)		(1,295.8)
Increase in residential land and lots – developed, under development, held for development and held for sale	(528.4)		(975.2)
Increase in rental properties	(655.9)		—
Increase in other assets	(616.7)		(296.2)
Increase in mortgage loans held for sale	(215.5)		(226.8)
Increase in accounts payable, accrued expenses and other liabilities	593.7		818.1
Net cash used in operating activities	(834.6)		(154.9)
INVESTING ACTIVITIES
Expenditures for property and equipment	(72.5)		(30.5)
Proceeds from sale of assets	—		31.8
Expenditures related to rental properties	—		(173.9)
Payments related to business acquisitions	—		(24.2)
Other investing activities	3.8		0.7
Net cash used in investing activities	(68.7)		(196.1)
FINANCING ACTIVITIES
Proceeds from notes payable	750.0		494.1
Repayment of notes payable	(750.8)		(400.1)
Advances on mortgage repurchase facility, net	84.3		70.9
Proceeds from stock associated with certain employee benefit plans	22.2		5.6
Cash paid for shares withheld for taxes	(61.7)		(82.9)
Cash dividends paid	(159.2)		(145.6)
Repurchases of common stock	(569.8)		(420.2)
Net proceeds from issuance of Forestar common stock	1.7		23.3
Net other financing activities	38.5		(2.3)
Net cash used in financing activities	(644.8)		(457.2)
Net decrease in cash, cash equivalents and restricted cash	(1,548.1)		(808.2)
Cash, cash equivalents and restricted cash at beginning of period	3,237.2		3,040.1
Cash, cash equivalents and restricted cash at end of period	$	1,689.1	$	2,231.9

SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Notes payable issued for inventory	$	64.3	$	12.5
Stock issued under employee incentive plans	$	124.4	$	114.5

See accompanying notes to consolidated financial statements.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~June 30, 2021~~March 31, 2022

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited, consolidated financial statements include the accounts of D.R. Horton, Inc. and all of its ~~100% owned,~~wholly-owned, majority-owned and controlled subsidiaries, which are collectively referred to as the Company, unless the context otherwise requires. Noncontrolling interests represent the proportionate equity interests in consolidated entities that are not 100% owned by the Company. ~~The~~As of March 31, 2022, the Company owns a ~~64%~~63% controlling interest in Forestar Group Inc. (Forestar) and therefore is required to consolidate 100% of Forestar within its consolidated financial statements, and the ~~36%~~37% interest the Company does not own is accounted for as noncontrolling interests. All intercompany accounts, transactions and balances have been eliminated in consolidation.

The financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments considered necessary to fairly state the results for the interim periods shown, including normal recurring accruals and other items. These financial statements, including the consolidated balance sheet as of September 30, ~~2020,~~2021, which was derived from audited financial statements, do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021.

Reclassifications

During the ~~third~~fourth quarter of fiscal 2021, the Company changed ~~the presentation~~its internal organization and reporting of its ~~single~~operating segments and reportable segments to combine its single-family rental operations and its multi-family rental operations ininto a new reporting segment and realigned the aggregation of its ~~consolidated financial statements. Bulk sales of rental properties are now presented as revenues and cost of sales, rental assets previously recorded as property and equipment have been reclassified~~homebuilding operating segments into 6 new reportable segments to ~~inventory, and related cash flows for the single and multi-family rental operations are now included in~~better allocate its homebuilding operating activities. Prior to the third quarter of fiscal 2021, bulk sales of rental properties were presented on a net basis as a gain on sale of assets, and the majority of the cash flow activities were included in investing activities. This change insegments across geographic reporting regions. The prior year presentation ~~was implemented as a result~~ of the Company’s ~~change~~segment information in ~~strategic focus during the third quarter~~Note B and in Management’s Discussion and Analysis of ~~fiscal 2021, which included increased levels~~Financial Condition and Results of ~~activity in~~Operations has been conformed to the current quarter and plans for future investment in the Company’s single and multi-family rental operations. This presentation was effected on a prospective basis beginning in the third quarter of fiscal 2021.presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Seasonality

Historically, the homebuilding industry has experienced seasonal fluctuations; therefore, the operating results for the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, ~~2021~~2022 or subsequent periods.

~~Business Acquisition~~

In October 2020, the Company acquired the homebuilding operations of Braselton Homes in Corpus Christi, Texas for approximately $23.0 million in cash. The assets acquired included approximately 90 homes in inventory, 95 lots and control of approximately 840 additional lots through purchase contracts. The Company also acquired a sales order backlog of approximately 125 homes.

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~~D.R. HORTON, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)~~

~~June 30, 2021~~

Pending Accounting Standards

In ~~December 2019,~~March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2019-12 related to simplifying the accounting for income taxes. The guidance is effective for the Company beginning October 1, 2021, although early adoption is permitted. The Company is currently evaluating the impact of this guidance, and it is not expected to have a material impact on its consolidated financial position, results of operations or cash flows.

~~In March 2020, the FASB~~ issued ASU 2020-04, “Reference Rate Reform,” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of the original guidance. The Company will adopt these standards when LIBOR is discontinued and does not expect them to have a material impact on its consolidated financial statements or related disclosures.

108

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

March 31, 2022

In October 2021, the FASB issued ASU 2021-08, which requires application of ASC 606, “Revenue from Contracts with Customers,” to recognize and measure contract assets and liabilities from contracts with customers acquired in a business combination. ASU 2021-08 creates an exception to the general recognition and measurement principle in ASC 805 and will result in recognition of contract assets and contract liabilities consistent with those recorded by the acquiree immediately before the acquisition date. The guidance is effective for the Company beginning October 1, 2023, with early adoption permitted. The Company is currently evaluating the impact of this guidance, and it is not expected to have a material impact on its consolidated financial position, results of operations or cash flows.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE B – SEGMENT INFORMATION

The Company is a national homebuilder that is primarily engaged in the acquisition and development of land and the construction and sale of residential homes, with operations in 96104 markets across 3032 states. The Company’s operating segments are its 5577 homebuilding divisions, its majority-owned Forestar residential lot development operations, its financial services operations, its rental operations and its other business activities. The Company’s reporting segments are its homebuilding reporting segments, its Forestar lot development segment, ~~and~~ its financial services segment and its rental operations segment. ~~The~~

During the fourth quarter of fiscal 2021, the Company changed its internal organization and reporting of its operating segments and reportable segments to combine its single-family rental operations and its multi-family rental operations into a new reporting segment to reflect the method by which the chief operating decision makers manage the business, evaluate internal results and allocate financial resources. Additionally, during the fourth quarter of fiscal 2021, the Company realigned the aggregation of its homebuilding operating segments ~~are aggregated~~ into 6 new reportable segments to better allocate its homebuilding operating segments across geographic reporting regions. Segment information for the ~~following~~three and six months ended March 31, 2021 has been reclassified to conform to the current presentation.

Homebuilding

Based on the aggregation of the homebuilding operating segments, the Company’s 6 reporting ~~segments: East, Midwest, Southeast, South Central, Southwest~~segments and ~~West. These reporting segments have~~the states in which it has homebuilding operations ~~located in the following states:~~are as follows:


			~~East:~~Northwest:						~~Delaware, Georgia (Savannah only), Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina~~Colorado, Oregon, Utah and ~~Virginia~~Washington
			~~Midwest:~~Southwest:						~~Colorado, Illinois, Indiana, Iowa, Kentucky, Minnesota~~Arizona, California, Hawaii, Nevada and ~~Ohio~~New Mexico
			South Central:						Oklahoma and Texas
			Southeast:						Alabama, Florida, Louisiana and Mississippi
			East:						Georgia, ~~Mississippi~~North Carolina, South Carolina and Tennessee
			~~South Central:~~North:						~~Louisiana, Oklahoma~~Delaware, Illinois, Indiana, Iowa, Kentucky, Maryland, Minnesota, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia and ~~Texas~~
			~~Southwest:~~						~~Arizona and New Mexico~~
			~~West:~~						~~California, Hawaii, Nevada, Oregon, Utah and Washington~~West Virginia

The Company’s homebuilding divisions design, build and sell single-family detached homes on lots they develop and on fully developed lots purchased ready for home construction. To a lesser extent, the homebuilding divisions also build and sell attached homes, such as townhomes, duplexes and triplexes. Most of the revenue generated by the Company’s homebuilding operations is from the sale of completed homes and to a lesser extent from the sale of land and lots.

During fiscal 2020, the Company began constructing and leasing homes as income-producing single-family rental communities. After a rental community is constructed and achieves a stabilized level of leased occupancy, the Company generally markets the community for a bulk sale of homes. These operations are reported in the Company’s homebuilding segment. During the third quarter of fiscal 2021, the Company sold a single-family rental community for $23.1 million in revenues and $11.4 million of gross profit. In the first quarter of fiscal 2021, the Company sold a single-family rental community for $31.8 million and recorded a gain on sale of $14.0 million. At June 30, 2021, the Company’s homebuilding inventory included $303.1 million of assets related to 44 single-family rental communities compared to $87.2 million of assets included in property and equipment related to 10 single-family rental communities at September 30, 2020. At June 30, 2021, the Company’s single-family rental properties included 2,340 homes and finished lots, of which 680 homes were completed, compared to 740 homes and finished lots, of which 440 homes were completed at September 30, 2020.Forestar

The Forestar segment is a residential lot development company with operations in 5553 markets across 2223 states. Forestar has made significant investments in land acquisition and development to expand its business across the United States. The homebuilding divisions acquire finished lots from Forestar in accordance with the master supply agreement between the two companies. Forestar’s segment results are presented on their historical cost basis, consistent with the manner in which management evaluates segment performance.

Financial Services

The Company’s financial services segment provides mortgage financing and title agency services to homebuyers in many of the Company’s homebuilding markets. The segment generates the substantial majority of its revenues from originating and selling mortgages and collecting fees for title insurance agency and closing services. The Company sells substantially all of the mortgages it originates and the ~~majority of the~~ related servicing rights to third-party purchasers.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

March 31, 2022

Rental

The Company’s rental segment consists of multi-family and single-family rental operations. The multi-family rental operations develop, construct, lease and sell residential rental properties. The single-family rental operations primarily construct and lease single-family homes and then market the community for a bulk sale of rental homes.

Other

In addition to its homebuilding, Forestar, ~~and~~ financial services and rental operations, the Company engages in other business activities through its subsidiaries. The Company conducts insurance-related operations, ~~constructs, owns and sells income-producing multi-family rental properties,~~ owns non-residential real estate including ranch land and improvements and owns and operates ~~oil and gas related~~energy-related assets. The results of these operations are immaterial for separate reporting and therefore are grouped together and presented ~~as other.~~in the Eliminations and Other column in the tables that follow.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

The Company’s multi-family rental operations develop, construct, lease, own and sell multi-family rental properties, which are typically marketed for sale after achieving a stabilized level of leased occupancy. At June 30, 2021, the Company had 11 multi-family rental projects under active construction and 4 projects that were substantially complete and in the lease-up phase. These 15 projects represent 4,540 multi-family units, including 3,230 units under active construction and 1,310 completed units. At June 30, 2021, the consolidated balance sheet included $458.3 million of assets related to multi-family rental operations, which included $436.3 million of rental property inventory. At September 30, 2020, the consolidated balance sheet included $246.2 million of assets related to multi-family rental operations, which included $232.1 million of property and equipment.

The accounting policies of the reporting segments are described throughout Note A included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. Financial information relating to the Company’s reporting segments is as follows:


		June 30, 2021													March 31, 2022
		Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated			Homebuilding		Forestar (1)		Financial Services		Rental		Eliminations and Other (2)		Consolidated
		(In millions)													(In millions)
Assets	Assets													Assets
Cash and cash equivalents	Cash and cash equivalents	$	1,673.8	$	116.0	$	101.1	$	51.8	$	0	$	1,942.7	Cash and cash equivalents	$	1,167.9	$	233.7	$	102.1	$	141.1	$	19.1	$	1,663.9
Restricted cash	Restricted cash	11.5		0		14.6		0.3		0		26.4		Restricted cash	14.9		—		9.5		0.8		—		25.2
Inventories:	Inventories:													Inventories:
Construction in progress and finished homes	Construction in progress and finished homes	7,837.8		0		0		0		(93.7)		7,744.1		Construction in progress and finished homes	10,047.5		—		—		—		(170.9)		9,876.6
Residential land and lots — developed and under development	Residential land and lots — developed and under development	5,675.4		1,777.9		0		0		(45.4)		7,407.9		Residential land and lots — developed and under development	6,550.8		1,861.7		—		—		(66.4)		8,346.1
Land held for development	Land held for development	30.4		83.5		0		0		0		113.9		Land held for development	26.0		98.8		—		—		—		124.8
Land held for sale	Land held for sale	23.5		0		0		0		0		23.5		Land held for sale	21.6		—		—		—		—		21.6
Rental properties	Rental properties	303.1		0		0		436.3		(17.1)		722.3		Rental properties	—		—		—		1,500.1		(22.7)		1,477.4
		13,870.2		1,861.4		0		436.3		(156.2)		16,011.7			16,645.9		1,960.5		—		1,500.1		(260.0)		19,846.5
Mortgage loans held for sale	Mortgage loans held for sale	0		0		1,644.1		0		0		1,644.1		Mortgage loans held for sale	—		—		2,242.8		—		—		2,242.8
Deferred income taxes, net	Deferred income taxes, net	152.5		0		0		0		(5.4)		147.1		Deferred income taxes, net	134.9		—		—		—		(3.2)		131.7
Property and equipment, net	Property and equipment, net	280.3		2.2		3.4		81.1		0		367.0		Property and equipment, net	332.9		5.0		3.9		1.0		91.2		434.0
Other assets	Other assets	1,381.5		35.4		122.6		62.7		(111.2)		1,491.0		Other assets	1,920.1		32.4		310.1		14.3		(99.2)		2,177.7
Goodwill	Goodwill	134.3		0		0		0		29.2		163.5		Goodwill	134.3		—		—		—		29.2		163.5
		$	17,504.1	$	2,015.0	$	1,885.8	$	632.2	$	(243.6)	$	21,793.5		$	20,350.9	$	2,231.6	$	2,668.4	$	1,657.3	$	(222.9)	$	26,685.3
Liabilities	Liabilities													Liabilities
Accounts payable	Accounts payable	$	1,171.1	$	45.6	$	0	$	34.2	$	0	$	1,250.9	Accounts payable	$	1,220.8	$	55.6	$	—	$	184.6	$	(82.4)	$	1,378.6
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,773.5		294.9		90.7		14.2		(172.0)		2,001.3		Accrued expenses and other liabilities	2,085.5		363.3		319.5		9.6		(159.0)		2,618.9
Notes payable	Notes payable	2,620.0		704.1		1,093.6		0		(1.4)		4,416.3		Notes payable	3,286.3		705.3		1,578.9		—		(0.5)		5,570.0
		$	5,564.6	$	1,044.6	$	1,184.3	$	48.4	$	(173.4)	$	7,668.5		$	6,592.6	$	1,124.2	$	1,898.4	$	194.2	$	(241.9)	$	9,567.5

______________

(1)Amounts are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

(2)Amounts ~~primarily represent~~include the balances of the Company’s other businesses, the elimination of intercompany transactions and, to a lesser extent, purchase accounting adjustments related to the Forestar acquisition.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022


		September 30, 2020													September 30, 2021
		Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated			Homebuilding		Forestar (1)		Financial Services		Rental		Eliminations and Other (2)		Consolidated
		(In millions)													(In millions)
Assets	Assets													Assets
Cash and cash equivalents	Cash and cash equivalents	$	2,551.1	$	394.3	$	55.6	$	17.5	$	0	$	3,018.5	Cash and cash equivalents	$	2,950.1	$	153.6	$	79.0	$	16.8	$	10.9	$	3,210.4
Restricted cash	Restricted cash	9.5		0		11.9		0.2		0		21.6		Restricted cash	8.4		—		18.0		0.4		—		26.8
Inventories:	Inventories:													Inventories:
Construction in progress and finished homes	Construction in progress and finished homes	6,037.5		0		0		0		(53.4)		5,984.1		Construction in progress and finished homes	7,848.0		—		—		—		(108.8)		7,739.2
Residential land and lots — developed and under development	Residential land and lots — developed and under development	4,901.4		1,304.3		0		0		(33.9)		6,171.8		Residential land and lots — developed and under development	6,004.0		1,824.7		—		—		(46.9)		7,781.8
Land held for development	Land held for development	47.8		5.4		0		0		0		53.2		Land held for development	30.4		80.5		—		—		—		110.9
Land held for sale	Land held for sale	28.3		0		0		0		0		28.3		Land held for sale	25.4		—		—		—		—		25.4
Rental properties														Rental properties	—		—		—		840.9		(19.1)		821.8
		11,015.0		1,309.7		0		0		(87.3)		12,237.4			13,907.8		1,905.2		—		840.9		(174.8)		16,479.1
Mortgage loans held for sale	Mortgage loans held for sale	0		0		1,529.0		0		0		1,529.0		Mortgage loans held for sale	—		—		2,027.3		—		—		2,027.3
Deferred income taxes, net	Deferred income taxes, net	142.3		0		0		0		2.6		144.9		Deferred income taxes, net	159.2		—		—		—		(3.9)		155.3
Property and equipment, net	Property and equipment, net	372.8		1.1		3.9		308.9		(3.0)		683.7		Property and equipment, net	303.3		2.9		3.5		0.6		82.6		392.9
Other assets	Other assets	996.4		34.8		125.8		52.8		(96.1)		1,113.7		Other assets	1,468.7		40.0		107.6		6.3		(62.0)		1,560.6
Goodwill	Goodwill	134.3		0		0		0		29.2		163.5		Goodwill	134.3		—		—		—		29.2		163.5
		$	15,221.4	$	1,739.9	$	1,726.2	$	379.4	$	(154.6)	$	18,912.3		$	18,931.8	$	2,101.7	$	2,235.4	$	865.0	$	(118.0)	$	24,015.9
Liabilities	Liabilities													Liabilities
Accounts payable	Accounts payable	$	859.3	$	29.2	$	0	$	12.0	$	0	$	900.5	Accounts payable	$	1,073.7	$	47.4	$	—	$	55.9	$	—	$	1,177.0
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,438.3		197.8		86.8		12.2		(128.1)		1,607.0		Accrued expenses and other liabilities	1,941.3		333.9		88.6		15.0		(168.5)		2,210.3
Notes payable	Notes payable	2,514.4		641.1		1,132.6		0		(4.8)		4,283.3		Notes payable	3,214.0		704.5		1,494.6		—		(0.7)		5,412.4
		$	4,812.0	$	868.1	$	1,219.4	$	24.2	$	(132.9)	$	6,790.8		$	6,229.0	$	1,085.8	$	1,583.2	$	70.9	$	(169.2)	$	8,799.7

______________

(1)Amounts are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022


		Three Months Ended June 30, 2021													Three Months Ended March 31, 2022
		Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated			Homebuilding		Forestar (1)		Financial Services		Rental		Eliminations and Other (2)		Consolidated
		(In millions)													(In millions)
Revenues	Revenues													Revenues
Home sales	Home sales	$	7,040.1	$	0	$	0	$	0	$	0	$	7,040.1	Home sales	$	7,499.2	$	—	$	—	$	—	$	—	$	7,499.2
Land/lot sales and other (4)		30.2		312.9		0		15.9		(303.2)		55.8
Land/lot sales and other														Land/lot sales and other	7.6		421.6		—		—		(374.4)		54.8
Rental property sales														Rental property sales	—		—		—		222.9		—		222.9
Financial services	Financial services	0		0		188.7		0		0		188.7		Financial services	—		—		222.1		—		—		222.1
		7,070.3		312.9		188.7		15.9		(303.2)		7,284.6			7,506.8		421.6		222.1		222.9		(374.4)		7,999.0
Cost of sales	Cost of sales													Cost of sales
Home sales (3)	Home sales (3)	5,219.2		0		0		0		(40.0)		5,179.2		Home sales (3)	5,335.2		—		—		—		(43.7)		5,291.5
Land/lot sales and other (4)		14.4		256.4		0		0		(243.0)		27.8
Land/lot sales and other														Land/lot sales and other	3.3		328.7		—		—		(307.0)		25.0
Rental property sales														Rental property sales	—		—		—		102.5		(4.3)		98.2
Inventory and land option charges	Inventory and land option charges	4.9		0.7		0		0		0		5.6		Inventory and land option charges	9.8		5.4		—		—		—		15.2
		5,238.5		257.1		0		0		(283.0)		5,212.6			5,348.3		334.1		—		102.5		(355.0)		5,429.9
Selling, general and administrative expense	Selling, general and administrative expense	502.0		16.9		127.0		9.6		0.2		655.7		Selling, general and administrative expense	507.3		24.3		138.0		22.8		2.7		695.1
Loss on extinguishment of debt		0		18.1		0		0		0		18.1
Other (income) expense	Other (income) expense	(7.1)		(0.3)		(8.6)		(1.4)		0		(17.4)		Other (income) expense	(1.6)		—		(8.7)		(4.9)		5.9		(9.3)
Income before income taxes	Income before income taxes	$	1,336.9	$	21.1	$	70.3	$	7.7	$	(20.4)	$	1,415.6	Income before income taxes	$	1,652.8	$	63.2	$	92.8	$	102.5	$	(28.0)	$	1,883.3

______________

(1)Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

(2)Amounts ~~primarily represent~~include the results of the Company’s other businesses and the elimination of intercompany ~~transactions and, to a lesser extent, purchase accounting adjustments related to the Forestar acquisition.~~transactions.

(3)Amount in the Eliminations and Other ~~Adjustments~~ column represents the recognition of profit on lots sold from Forestar to the homebuilding segment. Intercompany profit is eliminated in the consolidated financial statements when Forestar sells lots to the homebuilding segment and is recognized in the consolidated financial statements when the homebuilding segment closes homes on the lots to homebuyers.

~~(4)~~

~~Homebuilding segment other revenues and other cost of sales include the sale of a single-family rental community for $23.1 million in revenues and $11.4 million of gross profit.~~

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022


		Nine Months Ended June 30, 2021													Six Months Ended March 31, 2022
		Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated			Homebuilding		Forestar (1)		Financial Services		Rental		Eliminations and Other (2)		Consolidated
		(In millions)													(In millions)
Revenues	Revenues													Revenues
Home sales	Home sales	$	18,909.2	$	0	$	0	$	0	$	0	$	18,909.2	Home sales	$	14,155.6	$	—	$	—	$	—	$	—	$	14,155.6
Land/lot sales and other (4)		67.4		907.1		0		45.9		(865.8)		154.6
Land/lot sales and other														Land/lot sales and other	30.5		829.2		—		—		(748.7)		111.0
Rental property sales														Rental property sales	—		—		—		379.4		—		379.4
Financial services	Financial services	0		0		601.1		0		0		601.1		Financial services	—		—		406.4		—		—		406.4
		18,976.6		907.1		601.1		45.9		(865.8)		19,664.9			14,186.1		829.2		406.4		379.4		(748.7)		15,052.4
Cost of sales	Cost of sales													Cost of sales
Home sales (3)	Home sales (3)	14,196.3		0		0		0		(103.3)		14,093.0		Home sales (3)	10,169.1		—		—		—		(81.3)		10,087.8
Land/lot sales and other (4)		40.9		752.2		0		0		(707.7)		85.4
Land/lot sales and other														Land/lot sales and other	20.4		662.3		—		—		(624.8)		57.9
Rental property sales														Rental property sales	—		—		—		175.0		(5.1)		169.9
Inventory and land option charges	Inventory and land option charges	16.0		1.6		0		0		0		17.6		Inventory and land option charges	13.7		6.0		—		0.3		—		20.0
		14,253.2		753.8		0		0		(811.0)		14,196.0			10,203.2		668.3		—		175.3		(711.2)		10,335.6
Selling, general and administrative expense	Selling, general and administrative expense	1,422.7		48.7		360.4		30.9		0.5		1,863.2		Selling, general and administrative expense	1,004.9		45.8		263.2		41.4		5.7		1,361.0
Gain on sale of assets (5)		(13.1)		0		0		(0.9)		0		(14.0)
Loss on extinguishment of debt		0		18.1		0		0		0		18.1
Other (income) expense	Other (income) expense	(10.4)		(1.4)		(21.4)		5.8		(0.8)		(28.2)		Other (income) expense	(7.9)		(1.6)		(16.7)		(9.8)		11.2		(24.8)
Income before income taxes	Income before income taxes	$	3,324.2	$	87.9	$	262.1	$	10.1	$	(54.5)	$	3,629.8	Income before income taxes	$	2,985.9	$	116.7	$	159.9	$	172.5	$	(54.4)	$	3,380.6
Summary Cash Flow Information:

Summary Cash Flow Information														Summary Cash Flow Information
Depreciation and amortization	Depreciation and amortization	$	44.2	$	0.3	$	1.3	$	10.5	$	0.4	$	56.7	Depreciation and amortization	$	30.9	$	1.3	$	0.9	$	0.2	$	6.0	$	39.3
Cash provided by (used in) operating activities	Cash provided by (used in) operating activities	$	276.1	$	(340.6)	$	96.2	$	(58.2)	$	(8.0)	$	(34.5)	Cash provided by (used in) operating activities	$	(416.2)	$	76.6	$	(63.0)	$	(409.1)	$	(22.9)	$	(834.6)

______________

(1)Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

~~(4)Homebuilding segment other revenues and other cost of sales include the third quarter sale of a single-family rental community for $23.1 million in revenues and $11.4 million of gross profit.~~

~~(5)~~In December 2020, the Company sold a single-family rental community for $31.8 million, which resulted in a gain on sale of $13.1 million in the homebuilding segment and $0.9 million in the other businesses.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022


		Three Months Ended June 30, 2020													Three Months Ended March 31, 2021
		Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated			Homebuilding		Forestar (1)		Financial Services		Rental		Eliminations and Other (2)		Consolidated
		(In millions)													(In millions)
Revenues	Revenues													Revenues
Home sales	Home sales	$	5,207.6	$	0	$	0	$	0	$	0	$	5,207.6	Home sales	$	6,170.4	$	—	$	—	$	—	$	—	$	6,170.4
Land/lot sales and other	Land/lot sales and other	14.5		177.9		0		8.9		(175.5)		25.8		Land/lot sales and other	15.4		287.1		—		—		(251.1)		51.4
Financial services	Financial services	0		0		156.6		0		0		156.6		Financial services	—		—		225.1		—		—		225.1
		5,222.1		177.9		156.6		8.9		(175.5)		5,390.0			6,185.8		287.1		225.1		—		(251.1)		6,446.9
Cost of sales	Cost of sales													Cost of sales
Home sales (3)	Home sales (3)	4,082.3		0		0		0		(16.8)		4,065.5		Home sales (3)	4,652.0		—		—		—		(35.6)		4,616.4
Land/lot sales and other	Land/lot sales and other	10.2		157.0		0		0		(153.0)		14.2		Land/lot sales and other	12.7		233.2		—		—		(215.2)		30.7
Inventory and land option charges	Inventory and land option charges	4.9		0.1		0		0		0		5.0		Inventory and land option charges	3.2		0.6		—		—		—		3.8
		4,097.4		157.1		0		0		(169.8)		4,084.7			4,667.9		233.8		—		—		(250.8)		4,650.9
Selling, general and administrative expense	Selling, general and administrative expense	415.1		11.2		93.9		7.1		0.2		527.5		Selling, general and administrative expense	467.6		16.3		123.7		11.6		2.3		621.5
Other (income) expense	Other (income) expense	(0.2)		(0.7)		(6.1)		2.4		0		(4.6)		Other (income) expense	(1.8)		(0.6)		(6.3)		(5.2)		8.5		(5.4)
Income (loss) before income taxes		$	709.8	$	10.3	$	68.8	$	(0.6)	$	(5.9)	$	782.4
Income before income taxes														Income before income taxes	$	1,052.1	$	37.6	$	107.7	$	(6.4)	$	(11.1)	$	1,179.9

______________

(1)Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

(2)Amounts ~~primarily represent~~include the results of the Company’s other businesses, reconciling amounts between segment and consolidated balances and the elimination of intercompany ~~transactions and, to a lesser extent, purchase accounting adjustments related to the Forestar acquisition.~~transactions.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022


		Nine Months Ended June 30, 2020													Six Months Ended March 31, 2021
		Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated			Homebuilding		Forestar (1)		Financial Services		Rental		Eliminations and Other (2)		Consolidated
		(In millions)													(In millions)
Revenues	Revenues													Revenues
Home sales	Home sales	$	13,434.2	$	0	$	0	$	0	$	0	$	13,434.2	Home sales	$	11,869.1	$	—	$	—	$	—	$	—	$	11,869.1
Land/lot sales and other	Land/lot sales and other	49.7		584.3		0		27.2		(548.6)		112.6		Land/lot sales and other	33.3		594.2		—		—		(528.6)		98.9
Rental property sales														Rental property sales	—		—		—		31.8		(31.8)		—
Financial services	Financial services	0		0		364.0		0		0		364.0		Financial services	—		—		412.3		—		—		412.3
		13,483.9		584.3		364.0		27.2		(548.6)		13,910.8			11,902.4		594.2		412.3		31.8		(560.4)		12,380.3
Cost of sales	Cost of sales													Cost of sales
Home sales (3)	Home sales (3)	10,569.2		0		0		0		(34.4)		10,534.8		Home sales (3)	8,977.1		—		—		—		(63.3)		8,913.8
Land/lot sales and other	Land/lot sales and other	34.9		509.8		0		0		(477.6)		67.1		Land/lot sales and other	26.3		495.8		—		—		(464.5)		57.6
Rental property sales														Rental property sales	—		—		—		17.8		(17.8)		—
Inventory and land option charges	Inventory and land option charges	17.3		0.5		0		0		0		17.8		Inventory and land option charges	11.2		0.9		—		—		—		12.1
		10,621.4		510.3		0		0		(512.0)		10,619.7			9,014.6		496.7		—		17.8		(545.6)		8,983.5
Selling, general and administrative expense	Selling, general and administrative expense	1,135.3		32.8		257.7		23.9		0.4		1,450.1		Selling, general and administrative expense	917.0		31.8		233.3		20.9		4.4		1,207.4
Gain on sale of assets (4)		0		(0.1)		0		(59.4)		0		(59.5)
Gain on sale of assets														Gain on sale of assets	—		—		—		—		(14.0)		(14.0)
Other (income) expense	Other (income) expense	(9.7)		(4.8)		(17.7)		5.8		0		(26.4)		Other (income) expense	(3.9)		(1.1)		(12.8)		(9.1)		16.1		(10.8)
Income before income taxes	Income before income taxes	$	1,736.9	$	46.1	$	124.0	$	56.9	$	(37.0)	$	1,926.9	Income before income taxes	$	1,974.7	$	66.8	$	191.8	$	2.2	$	(21.3)	$	2,214.2
Summary Cash Flow Information:

Summary Cash Flow Information														Summary Cash Flow Information
Depreciation and amortization	Depreciation and amortization	$	49.8	$	0.2	$	1.2	$	5.8	$	0.4	$	57.4	Depreciation and amortization	$	32.0	$	1.5	$	0.8	$	5.1	$	4.7	$	44.1
Cash provided by (used in) operating activities	Cash provided by (used in) operating activities	$	1,157.0	$	(205.7)	$	(347.7)	$	2.1	$	(16.8)	$	588.9	Cash provided by (used in) operating activities	$	190.5	$	(249.5)	$	(32.3)	$	(216.7)	$	153.1	$	(154.9)

______________

(1)Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

~~(4)~~In the nine months ended June 30, 2020, the Company sold two multi-family rental properties for a total of $128.5 million, which resulted in gains on sale totaling $59.4 million in the other businesses.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

Homebuilding Inventories by Reporting Segment (1)
June 30,
2021 September 30,
2020
(In millions)
East (2) $ 1,605.6 $ 1,328.3
Midwest (2) 1,225.9 958.5
Southeast (2) 3,510.6 2,919.9
South Central (2) 3,824.6 2,879.9
Southwest (2) 955.7 695.8
West (2) 2,536.6 2,009.1
Corporate and unallocated (3) 211.2 223.5
$ 13,870.2 $ 11,015.0


Homebuilding Inventories by Reporting Segment (1)	March 31, 2022		September 30, 2021
	(In millions)
Northwest	$	1,567.0	$	1,307.5
Southwest	2,885.8		2,445.6
South Central	4,084.4		3,479.3
Southeast	3,804.2		3,178.6
East	2,434.3		1,919.6
North	1,663.8		1,368.9
Corporate and unallocated (2)	206.4		208.3
	$	16,645.9	$	13,907.8

____________________________

(1)Homebuilding inventories are the only assets included in the measure of homebuilding segment assets used by the Company’s chief operating decision makers.

(2)Single-family rental properties included in homebuilding inventories at June 30, 2021 totaled $303.1 million, of which $31.7 million were in the East region, $20.2 million were in the Midwest region, $156.3 million were in the Southeast region, $33.5 million were in the South Central region, $25.5 million were in the Southwest region and $35.9 million were in the West region.

~~(3)~~Corporate and unallocated consists primarily of homebuilding capitalized interest and property taxes.


Homebuilding Results by Reporting Segment	Homebuilding Results by Reporting Segment	Three Months Ended June 30,				Nine Months Ended June 30,				Homebuilding Results by Reporting Segment	Three Months Ended March 31,				Six Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions)									(In millions)
Revenues	Revenues									Revenues
Northwest										Northwest	$	637.0	$	548.5	$	1,205.9	$	1,096.5
Southwest										Southwest	1,135.1		912.9		2,046.7		1,751.5
South Central										South Central	1,838.4		1,384.7		3,532.7		2,748.2
Southeast										Southeast	1,946.5		1,720.7		3,757.5		3,185.7
East	East	$	1,032.7	$	736.3	$	2,703.4	$	1,836.5	East	1,219.5		1,070.9		2,294.3		2,078.6
Midwest		514.6		373.3		1,396.1		964.6
Southeast		2,300.1		1,629.1		6,133.4		4,096.4
South Central		1,709.8		1,376.4		4,688.8		3,401.5
Southwest		291.0		216.1		766.7		626.8
West		1,222.1		890.9		3,288.2		2,558.1
		$	7,070.3	$	5,222.1	$	18,976.6	$	13,483.9
Inventory and Land Option Charges
East		$	1.4	$	0.2	$	2.7	$	(0.1)
Midwest		0.5		0.4		0.7		1.9
Southeast		1.0		2.0		8.8		6.3
South Central		1.5		1.9		2.1		6.3
Southwest		0		0.1		0.4		0.1
West		0.5		0.3		1.3		2.8
North										North	730.3		548.1		1,349.0		1,041.9
		$	4.9	$	4.9	$	16.0	$	17.3		$	7,506.8	$	6,185.8	$	14,186.1	$	11,902.4
Income before Income Taxes	Income before Income Taxes									Income before Income Taxes
Northwest										Northwest	$	148.2	$	93.9	$	260.0	$	180.7
Southwest										Southwest	226.6		130.5		385.9		245.7
South Central										South Central	416.0		251.9		770.3		491.9
Southeast										Southeast	482.2		317.2		897.7		564.4
East	East	$	190.3	$	106.9	$	468.8	$	240.1	East	265.9		185.2		468.2		355.9
Midwest		67.2		34.1		177.3		76.4
Southeast		465.3		233.5		1,147.8		567.4
South Central		323.1		201.8		854.6		490.7
Southwest		46.7		29.7		124.8		95.0
West		244.3		103.8		550.9		267.3
North										North	113.9		73.4		203.8		136.1
		$	1,336.9	$	709.8	$	3,324.2	$	1,736.9		$	1,652.8	$	1,052.1	$	2,985.9	$	1,974.7

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE C – INVENTORIES

At the end of each quarter, the Company reviews the performance and outlook for all of its communities and land inventories for indicators of potential impairment and performs detailed impairment evaluations and analyses when necessary. As a result of ~~June 30, 2021, the Company determined that no communities were impaired, and 0~~this review, Forestar recorded a $3.8 million impairment ~~charges were recorded~~charge related to one land development project during the three and six months ended ~~June 30, 2021. During the nine months ended June 30, 2021, impairment charges totaled $5.6 million.~~March 31, 2022. There were 0no impairment charges recorded in the prior year quarter and ~~$1.7~~$5.6 million of impairment charges recorded in the ~~nine~~six months ended ~~June 30, 2020.~~March 31, 2021.

During the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, earnest money and pre-acquisition cost write-offs related to land purchase contracts that the Company has terminated or expects to terminate were ~~$5.6~~$11.4 million and ~~$12.0~~$16.2 million, respectively, compared to ~~$5.0~~$3.8 million and ~~$16.1~~$6.5 million in the same periods of fiscal ~~2020.~~2021. Inventory impairments and land option charges are included in cost of sales in the consolidated statements of operations.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE D – NOTES PAYABLE

The Company’s notes payable at their carrying amounts consist of the following:

June 30,
2021 September 30,
2020
(In millions)
Homebuilding:
Unsecured:
Revolving credit facility $ 0 $ 0
364-day revolving credit facility (1)
0 0
2.55% senior notes due 2020 (2)
0 399.8
4.375% senior notes due 2022 (2)
349.5 349.2
4.75% senior notes due 2023 (2)
299.5 299.2
5.75% senior notes due 2023 (2)
399.0 398.7
2.5% senior notes due 2024 (2)
497.1 496.5
2.6% senior notes due 2025 (2)
496.0 495.1
1.4% senior notes due 2027 (2)
494.7 0
Other secured notes (3)
82.8 71.1
2,618.6 2,509.6
Forestar:
Unsecured:
Revolving credit facility 0 0
8.0% senior notes due 2024 (4)(5)
0 345.2
3.85% senior notes due 2026 (5)
395.2 0
5.0% senior notes due 2028 (5)
296.4 295.9
Other secured notes 12.5 0
704.1 641.1
Financial Services:
Mortgage repurchase facility 1,093.6 1,132.6
$ 4,416.3 $ 4,283.3


	March 31, 2022		September 30, 2021
	(In millions)
Homebuilding
Unsecured:
Revolving credit facility	$	—	$	—
4.375% senior notes due 2022 (1)	349.8		349.6
4.75% senior notes due 2023 (1)	299.7		299.5
5.75% senior notes due 2023 (1)	399.3		399.1
2.5% senior notes due 2024 (1)	497.7		497.3
2.6% senior notes due 2025 (1)	496.7		496.2
1.3% senior notes due 2026 (1)	595.0		594.5
1.4% senior notes due 2027 (1)	495.3		494.9
Other secured notes (2)	152.3		82.2
	3,285.8		3,213.3
Forestar
Unsecured:
Revolving credit facility	—		—
3.85% senior notes due 2026 (3)	396.0		395.5
5.0% senior notes due 2028 (3)	296.8		296.5
Other secured notes	12.5		12.5
	705.3		704.5
Financial Services
Mortgage repurchase facility	1,578.9		1,494.6

Rental
Unsecured:
Revolving credit facility	—		—
Total (4)	$	5,570.0	$	5,412.4

____________________________

(1)~~The Company’s $375 million 364-day senior unsecured homebuilding revolving credit facility was not renewed upon its maturity on May 27, 2021.~~

~~(2)~~Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled ~~$12.3~~$14.3 million and ~~$10.7~~$16.5 million at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively.

~~(3)~~(2)Homebuilding other secured notes excludes ~~$1.4~~$0.5 million and ~~$4.8~~$0.7 million of earnest money notes payable ~~due~~ to Forestar at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively. These intercompany notes are eliminated in consolidation.

~~(4)Forestar’s 8.0% senior notes due April 15, 2024 were redeemed in May 2021.~~

~~(5)~~(3)Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled ~~$8.4~~$7.2 million and ~~$8.9~~$8.0 million at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively.

(4)The fair value of notes payable at March 31, 2022 totaled $5.4 billion, of which $3.7 billion was measured using Level 2 inputs and $1.7 billion was measured using Level 3 inputs. The fair value of notes payable at September 30, 2021 totaled $5.5 billion, of which $3.9 billion was measured using Level 2 inputs and $1.6 billion was measured using Level 3 inputs.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

~~Homebuilding:~~Homebuilding

~~In April 2021, the Company’s~~The Company has a $2.19 billion senior unsecured homebuilding revolving credit facility ~~was amended to increase its capacity to $2.19 billion~~ with an uncommitted accordion feature that could increase the size of the facility to $3.0 billion, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to 100% of the total revolving credit ~~commitment.~~commitments. Letters of credit issued under the facility reduce the available borrowing capacity. The ~~interest rate on borrowings under the revolving credit facility may be based on either the Prime Rate or LIBOR plus an applicable margin, as defined in the credit agreement governing the facility. The~~ maturity date of the facility ~~was extended to~~is April 20, 2026. Borrowings and repayments under the facility totaled $750 million each during the six months ended March 31, 2022. At ~~June 30, 2021,~~March 31, 2022, there were 0no borrowings outstanding and ~~$159.3~~$175.6 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$2.03~~$2.0 billion.

The Company’s homebuilding revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if the leverage ratio exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. The credit agreement governing the facility and the indentures governing the senior notes also impose restrictions on the creation of secured debt and liens. At ~~June 30, 2021,~~March 31, 2022, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding revolving credit facility and public debt obligations.

The Company’s homebuilding revolving credit facility is guaranteed by D.R. Horton, Inc.’s significant wholly-owned homebuilding subsidiaries.

D.R. Horton has an automatically effective universal shelf registration statement filed with the ~~SEC~~Securities and Exchange Commission (SEC) in ~~August 2018,~~July 2021, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

In October 2020, the Company issued $500 million principal amount of 1.4% senior notes due October 15, 2027, with interest payable semi-annually. The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 1.6%. In December 2020, the Company repaid $400 million principal amount of its 2.55% senior notes at maturity.

~~Effective~~ July ~~30,~~ 2019, the Board of Directors authorized the repurchase of up to $500 million of the Company’s debt securities. The authorization has no expiration date. All of the $500 million authorization was remaining at ~~June 30, 2021.~~March 31, 2022.

~~Forestar:~~Forestar

~~In April 2021, Forestar’s~~Forestar has a $410 million senior unsecured revolving credit facility ~~was amended to increase its capacity to $410 million~~ with an uncommitted accordion feature that could increase the size of the facility to $600 million, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit ~~commitment.~~commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on ~~Forestar’s~~the book value of ~~its~~Forestar’s real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility ~~was extended to~~is April 16, 2025. ~~Borrowings and repayments under the facility were $25 million each during the nine months ended June 30, 2021.~~ At ~~June 30, 2021,~~March 31, 2022, there were 0no borrowings outstanding and ~~$60.2~~$60.5 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$349.8~~$349.5 million.

~~Table of Contents~~

~~D.R. HORTON, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)~~

~~June 30, 2021~~

The Forestar revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. ~~At June 30, 2021, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.~~

In April 2021, Forestar issued $400 million principal amount of 3.85% senior notes that mature May 15, 2026 with interest payable semi-annually. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 4.1%. The net proceeds from this issuance were primarily used to redeem Forestar’s $350 million principal amount of 8.0% senior notes due 2024 in May 2021. The redemption price of $365.6 million included a call premium of $14.0 million and accrued and unpaid interest of $1.6 million. Forestar recognized an $18.1 million loss on extinguishment of debt upon redemption of the notes.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

March 31, 2022

Forestar’s revolving credit facility and its senior notes are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, ~~debt.~~financial services or rental operations. At ~~June 30, 2021,~~March 31, 2022, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

~~Effective~~In April ~~30,~~ 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities. The authorization has no expiration date. All of the $30 million authorization was remaining at ~~June 30, 2021.~~March 31, 2022.

Financial ~~Services:~~Services

The Company’s mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that provides financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties upon receipt of funds from the counterparties. DHI Mortgage then has the right and obligation to repurchase the purchased loans upon their sale to third-party purchasers in the secondary market or within specified time frames from 45 to 60 days in accordance with the terms of the mortgage repurchase facility. In February 2022, the mortgage repurchase facility was amended to increase its capacity and extend its maturity date to February 17, 2023. The total capacity of the facility is ~~$1.4~~$1.6 billion; however, the capacity automatically increases ~~without requiring additional commitments, to $1.6 billion for approximately 30 days at each quarter end~~during certain higher volume periods and ~~45 days at fiscal year end. The capacity of the facility~~ can ~~also~~ be further increased ~~to $1.8 billion, subject to the availability of~~through additional commitments. ~~Through additional commitments, the~~The total capacity of the facility at March 31, 2022 was temporarily increased to $1.6 billion effective June 11, 2021 through November 4, 2021. During this period, the capacity increases, without requiring additional commitments, to $1.8 billion for approximately 30 days at the end of the third quarter and for 45 days at fiscal year end. The maturity date of the facility is February 18, 2022.$2.1 billion.

As of ~~June 30, 2021, $1.5~~March 31, 2022, $2.2 billion of mortgage loans held for sale with a collateral value of ~~$1.5~~$2.2 billion were pledged under the mortgage repurchase facility. As a result of advance paydowns totaling ~~$410.2~~$619.9 million, DHI Mortgage had an obligation of ~~$1.1~~$1.6 billion outstanding under the mortgage repurchase facility at ~~June 30, 2021~~March 31, 2022 at a ~~2.1%~~1.9% annual interest rate.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, ~~debt.~~Forestar or rental operations. The facility contains financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable leverage ratio and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At ~~June 30, 2021,~~March 31, 2022, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.

Rental

On March 4, 2022, the Company’s rental subsidiary, DRH Rental, entered into a $625 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.25 billion, subject to certain conditions and availability of additional bank commitments. On March 17, 2022, DRH Rental utilized the accordion feature and increased the size of the facility to $750 million through an additional commitment. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Availability under the revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental’s real estate assets and unrestricted cash. At March 31, 2022, the borrowing base limited the available capacity under the facility to $486 million and there were no borrowings outstanding or letters of credit issued under the facility. The maturity date of the facility is March 4, 2026.

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require DRH Rental to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. At March 31, 2022, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

DRH Rental’s revolving credit facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, Forestar or financial services operations.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE E – CAPITALIZED INTEREST

The Company capitalizes interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. During periods in which the Company’s active inventory is lower than its debt level, a portion of the interest incurred is reflected as interest expense in the period incurred. During the first ~~nine~~six months of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, the Company’s active inventory exceeded its debt level, and all interest incurred was capitalized to inventory.

The following table summarizes the Company’s interest costs incurred, capitalized and expensed during the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended March 31,				Six Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions)									(In millions)
Capitalized interest, beginning of period	Capitalized interest, beginning of period	$	218.6	$	200.5	$	207.7	$	180.1	Capitalized interest, beginning of period	$	221.3	$	215.1	$	217.7	$	207.7
Interest incurred (1)	Interest incurred (1)	37.7		38.0		116.0		113.3		Interest incurred (1)	36.7		37.9		73.6		78.3
Interest charged to cost of sales	Interest charged to cost of sales	(35.4)		(32.8)		(102.8)		(87.7)		Interest charged to cost of sales	(34.7)		(34.4)		(68.0)		(67.4)
Capitalized interest, end of period	Capitalized interest, end of period	$	220.9	$	205.7	$	220.9	$	205.7	Capitalized interest, end of period	$	223.3	$	218.6	$	223.3	$	218.6

__________________

(1) Interest incurred includes interest on the Company's mortgage repurchase facility of ~~$4.7~~$3.0 million and ~~$13.0~~$7.0 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, and ~~$4.3~~$3.8 million and ~~$14.0~~$8.3 million in the same periods of fiscal ~~2020.~~2021. Also included in interest incurred is Forestar interest of ~~$10.3~~$8.1 million and ~~$33.3~~$16.2 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, and ~~$11.4~~$11.5 million and ~~$29.8~~$23.0 million in the same periods of fiscal ~~2020.~~2021.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE F ~~– PROPERTY AND EQUIPMENT~~

~~The Company’s property and equipment balances and the related accumulated depreciation at June 30, 2021 and September 30, 2020 are summarized below.~~

June 30,
2021 September 30,
2020
(In millions)
Homebuilding
Buildings and improvements $ 277.0 $ 267.4
Model home furniture 133.9 134.0
Office furniture and equipment 105.6 108.1
Land 32.2 32.3
Single-family rental properties (1)
Single-family rental properties 0 68.1
Land 0 19.1
Total single-family rental properties 0 87.2
Accumulated depreciation (268.4) (256.2)
Total homebuilding 280.3 372.8
Other Businesses
Multi-family rental properties (1)
Multi-family rental properties 0 173.8
Land 0 58.3
Total multi-family rental properties 0 232.1
Oil and gas related assets 75.1 69.7
Office furniture and equipment 16.5 15.6
Land 16.1 19.7
Accumulated depreciation (26.6) (28.2)
Total other businesses 81.1 308.9
Forestar, net 2.2 1.1
Financial services, net 3.4 3.9
Eliminations 0 (3.0)
Property and equipment, net $ 367.0 $ 683.7

~~__________________~~

(1) Assets related to single-family and multi-family rental properties totaling $303.1 million and $436.3 million, respectively, are recorded as rental property inventory in the current year period.

Depreciation expense was $14.7 million and $49.5 million during the three and nine months ended June 30, 2021, respectively, compared to $17.1 million and $51.6 million in the same periods of fiscal 2020.

~~Table of Contents~~

~~D.R. HORTON, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)~~

~~June 30, 2021~~

~~NOTE G~~ – MORTGAGE LOANS

Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. The Company typically sells the servicing rights for the majority of loans when the loans are sold. Servicing rights retained are typically sold within six months of loan origination. At ~~June~~March 31, 2022, mortgage loans held for sale of $2.24 billion had an aggregate outstanding principal balance of $2.27 billion. At September 30, 2021, mortgage loans held for sale ~~had an aggregate carrying value~~ of ~~$1.64~~$2.03 billion ~~and~~had an aggregate outstanding principal balance of ~~$1.60~~$1.97 billion. ~~At September 30, 2020, mortgage~~Mortgage loans held for sale ~~had an aggregate carrying~~at both dates were primarily composed of mortgage loans measured at fair value ~~of $1.53 billion and an aggregate outstanding principal balance of $1.46 billion.~~ on a recurring basis using Level 2 inputs.

During the ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ mortgage loans originated totaled ~~$11.5~~$8.4 billion and ~~$8.4~~$7.3 billion, respectively, and mortgage loans sold totaled ~~$11.4~~$8.1 billion and ~~$8.0~~$7.0 billion, respectively. The Company had gains on sales of loans and servicing rights of ~~$135.4~~$168.0 million and ~~$453.0~~$302.0 million during the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$116.7~~$178.6 million and ~~$263.7~~$317.4 million in the prior year periods. Net gains on sales of loans and servicing rights are included in revenues in the consolidated statements of operations. During the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, approximately ~~55%~~68% of the Company’s mortgage loans were sold directly to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or into securities backed by the Government National Mortgage Association (Ginnie Mae), and ~~37%~~24% were sold to ~~two~~one other major financial ~~entities.~~entity.

The Company also uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers. At ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, the Company had mortgage-backed securities (MBS) totaling ~~$862.4~~$784.2 million and ~~$1.1 billion,~~$834.6 million, respectively, that did not yet have interest rate lock commitments (IRLCs) or closed loans created or assigned and recorded ~~a liability~~an asset of ~~$1.9~~$9.8 million and ~~$5.3~~$1.1 million, respectively, for the fair value of such MBS position.

The Company is party to IRLCs, which are extended to borrowers who have applied for loan funding and meet defined credit and underwriting criteria. At March 31, 2022 and September 30, 2021, the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value using Level 2 inputs, totaled $3.7 billion and $1.5 billion, respectively.

NOTE HG – INCOME TAXES

The Company’s income tax expense for the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 was ~~$299.1~~$441.0 million and ~~$784.1~~$792.5 million, respectively, compared to ~~$149.5~~$246.0 million and ~~$377.6~~$485.1 million in the prior year periods. The effective tax rate was ~~21.1% and 21.6%~~23.4% for both the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 compared to ~~19.1%~~20.8% and ~~19.6%~~21.9%, respectively, in the prior year periods. The effective tax rates for all periods include an expense for state income taxes and tax benefits related to stock-based compensation and the federal energy efficient homes tax credit. ~~For the three and nine months ended June 30, 2020, the fiscal 2020 retroactive reinstatement of the~~The federal energy efficient homes tax credit ~~reduced the effective tax rate by 3.1% and 2.8%, respectively. For the three and nine months ended June 30, 2021, a change in the estimate of~~expired for homes ~~qualifying for the fiscal 2020 energy efficient tax credit and the retroactive extension of the energy efficient tax credit reduced the effective tax rate by 1.9% and 0.9%, respectively.~~closed after December 31, 2021.

The Company’s deferred tax assets, net of deferred tax liabilities, were ~~$154.4~~$135.7 million at ~~June 30, 2021~~March 31, 2022 compared to ~~$152.4~~$159.5 million at September 30, ~~2020.~~2021. The Company has a valuation allowance of ~~$7.3~~$4.0 million and ~~$7.5~~$4.2 million at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively, related to state deferred tax assets for net operating loss (NOL) carryforwards that are more likely than not to expire before being realized. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to the remaining state NOL carryforwards. Any reversal of the valuation allowance in future periods will impact the Company’s effective tax rate.

The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company’s deferred tax assets.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE IH – EARNINGS PER SHARE

The following table sets forth the numerators and denominators used in the computation of basic and diluted earnings per share.


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended March 31,				Six Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions)									(In millions)
Numerator:	Numerator:									Numerator:
Net income attributable to D.R. Horton, Inc.	Net income attributable to D.R. Horton, Inc.	$	1,115.5	$	630.7	$	2,836.8	$	1,544.7	Net income attributable to D.R. Horton, Inc.	$	1,436.3	$	929.5	$	2,577.9	$	1,721.3
Denominator:	Denominator:									Denominator:
Denominator for basic earnings per share — weighted average common shares	Denominator for basic earnings per share — weighted average common shares	359.7		363.8		362.2		366.0		Denominator for basic earnings per share — weighted average common shares	353.1		362.3		354.6		363.4
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Employee stock awards	Employee stock awards	4.3		3.9		4.9		4.4		Employee stock awards	3.2		4.9		3.6		5.2
Denominator for diluted earnings per share — adjusted weighted average common shares	Denominator for diluted earnings per share — adjusted weighted average common shares	364.0		367.7		367.1		370.4		Denominator for diluted earnings per share — adjusted weighted average common shares	356.3		367.2		358.2		368.6
Basic net income per common share attributable to D.R. Horton, Inc.	Basic net income per common share attributable to D.R. Horton, Inc.	$	3.10	$	1.73	$	7.83	$	4.22	Basic net income per common share attributable to D.R. Horton, Inc.	$	4.07	$	2.57	$	7.27	$	4.74
Diluted net income per common share attributable to D.R. Horton, Inc.	Diluted net income per common share attributable to D.R. Horton, Inc.	$	3.06	$	1.72	$	7.73	$	4.17	Diluted net income per common share attributable to D.R. Horton, Inc.	$	4.03	$	2.53	$	7.20	$	4.67

NOTE JI – STOCKHOLDERS’ EQUITY

D.R. Horton has an automatically effective universal shelf registration statement, filed with the SEC in ~~August 2018,~~July 2021, registering debt and equity securities that it may issue from time to time in amounts to be determined. ~~Forestar also has an effective shelf registration statement filed with~~

In April 2021, the ~~SEC in September 2018, registering $500 million~~Board of ~~equity securities,~~Directors authorized the repurchase of ~~which $100 million was reserved for sales under its at-the-market equity offering program that became effective in August 2020.~~up to $1.0 billion of the Company’s common stock. During the ~~nine~~six months ended ~~June 30, 2021, Forestar issued 1.4~~March 31, 2022, the Company repurchased 5.8 million shares of its common stock ~~under its at-the-market equity offering program~~ for ~~proceeds of $32.6~~$544.2 million. At March 31, 2022, there was $2.0 million net of commissions and other issuance costs. At June 30, 2021, $361.0 million remained available for issuance under Forestar’s shelf registration statement, of which $66.7 million is reserved for sales under its at-the-market equity offering program.

~~Effective~~remaining on the repurchase authorization. In April ~~20, 2021,~~2022, the Board of Directors authorized the repurchase of up to $1.0 billion of the Company’s common stock, replacing the prior authorization. The authorization has no expiration date. The Company repurchased 2.6 million shares of its common stock for $241.2 million during the current quarter for a total of 8.1 million shares repurchased for $661.4 million during the nine months ended June 30, 2021. At June 30, 2021, there was $758.8 million remaining on the repurchase authorization.

During each of the first ~~three~~two quarters of fiscal ~~2021,~~2022, the Board of Directors approved ~~and paid~~a quarterly cash ~~dividends~~dividend of ~~$0.20~~$0.225 per common share, the most recent of which was paid on ~~May 20, 2021~~February 25, 2022 to stockholders of record on ~~May 10, 2021.~~February 17, 2022. In ~~July 2021,~~April 2022, the Board of Directors approved a quarterly cash dividend of ~~$0.20~~$0.225 per common share, payable on ~~August 17, 2021~~May 18, 2022 to stockholders of record on ~~August 10, 2021.~~May 9, 2022. Cash dividends of ~~$0.175~~$0.20 per common share were approved and paid in each quarter of fiscal ~~2020.~~2021.

Forestar has an effective shelf registration statement, filed with the SEC in October 2021, registering $750 million of equity securities, of which $300 million was reserved for sales under its at-the-market equity offering program that became effective in November 2021. During the six months ended March 31, 2022, Forestar issued 84,547 shares of common stock under its at-the-market equity offering program for proceeds of $1.7 million, net of commissions and other issuance costs totaling $0.1 million. At March 31, 2022, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its at-the-market equity offering program.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE KJ – EMPLOYEE BENEFIT PLANS

Restricted Stock Units (RSUs)

The Company’s Stock Incentive Plan provides for the granting of stock options and restricted stock units to executive officers, other key employees and non-management directors. ~~Restricted stock unit~~RSU awards may be based on performance (performance-based) or on service over a requisite time period (time-based). Performance-based and time-based RSU equity awards represent the contingent right to receive one share of the Company’s common stock per RSU if the vesting conditions and/or performance criteria are satisfied. The RSUs have no dividend or voting rights until vested.

In ~~November 2020,~~October 2021, the Company granted ~~360,000~~390,000 performance-based ~~RSU equity awards~~RSUs to its executive officers. ~~These~~In March 2022, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) approved an amendment and restatement of this award to increase the RSUs granted from 390,000 to 430,000. Also in March 2022, the Compensation Committee amended the executive officer short-term performance bonus plan to reduce the amount of the award that could be earned by four of its executive officers. The 430,000 performance-based RSU equity awards vest at the end of a three-year performance period ending September 30, ~~2023.~~2024. The number of units that ultimately vest depends on the Company’s relative position as compared to its peers in achieving certain performance criteria and can range from 0% to 200% of the number of units granted. The performance criteria are total shareholder return; return on investment; selling, general and administrative expense containment; and gross profit. The grant date fair value of these equity awards was ~~$70.60~~$80.58 per unit. Compensation expense related to this grant was ~~$3.1~~$4.1 million and ~~$9.4~~$8.3 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, based on an estimate of the Company’s performance against its peer group, the elapsed portion of the performance period and the grant date fair value of the award.

During the ~~nine~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company granted approximately ~~860,000~~1.2 million time-based RSUs to ~~1,030~~approximately 1,200 recipients, including executive officers, other key employees and non-management directors. The weighted average grant date fair value of these equity awards was ~~$83.13~~$74.96 per unit, and they vest annually in equal installments over periods of three to five years. Compensation expense related to these grants was ~~$4.0~~$8.5 million ~~and $9.5 million~~ in both the three and ~~nine~~six months ended ~~June 30, 2021, respectively. Compensation expense in the nine month period included $4.8 million of~~March 31, 2022, which primarily related to expense recognized for employees that were retirement eligible on the date of grant.

Total stock-based compensation expense related to the Company’s performance-based and time-based ~~restricted stock units~~RSUs was ~~$21.4~~$28.9 million and ~~$66.6~~$50.9 million during the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$20.4~~$24.0 million and ~~$56.6~~$45.2 million during the three and ~~nine~~six months ended ~~June 30, 2020.~~March 31, 2021.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE LK – COMMITMENTS AND CONTINGENCIES

Warranty Claims

The Company provides its homebuyers with a ten-year limited warranty for major defects in structural elements such as framing components and foundation systems, a two-year limited warranty on major mechanical systems and a one-year limited warranty on other construction components. The Company’s warranty liability is based upon historical warranty cost experience in each market in which it operates and is adjusted to reflect qualitative risks associated with the types of homes built and the geographic areas in which they are built.

Changes in the Company’s warranty liability during the three and ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended March 31,				Six Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
		(In millions)									(In millions)
Warranty liability, beginning of period	Warranty liability, beginning of period	$	340.7	$	262.7	$	310.2	$	247.3	Warranty liability, beginning of period	$	390.0	$	324.0	$	376.3	$	310.2
Warranties issued	Warranties issued	41.8		29.4		111.5		75.1		Warranties issued	43.6		36.3		82.5		69.7
Changes in liability for pre-existing warranties	Changes in liability for pre-existing warranties	1.7		5.7		5.4		14.0		Changes in liability for pre-existing warranties	3.0		1.1		7.3		3.7
Settlements made	Settlements made	(22.7)		(16.5)		(65.6)		(55.1)		Settlements made	(28.8)		(20.7)		(58.3)		(42.9)
Warranty liability, end of period	Warranty liability, end of period	$	361.5	$	281.3	$	361.5	$	281.3	Warranty liability, end of period	$	407.8	$	340.7	$	407.8	$	340.7

Legal Claims and Insurance

The Company is named as a defendant in various claims, complaints and other legal actions in the ordinary course of business. At any point in time, the Company is managing several hundred individual claims related to construction defect matters, personal injury claims, employment matters, land development issues, contract disputes and other matters. The Company has established reserves for these contingencies based on the estimated costs of pending claims and the estimated costs of anticipated future claims related to previously closed homes. The estimated liabilities for these contingencies were ~~$543.1~~$617.1 million and ~~$473.8~~$577.5 million at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively, and are included in accrued expenses and other liabilities in the consolidated balance sheets. Approximately 99% of these reserves related to construction defect matters at both ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020.~~2021. Expenses related to the Company’s legal contingencies were ~~$46.2~~$44.1 million and ~~$41.1~~$37.3 million in the ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Changes in the Company’s legal claims reserves during the ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Nine Months Ended June 30,					Six Months Ended March 31,
		2021		2020			2022		2021
		(In millions)					(In millions)
Reserves for legal claims, beginning of period	Reserves for legal claims, beginning of period	$	473.8	$	434.7	Reserves for legal claims, beginning of period	$	577.5	$	473.8
Increase in reserves	Increase in reserves	88.8		57.1		Increase in reserves	55.7		56.2
Payments	Payments	(19.5)		(30.5)		Payments	(16.1)		(5.6)
Reserves for legal claims, end of period	Reserves for legal claims, end of period	$	543.1	$	461.3	Reserves for legal claims, end of period	$	617.1	$	524.4

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

The Company estimates and records receivables under its applicable insurance policies related to its estimated contingencies for known claims and anticipated future construction defect claims on previously closed homes and other legal claims and lawsuits incurred in the ordinary course of business when recovery is probable. However, because the self-insured retentions under these policies are significant, the Company anticipates it will largely be self-insured. The Company’s estimated insurance receivables from estimated losses for pending legal claims and anticipated future claims related to previously closed homes totaled ~~$98.1~~$112.0 million, ~~$81.2~~$109.5 million and ~~$82.4~~$90.5 million at ~~June~~March 31, 2022, September 30, 2021 ~~September 30, 2020~~ and ~~June 30, 2020,~~March 31, 2021, respectively, and are included in other assets in the consolidated balance sheets. Additionally, the Company may have the ability to recover a portion of its losses from its subcontractors and their insurance carriers when the Company has been named as an additional insured on their insurance policies.

The estimation of losses related to these reserves and the related estimates of recoveries from insurance policies are subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to the Company’s markets and the types of products built, claim frequency, claim settlement costs and patterns, insurance industry practices and legal interpretations, among others. Due to the high degree of judgment required in establishing reserves for these contingencies, actual future costs and recoveries from insurance could differ significantly from current estimated amounts, and it is not possible for the Company to make a reasonable estimate of the possible loss or range of loss in excess of its reserves.

Land and Lot Purchase Contracts

The Company enters into land and lot purchase contracts to acquire land or lots for the construction of homes. Under these contracts, the Company will fund a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at a future point in time with predetermined terms. Under the terms of many of the purchase contracts, the deposits are not refundable in the event the Company elects to terminate the contract. Land purchase contract deposits and capitalized pre-acquisition costs are expensed to inventory and land option charges when the Company believes it is probable that it will not acquire the property under contract and will not be able to recover these costs through other means.

At ~~June 30, 2021,~~March 31, 2022, the ~~Company’s homebuilding segment~~Company had total deposits of ~~$999.8 million,~~$1.4 billion, consisting of cash deposits of ~~$918.9 million~~$1.3 billion and promissory notes and surety bonds of ~~$80.9~~$86.1 million, related to contracts to purchase land and lots with a total remaining purchase price of approximately ~~$15.0~~$18.7 billion. The majority of land and lots under contract are currently expected to be purchased within three years. Of these amounts, ~~$152.7~~$137.7 million of the deposits related to contracts with Forestar to purchase land and lots with a remaining purchase price of ~~$1.6~~$1.5 billion. A limited number of the homebuilding land and lot purchase contracts at ~~June 30, 2021,~~March 31, 2022, representing ~~$136.9~~$91.1 million of remaining purchase price, were subject to specific performance provisions that may require the Company to purchase the land or lots upon the land sellers meeting their respective contractual obligations. Of the ~~$136.9~~$91.1 million remaining purchase price subject to specific performance provisions, ~~$67.8~~$64.8 million related to contracts between the homebuilding segment and Forestar.

During the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, Forestar reimbursed the homebuilding segment ~~$3.5~~$2.7 million and ~~$27.7~~$5.4 million, respectively, for previously paid earnest money and ~~$14.9~~$16.2 million and ~~$43.1~~$37.8 million, respectively, for pre-acquisition and other due diligence costs related to land purchase contracts whereby the homebuilding segment assigned its rights under contract to Forestar. During the three and ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, Forestar reimbursed the homebuilding segment ~~$7.0~~$8.0 million and ~~$23.2~~$24.2 million, respectively, for previously paid earnest money and ~~$12.9~~$7.3 million and ~~$26.2~~$28.2 million, respectively, for pre-acquisition and other due diligence costs.

Other Commitments

At ~~June 30, 2021,~~March 31, 2022, the Company had outstanding surety bonds of ~~$2.1~~$2.5 billion and letters of credit of ~~$219.5~~$236.1 million to secure performance under various contracts. Of the total letters of credit, ~~$159.3~~$175.6 million were issued under the homebuilding revolving credit facility and ~~$60.2~~$60.5 million were issued under Forestar’s revolving credit facility.

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

March 31, 2022

NOTE L – OTHER ASSETS, ACCRUED EXPENSES AND OTHER LIABILITIES

The Company’s other assets at March 31, 2022 and September 30, 2021 were as follows:


	March 31, 2022		September 30, 2021
	(In millions)
Earnest money and refundable deposits	$	1,440.8	$	1,079.8
Insurance receivables	112.0		109.5
Other receivables	151.5		153.6
Prepaid assets	77.2		51.6
Contract assets - insurance agency commissions	64.8		58.6
Lease right of use assets	41.7		35.6
Interest rate lock commitments	56.6		17.9
Mortgage servicing rights	5.0		4.1
Mortgage hedging instruments and commitments	171.4		—
Other	56.7		49.9
	$	2,177.7	$	1,560.6

The Company’s accrued expenses and other liabilities at March 31, 2022 and September 30, 2021 were as follows:


	March 31, 2022		September 30, 2021
	(In millions)
Reserves for legal claims	$	617.1	$	577.5
Employee compensation and related liabilities	466.3		492.1
Warranty liability	407.8		376.3
Customer deposits	283.4		193.4
Inventory related accruals	315.5		261.2
Broker deposits related to hedging instruments	139.3		—
Federal and state income tax liabilities	85.4		88.2
Accrued property taxes	30.9		51.0
Lease liabilities	43.2		37.0
Accrued interest	34.1		31.5
Interest rate lock commitments	89.0		—
Mortgage hedging instruments and commitments	9.8		1.7
Other	97.1		100.4
	$	2,618.9	$	2,210.3

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D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

~~June 30, 2021~~March 31, 2022

NOTE M – ~~OTHER ASSETS, ACCRUED EXPENSES AND OTHER LIABILITIES~~SUBSEQUENT EVENT

In April 2022, D.R. Horton and Vidler Water Resources, Inc. (Nasdaq: VWTR) (Vidler) entered into a definitive merger agreement pursuant to which D.R. Horton will acquire Vidler for $15.75 per share in an all-cash transaction. Upon successful completion of the tender offer and following completion of the merger, the common stock of Vidler will no longer be listed for trading on the Nasdaq Stock Market. The ~~Company’s other assets at June 30, 2021~~total equity value of the transaction is approximately $291 million, and ~~September 30, 2020 were as follows:~~

June 30,
2021 September 30,
2020
(In millions)
Earnest money and refundable deposits $ 999.8 $ 657.1
Insurance receivables 98.1 81.2
Other receivables 152.3 143.1
Prepaid assets 54.7 46.0
Interest rate lock commitments 22.1 31.3
Margin deposits 20.0 16.2
Contract assets - insurance agency commissions 54.6 47.1
Lease right of use assets 35.0 34.7
Mortgage servicing rights 14.2 17.1
Other 40.2 39.9
$ 1,491.0 $ 1,113.7

~~The Company’s accrued expenses and other liabilities at June 30, 2021 and September 30, 2020 were as follows:~~

June 30,
2021 September 30,
2020
(In millions)
Reserves for legal claims $ 543.1 $ 473.8
Employee compensation and related liabilities 427.8 376.1
Warranty liability 361.5 310.2
Mortgage hedging instruments and commitments 18.9 16.5
Accrued interest 34.9 35.3
Federal and state income tax liabilities 39.1 42.6
Inventory related accruals 200.5 93.9
Customer deposits 201.3 93.1
Accrued property taxes 37.8 44.1
Lease liabilities 36.5 37.0
Other 99.9 84.4
$ 2,001.3 $ 1,607.0
the transaction is expected to close during the second calendar quarter of 2022, subject to customary closing conditions.

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~~D.R. HORTON, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)~~

~~June 30, 2021~~

~~NOTE N – FAIR VALUE MEASUREMENTS~~

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis at June 30, 2021 and September 30, 2020. Changes in the fair value of the Level 3 assets during the nine months ended June 30, 2021 and 2020 were not material.

Fair Value at June 30, 2021
Balance Sheet Location Level 1 Level 2 Level 3 Total
(In millions)
Mortgage loans held for sale (1) Mortgage loans held for sale $ 0 $ 1,624.7 $ 9.4 $ 1,634.1
Mortgage servicing rights (2) Other assets 0 13.9 0.3 14.2
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments Other assets 0 22.1 0 22.1
Forward sales of mortgage-backed securities Other liabilities 0 (16.9) 0 (16.9)

Fair Value at September 30, 2020
Balance Sheet Location Level 1 Level 2 Level 3 Total
(In millions)
Debt securities collateralized by residential real estate Other assets $ 0 $ 0 $ 3.9 $ 3.9
Mortgage loans held for sale (1) Mortgage loans held for sale 0 1,503.2 15.1 1,518.3
Mortgage servicing rights (2) Other assets 0 0 17.1 17.1
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments Other assets 0 31.3 0 31.3
Forward sales of mortgage-backed securities Other liabilities 0 (16.2) 0 (16.2)

~~___________________~~

~~(1)~~The Company typically elects the fair value option upon origination for mortgage loans held for sale. Interest income earned on mortgage loans held for sale is based on contractual interest rates and included in other income. Mortgage loans held for sale valued using Level 3 inputs at June 30, 2021 and September 30, 2020 included $9.4 million and $15.1 million, respectively, of loans for which the Company elected the fair value option upon origination and did not sell into the secondary market. The fair value of these mortgage loans held for sale is generally calculated considering pricing in the secondary market and adjusted for the value of the underlying collateral, including interest rate risk, liquidity risk and prepayment risk. The Company plans to sell these loans as market conditions permit.

~~(2)~~Although the majority of the Company’s mortgage loans are sold on a servicing-released basis, when the servicing rights are retained, the Company records them at fair value using third-party Level 3 valuations unless specific investor bids are available during the subsequent sale process resulting in a Level 2 valuation. The key assumptions used in third-party Level 3 valuations, which are generally unobservable inputs, are mortgage prepayment rates, discount rates and delinquency rates, which were 10%, 11% and 6%, respectively, at June 30, 2021 and 13%, 11% and 5%, respectively, at September 30, 2020.

~~(3)~~Fair value measurements of these derivatives represent changes in fair value, as calculated by reference to quoted prices for similar assets and are reflected in the balance sheet as other assets or accrued expenses and other liabilities. Changes in the fair value of these derivatives are included in revenues in the consolidated statements of operations. The net fair value change for the three and nine months ended June 30, 2021 and 2020 recognized in revenues in the consolidated statements of operations was not significant.

~~Table of Contents~~

~~D.R. HORTON, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)~~

~~June 30, 2021~~

~~The following table summarizes the Company’s assets measured at fair value on a nonrecurring basis at June 30, 2021 and September 30, 2020:~~
Fair Value at
June 30, 2021 Fair Value at
September 30, 2020
Balance Sheet Location Level 2 Level 3 Level 2 Level 3
(In millions)
Mortgage loans held for sale (1) (2) Mortgage loans held for sale $ 0.6 $ 0.6 $ 1.5 $ 2.2
Other mortgage loans (1) (3) Other assets 2.7 1.3 0.6 2.0
Real estate owned (1) (3) Other assets 0 0.2 0 0

~~___________________~~

~~(1)~~The fair values included in the table above represent only those assets whose carrying values were adjusted to fair value as a result of impairment in the respective period and were held at the end of the period.

~~(2)~~These mortgage loans have some degree of impairment affecting their marketability and are valued at the lower of carrying value or fair value. When available, quoted prices in the secondary market are used to determine fair value (Level 2); otherwise, a cash flow valuation model is used to determine fair value (Level 3).

~~(3)The fair values of other mortgage loans and real estate owned were determined based on the value of the underlying collateral.~~

For the financial assets and liabilities that the Company does not reflect at fair value, the following tables present both their respective carrying value and fair value at June 30, 2021 and September 30, 2020:

Carrying Value Fair Value at June 30, 2021
Level 1 Level 2 Level 3 Total
(In millions)
Cash and cash equivalents (1) $ 1,942.7 $ 1,942.7 $ 0 $ 0 $ 1,942.7
Restricted cash (1) 26.4 26.4 0 0 26.4
Notes payable (2) (3) 4,416.3 0 3,373.9 1,188.9 4,562.8

Carrying Value Fair Value at September 30, 2020
Level 1 Level 2 Level 3 Total
(In millions)
Cash and cash equivalents (1) $ 3,018.5 $ 3,018.5 $ 0 $ 0 $ 3,018.5
Restricted cash (1) 21.6 21.6 0 0 21.6
Notes payable (2) (3) 4,283.3 0 3,285.5 1,203.7 4,489.2

~~___________________~~

~~(1)The fair values of cash, cash equivalents and restricted cash approximate their carrying values due to their short-term nature and are classified as Level 1 within the fair value hierarchy.~~

~~(2)The fair value of the senior notes is determined based on quoted prices, which is classified as Level 2 within the fair value hierarchy.~~

~~(3)~~The fair values of other secured notes and borrowings on the revolving credit facilities and the mortgage repurchase facility approximate carrying value due to their short-term nature or floating interest rate terms, as applicable, and are classified as Level 3 within the fair value hierarchy.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this quarterly report and with our annual report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those described in the “Forward-Looking Statements” section following this discussion.

BUSINESS

D.R. Horton, Inc. is the largest homebuilding company in the United States as measured by number of homes closed. We construct and sell homes through our operating divisions in 96104 markets across 3032 states, primarily under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes and Freedom Homes. Our common stock is included in the S&P 500 Index and listed on the New York Stock Exchange under the ticker symbol “DHI.” Unless the context otherwise requires, the terms “D.R. Horton,” the “Company,” “we” and “our” used herein refer to D.R. Horton, Inc., a Delaware corporation, and its predecessors and subsidiaries.

Our business operations consist of homebuilding, a majority-owned residential lot development company, financial services, rental and other activities. Our homebuilding operations are our core business and primarily include the construction and sale of single-family homes with sales prices generally ranging from $150,000 to more than $1,000,000, with an average closing price of ~~$315,000~~$370,300 during the ~~nine~~six months ended ~~June 30, 2021.~~March 31, 2022. Approximately 91% of our home sales revenue in the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 was generated from the sale of single-family detached homes, with the remainder from the sale of attached homes, such as townhomes, duplexes and triplexes.

Our position as the most geographically diverse and largest volume homebuilder in the United States provides a strong platform for us to compete for new home sales. Our product offerings include a broad range of homes for entry-level, move-up, active adult and luxury ~~buyers across our markets.~~buyers. Our entry-level homes at affordable price points have experienced very strong demand from homebuyers, as this segment of the new home market remains under-served, with low inventory levels relative to demand.

During fiscal 2020, we also began constructing and leasing homes as income-producing single-family rental communities. After a rental community is constructed and achieves a stabilized level of leased occupancy, we generally market the community for a bulk sale of homes. These operations are reported in our homebuilding segment. During the third quarter of fiscal 2021, we sold a single-family rental community for $23.1 million in revenues and $11.4 million of gross profit. In the first quarter of fiscal 2021, we sold a single-family rental community for $31.8 million and recorded a gain on sale of $14.0 million. At June 30, 2021, our homebuilding inventory included $303.1 million of assets related to 44 single-family rental communities, and our single-family rental platform included 2,340 homes and finished lots, of which 680 homes were completed.

~~At June 30, 2021,~~March 31, 2022, we owned ~~64%~~63% of the outstanding shares of Forestar Group Inc. (Forestar), a publicly traded residential lot development company listed on the New York Stock Exchange under the ticker symbol “FOR.” Forestar is a key part of our homebuilding strategy to enhance operational and capital efficiency and returns by expanding relationships with land developers and increasing the portion of our land and lot position controlled through land purchase contracts. Forestar has made significant investments in land acquisition and development over the last few years to expand its business across ~~the United States.~~our homebuilding operating footprint.

Our financial services operations provide mortgage financing and title agency services to homebuyers in many of our homebuilding markets. DHI Mortgage, our ~~100% owned~~wholly-owned subsidiary, provides mortgage financing services primarily to our homebuyers and sells substantially all of the mortgages it originates and ~~the majority of~~ the related servicing rights to third-party purchasers. DHI Mortgage originates loans in accordance with purchaser guidelines and sells substantially all of its mortgage production ~~shortly~~ after origination. Our ~~100% owned~~wholly-owned subsidiary title companies serve as title insurance agents by providing title insurance policies, examination, underwriting and closing services, primarily related to our homebuilding transactions.

~~Table~~Our rental segment consists of ~~Contents~~

multi-family and single-family rental operations. The multi-family rental operations develop, construct, lease and sell residential rental properties. The single-family rental operations primarily construct and lease single-family homes and then market the community for a bulk sale of rental homes.

In addition to our homebuilding, Forestar, ~~and~~ financial services and rental operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, ~~construct, own and sell income-producing multi-family rental properties,~~ own non-residential real estate including ranch land and improvements and own and operate ~~oil and gas related~~energy-related assets. The results of these operations are immaterial for separate reporting and therefore are grouped together and presented as other. Our multi-family rental operations develop, construct, lease, own and sell multi-family residential properties that produce rental income. We primarily focus on constructing garden style multi-family communities, which typically accommodate 200 to 400 dwelling units, in high growth suburban markets. After we complete construction and achieve a stabilized level of leased occupancy, the property is typically marketed for sale. At June 30, 2021 and September 30, 2020, our consolidated balance sheets included $458.3 million and $246.2 million, respectively, of assets related to multi-family rental operations. Total assets related to other business activities were $632.2 million and $379.4 million at June 30, 2021 and September 30, 2020, respectively.

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OVERVIEW

During the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, the number ~~and value~~ of our net sales orders decreased 3%, while the value of those sales orders increased ~~20% and 33%, respectively,~~18% compared to the prior year period. ~~During the nine months ended June 30, 2021, our~~Our number of homes closed ~~and~~decreased 1%, while our home sales revenues increased ~~33% and 41%, respectively,~~19% compared to the prior year ~~period, and our~~period. Our consolidated revenues increased ~~41%~~22% to ~~$19.7~~$15.1 billion compared to ~~$13.9~~$12.4 billion in the prior year period. Our pre-tax income was ~~$3.6~~$3.4 billion in the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$1.9~~$2.2 billion in the prior year period, and our pre-tax operating margin was ~~18.5%~~22.5% compared to ~~13.9%~~17.9%. Net income was ~~$2.8~~$2.6 billion in the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$1.5~~$1.7 billion in the prior year ~~period.~~period, and our diluted earnings per share was $7.20 compared to $4.67.

In the trailing twelve months ended ~~June 30, 2021,~~March 31, 2022, our return on equity (ROE) was ~~29.5%~~34.0% compared to ~~19.9%~~27.1% in the prior year period, and our homebuilding return on inventory (ROI) was ~~34.9%~~40.3% compared to ~~21.6%~~31.1%. ROE is calculated as net income attributable to D.R. Horton for the trailing twelve months divided by average stockholders’ equity, where average stockholders’ equity is the sum of ending stockholders’ equity balances of the trailing five quarters divided by five. Homebuilding ROI is calculated as homebuilding pre-tax income for the trailing twelve months divided by average inventory, where average inventory is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five.

During ~~March 2020,~~ the ~~impacts~~first half of the COVID-19 pandemic and the related widespread reductions in economic activity across the United States began to adversely affect our business. As economic activity resumed and restrictive orders relating to COVID-19 were eased,fiscal 2022, demand for our homes ~~improved significantly during the remainder of fiscal 2020 and has~~ remained strong ~~throughout fiscal 2021. We believe the increase~~despite increased inflationary pressures and increases in ~~demand has been fueled by historically low~~ interest rates on mortgage ~~loans and~~loans. We believe demand for our homes is supported by the limited supply of homes at affordable price points across most of our markets. We are well-positioned ~~for increased~~to meet this demand with our affordable product offerings, lot supply and housing inventory. However, multiple disruptions in the supply chain ~~combined with the improvement in economic conditions and strong demand for new homes,~~ have resulted in shortages in certain building materials, ~~and~~which, together with tightness in the labor market, ~~which~~ has caused our construction cycle to lengthen. ~~During the current quarter, we~~We have slowed our home sales pace to more closely align with our production levels, and we are selling homes later in the construction cycle when we have more certainty regarding the home close date for our homebuyers. Based on the current availability of labor and materials, the stage of completion of our current homes in inventory, production schedules and capacity, we expect to continue restricting the pace of our sales orders ~~during~~in most of our ~~fourth fiscal quarter.~~communities in the near term to match our production levels.

Within our homebuilding land and lot portfolio, our lots controlled through purchase contracts represent ~~76%~~77% of the lots owned and controlled at ~~June 30, 2021~~March 31, 2022 compared to ~~70%~~76% and 75% at September 30, ~~2020~~2021 and ~~66% at June 30, 2020.~~March 31, 2021, respectively. Our relationship with Forestar and expanded relationships with other land developers across the country have allowed us to continue to increase the controlled portion of our lot pipeline.

We believe our strong balance sheet and liquidity position provide us with the flexibility to operate effectively through changing economic conditions. We plan to continue to generate strong cash flows from our homebuilding operations and manage our product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on our inventory investments in each of our communities based on local housing market conditions.

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STRATEGY

Our operating strategy focuses on enhancing long-term value to our shareholders by leveraging our financial and competitive position ~~in our core homebuilding business~~ to maximize the returns on our inventory investments and generate strong profitability and cash flows, while managing risk and maintaining financial flexibility to navigate changing economic ~~conditions and make opportunistic strategic investments. We made operational adjustments as a result of COVID-19; however, our~~conditions. Our strategy remains consistent and includes the following initiatives:

•Developing and retaining highly experienced and productive teams of personnel throughout our company that are aligned and focused on continuous improvement in our operational execution and financial performance.

•Maintaining a ~~strong~~significant cash balance and strong overall liquidity position ~~and~~while controlling our level of debt.

•Allocating and actively managing our inventory investments across our operating markets to diversify our geographic risk.

•Offering new home communities that appeal to a broad range of entry-level, move-up, active adult and luxury homebuyers based on consumer demand in each market.

•Modifying product offerings, sales pace, home prices and sales incentives as necessary in each of our markets to meet consumer demand and maintain affordability.

•Delivering high quality homes and a positive experience to our customers both during and after the sale.

•Managing our inventory of homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.

•Investing in land and land development in desirable markets, while controlling the level of land and lots we own in each market relative to the local new home demand.

•Continuing to seek opportunities to expand the portion of our land and finished lots controlled through purchase contracts with Forestar and other land ~~developers across the country.~~developers.

•Controlling the cost of goods purchased from both vendors and subcontractors.

•Improving the efficiency of our land development, construction, sales and other key operational activities.

•Controlling our selling, general and administrative (SG&A) expense infrastructure to match production levels.

•~~Opportunistically evaluating potential acquisitions to enhance our operations and improve returns.~~

•Ensuring that our financial services business provides high quality mortgage and title services to homebuyers efficiently and effectively.

•Increasing our investments in the construction and leasing of single-family and multi-family rental properties to meet rental demand in high growth suburban markets and selling these properties profitably.

•Opportunistically evaluating potential acquisitions to enhance our operating platform.

We believe our operating strategy, which has produced positive results in recent years, will allow us to successfully operate through changing economic conditions to maintain and improve our financial and competitive position. However, we cannot provide any assurances that the initiatives listed above will continue to be successful, and we may need to adjust parts of our strategy to meet future market conditions.

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KEY RESULTS

Key financial results as of and for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared to the same period of ~~2020,~~2021, were as follows:

Homebuilding:

•Homebuilding revenues increased ~~35%~~21% to ~~$7.1~~$7.5 billion compared to ~~$5.2~~$6.2 billion.

•Homes closed increased ~~22%~~1% to ~~21,588~~19,828 homes, and the average closing price of those homes ~~was $326,100.~~increased 21% to $378,200.

•Net sales orders decreased ~~17%~~10% to ~~17,952~~24,340 homes, while the value of net sales orders increased 2%10% to ~~$6.4~~$9.7 billion.

•Sales order backlog ~~increased 39%~~decreased 6% to ~~32,209~~33,859 homes, ~~and~~while the value of sales order backlog increased ~~57%~~15% to ~~$11.0~~$13.3 billion.

•Home sales gross margin was ~~25.9%~~28.9% compared to ~~21.6%~~24.6%.

•Homebuilding SG&A expense was ~~7.1%~~6.8% of homebuilding revenues compared to ~~7.9%~~7.6%.

•Homebuilding pre-tax income was ~~$1.3~~$1.7 billion compared to ~~$709.8 million.~~$1.1 billion.

•Homebuilding pre-tax income was ~~18.9%~~22.0% of homebuilding revenues compared to ~~13.6%~~17.0%.

•Homebuilding cash and cash equivalents totaled ~~$1.7~~$1.2 billion compared to ~~$2.6~~$3.0 billion and $1.9 billion at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Homebuilding inventories totaled ~~$13.9~~$16.6 billion compared to ~~$11.0~~$13.9 billion and ~~$10.9~~$12.9 billion at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Homes in inventory totaled ~~47,300~~59,800 compared to ~~38,000~~47,800 and ~~32,800~~46,100 at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Owned lots totaled ~~123,900~~131,200 compared to ~~112,600~~127,800 and ~~115,200~~121,500 at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively. Lots controlled through purchase contracts increased to ~~393,200~~442,800 from ~~264,300~~402,500 and ~~220,300~~365,200 at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Homebuilding debt was ~~$2.6~~$3.3 billion compared to ~~$2.5~~$3.2 billion and $2.6 billion at ~~both~~ September 30, ~~2020~~2021 and ~~June 30, 2020.~~March 31, 2021, respectively.

•Homebuilding debt to total capital was ~~16.0%~~16.4% compared to ~~17.5%~~17.8% and ~~18.4%~~16.8% at September 30, ~~2020~~2021 and ~~June~~March 31, 2021, respectively. Net homebuilding debt to total capital was 11.2% compared to 1.7% and 5.3% at September 30, ~~2020,~~2021 and March 31, 2021, respectively.

~~Table of Contents~~

Forestar:

•Forestar’s revenues increased ~~76%~~47% to ~~$312.9~~$421.6 million compared to ~~$177.9~~$287.1 million. Revenues in the current and prior year quarters included ~~$303.2~~$389.7 million and ~~$175.5~~$268.3 million, respectively, of revenue from land and lot sales to our homebuilding segment.

•Forestar’s lots sold increased ~~91%~~61% to ~~3,858~~5,788 compared to ~~2,023.~~3,588. Lots sold to D.R. Horton totaled ~~3,719~~4,771 compared to ~~1,991.~~3,358.

•Forestar’s pre-tax income was ~~$21.1~~$63.2 million ~~including an $18.1 million loss on extinguishment of debt,~~ compared to ~~$10.3~~$37.6 million.

•Forestar’s pre-tax income was ~~6.7%~~15.0% of ~~Forestar~~ revenues compared to ~~5.8%~~13.1%.

•Forestar’s cash and cash equivalents totaled ~~$116.0~~$233.7 million compared to ~~$394.3~~$153.6 million and ~~$355.6~~$167.2 million at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

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•Forestar’s inventories totaled ~~$1.9~~$2.0 billion compared to ~~$1.3~~$1.9 billion and $1.7 billion at ~~both~~ September 30, ~~2020~~2021 and ~~June 30, 2020.~~March 31, 2021, respectively.

•Forestar’s owned and controlled lots totaled ~~96,600~~96,500 compared to ~~60,500~~97,000 and ~~50,700~~84,500 at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively. Of these lots, ~~39,400~~36,700 were under contract to sell to or subject to a right of first offer with D.R. Horton compared to ~~30,400~~39,200 and ~~29,600~~37,100 at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Forestar’s debt was ~~$704.1~~$705.3 million compared to ~~$641.1~~$704.5 million and ~~$640.6~~$654.6 million at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Forestar’s debt to total capital was ~~42.1%~~38.9% compared to ~~42.4% and 43.1%~~41.0% at both September 30, ~~2020~~2021 and ~~June 30, 2020, respectively.~~March 31, 2021. Forestar’s net debt to total capital was ~~37.8%~~29.9% compared to ~~22.1%~~35.2% and ~~25.2%~~34.1% at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

Financial Services:

•Financial services revenues ~~increased 20%~~decreased 1% to ~~$188.7~~$222.1 million compared to ~~$156.6~~$225.1 million.

•Financial services pre-tax income ~~increased 2%~~decreased 14% to ~~$70.3~~$92.8 million compared to ~~$68.8~~$107.7 million.

•Financial services pre-tax income was ~~37.3%~~41.8% of financial services revenues compared to ~~43.9%~~47.8%.

Rental:

•Rental revenues were $222.9 million compared to no revenue in the prior year quarter.

•Rental pre-tax income was $102.5 million compared to a pre-tax loss of $6.4 million.

•Rental inventory totaled $1.5 billion compared to $840.9 million and $543.5 million at September 30, 2021 and March 31, 2021, respectively.

•Rental units closed totaled 494 compared to none closed in the prior year quarter.

Consolidated Results:

•Consolidated revenues increased 24% to $8.0 billion compared to $6.4 billion.

•Consolidated pre-tax income increased ~~81%~~60% to ~~$1.4~~$1.9 billion compared to ~~$782.4 million.~~$1.2 billion.

•Consolidated pre-tax income was ~~19.4%~~23.5% of consolidated revenues compared to ~~14.5%~~18.3%.

•Income tax expense was ~~$299.1~~$441.0 million compared to ~~$149.5~~$246.0 million, and our effective tax rate was ~~21.1%~~23.4% compared to ~~19.1%~~20.8%.

•Net income attributable to D.R. Horton increased ~~77%~~55% to ~~$1.1~~$1.4 billion compared to ~~$630.7~~$929.5 million.

•Diluted net income per common share attributable to D.R. Horton increased ~~78%~~59% to ~~$3.06~~$4.03 compared to ~~$1.72.~~$2.53.

•Stockholders’ equity was ~~$13.8~~$16.8 billion compared to ~~$11.8~~$14.9 billion and ~~$11.0~~$13.0 billion at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Book value per common share increased to ~~$38.54~~$47.66 compared to ~~$32.53~~$41.81 and ~~$30.38~~$35.96 at September 30, ~~2020~~2021 and ~~June 30, 2020,~~March 31, 2021, respectively.

•Debt to total capital was ~~24.2%~~24.9% compared to ~~26.6%~~26.7% and ~~28.0%~~25.7% at September 30, ~~2020~~2021 and ~~June~~March 31, 2021, respectively. Net debt to total capital was 18.9% compared to 12.9% and 14.9% at September 30, ~~2020,~~2021 and March 31, 2021, respectively.

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Key financial results for the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, as compared to the same period of ~~2020,~~2021, were as follows:

Homebuilding:

•Homebuilding revenues increased ~~41%~~19% to ~~$19.0~~$14.2 billion compared to ~~$13.5~~$11.9 billion.

•Homes closed ~~increased 33%~~decreased 1% to ~~60,028~~38,224 homes, ~~and~~while the average closing price of those homes ~~was $315,000.~~increased 20% to $370,300.

•Net sales orders ~~increased 20%~~decreased 3% to ~~65,429~~45,862 homes, ~~and~~while the value of net sales orders increased ~~33%~~18% to ~~$21.7~~$18.0 billion.

•Home sales gross margin was ~~24.9%~~28.2% compared to ~~21.3%~~24.4%.

•Homebuilding SG&A expense was ~~7.5%~~7.1% of homebuilding revenues compared to ~~8.4%~~7.7%.

•Homebuilding pre-tax income was ~~$3.3~~$3.0 billion compared to ~~$1.7~~$2.0 billion.

•Homebuilding pre-tax income was ~~17.5%~~21.0% of homebuilding revenues compared to ~~12.9%~~16.6%.

•Net cash used by homebuilding operations was $416.2 million compared to net cash provided by homebuilding operations ~~was $276.1 million compared to $1.2 billion.~~of $190.5 million.

Forestar:

•Forestar’s revenues increased ~~55%~~40% to ~~$907.1~~$829.2 million compared to ~~$584.3~~$594.2 million. Revenues in the current and prior year periods included ~~$865.8~~$719.8 million and ~~$548.6~~$562.5 million, respectively, of revenue from land and lot sales to our homebuilding segment.

•Forestar’s lots sold increased ~~72%~~44% to ~~11,013~~10,304 compared to ~~6,396.~~7,155. Lots sold to D.R. Horton totaled ~~10,466~~8,785 compared to ~~6,287.~~6,747.

•Forestar’s pre-tax income was ~~$87.9~~$116.7 million compared to ~~$46.1~~$66.8 million.

•Forestar’s pre-tax income was ~~9.7%~~14.1% of ~~Forestar~~ revenues compared to ~~7.9%~~11.2%.

Financial Services:

•Financial services revenues ~~increased 65%~~decreased 1% to ~~$601.1~~$406.4 million compared to ~~$364.0~~$412.3 million.

•Financial services pre-tax income ~~increased 111%~~decreased 17% to ~~$262.1~~$159.9 million compared to ~~$124.0~~$191.8 million.

•Financial services pre-tax income was ~~43.6%~~39.3% of financial services revenues compared to ~~34.1%~~46.5%.

Rental:

•Rental revenues were $379.4 million compared to $31.8 million.

•Rental pre-tax income was $172.5 million compared to $2.2 million.

•Rental units closed totaled 1,071 compared to 124.

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Consolidated Results:

•Consolidated revenues increased 22% to $15.1 billion compared to $12.4 billion.

•Consolidated pre-tax income increased ~~88%~~53% to ~~$3.6~~$3.4 billion compared to ~~$1.9~~$2.2 billion.

•Consolidated pre-tax income was ~~18.5%~~22.5% of consolidated revenues compared to ~~13.9%~~17.9%.

•Income tax expense was ~~$784.1~~$792.5 million compared to ~~$377.6~~$485.1 million, and our effective tax rate was ~~21.6%~~23.4% compared to ~~19.6%~~21.9%.

•Net income attributable to D.R. Horton increased ~~84%~~50% to ~~$2.8~~$2.6 billion compared to ~~$1.5~~$1.7 billion.

•Diluted net income per common share attributable to D.R. Horton increased ~~85%~~54% to ~~$7.73~~$7.20 compared to ~~$4.17.~~$4.67.

•Net cash used in operations was ~~$34.5~~$834.6 million compared to ~~$588.9 million of cash provided by operations.~~$154.9 million.

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RESULTS OF OPERATIONS - HOMEBUILDING

We conduct our homebuilding operations in the geographic regions, states and markets listed below, and we conduct our financial services operations in ~~many~~most of these markets. Our homebuilding operating divisions are aggregated into six reporting segments, also referred to as reporting regions, which comprise the markets below. Our financial statements and the notes thereto contain additional information regarding segment performance.

Table of Contents

State

Reporting Region/Market

State

Reporting Region/Market

~~East~~Northwest Region

~~Southeast~~South Central Region

~~Delaware~~Colorado

~~Central Delaware~~Colorado Springs

~~Alabama~~Oklahoma

~~Birmingham~~

~~Northern Delaware~~

~~Huntsville~~

~~Georgia~~

~~Savannah~~

~~Mobile/Baldwin County~~

~~Maryland~~

~~Baltimore~~

~~Montgomery~~

~~Suburban Washington, D.C.~~

~~Tuscaloosa~~

~~Western Maryland~~

~~Florida~~

~~Fort Myers/Naples~~

~~New Jersey~~

~~Northern New Jersey~~

~~Gainesville~~

~~Southern New Jersey~~

~~Jacksonville~~

~~North Carolina~~

~~Asheville~~

~~Lakeland~~

~~Charlotte~~

~~Melbourne/Vero Beach~~

~~Greensboro/Winston-Salem~~

~~Miami/Fort Lauderdale~~

~~Raleigh/Durham~~

~~Ocala~~

~~Wilmington~~

~~Orlando~~

~~Pennsylvania~~

~~Central Pennsylvania~~

~~Pensacola/Panama~~Oklahoma City

~~Philadelphia~~Denver

~~Port St. Lucie~~Tulsa

Fort Collins

Texas

Austin

~~South Carolina~~Oregon

~~Charleston~~Bend

~~Tallahassee~~Beaumont

~~Columbia~~Eugene/Springfield

~~Tampa/Sarasota~~Bryan/College Station

~~Greenville/Spartanburg~~Portland/Salem

~~Volusia County~~Corpus Christi

Utah

Salt Lake City

Dallas

~~Hilton Head~~St. George

~~West Palm Beach~~Fort Worth

Washington

Central Washington

Houston

~~Myrtle Beach~~Seattle/Tacoma/Everett/Olympia

Killeen/Temple/Waco

Spokane

Lubbock

Vancouver

Midland/Odessa

New Braunfels/San Marcos

Southwest Region

San Antonio

Arizona

Phoenix

Tucson

East Region

California

Bakersfield

Georgia

Atlanta

~~Virginia~~

~~Northern Virginia~~Bay Area

Augusta

~~Southern Virginia~~Fresno/Tulare

~~Mississippi~~

~~Gulf Coast~~Savannah

Los Angeles County

North Carolina

Asheville

Modesto/Merced/Stockton

Charlotte

Riverside County

Greensboro/Winston-Salem

Sacramento

New Bern/Greenville

San Bernardino County

Raleigh/Durham

San Diego County

Wilmington

Hawaii

Oahu

South Carolina

Charleston

Nevada

Las Vegas

Columbia

Reno

Greenville/Spartanburg

New Mexico

Albuquerque

Hilton Head

Myrtle Beach

Southeast Region

Tennessee

Chattanooga

Alabama

~~Midwest Region~~Birmingham

Knoxville

~~Colorado~~

~~Colorado Springs~~Huntsville

Memphis

~~Denver~~Mobile/Baldwin County

Nashville

~~Fort Collins~~Montgomery

Tuscaloosa

North Region

Florida

Fort Myers/Naples

Delaware

Central Delaware

Gainesville

Northern Delaware

Jacksonville

Illinois

Chicago

~~Southwest Region~~Lakeland

Indiana

Fort Wayne

~~Arizona~~Melbourne/Vero Beach

~~Phoenix~~Indianapolis

~~Indianapolis~~Miami/Fort Lauderdale

~~Tucson~~

Northwest Indiana

~~New Mexico~~

~~Albuquerque~~Ocala

Iowa

Des Moines

Orlando

Iowa City/Cedar Rapids

Pensacola/Panama City

Kentucky

Louisville

Port St. Lucie

Maryland

Baltimore

Tallahassee

~~West Region~~Suburban Washington, D.C.

Tampa/Sarasota

Western Maryland

Volusia County

Minnesota

Minneapolis/St. Paul

~~California~~

~~Bakersfield~~

~~Ohio~~

~~Cincinnati~~

~~Bay Area~~

~~Columbus~~West Palm Beach

Nebraska

~~Fresno~~

~~Los Angeles County~~

~~South Central Region~~

~~Modesto/Merced~~Omaha

Louisiana

Baton Rouge

New Jersey

~~Riverside County~~Northern New Jersey

Lake Charles/Lafayette

~~Sacramento~~Southern New Jersey

~~Oklahoma~~Mississippi

~~Oklahoma City~~Gulf Coast

Ohio

Cincinnati

~~San Bernardino County~~Columbus

~~Tulsa~~Pennsylvania

Central Pennsylvania

~~San Diego County~~

~~Texas~~

~~Austin~~

~~Hawaii~~

~~Oahu~~Philadelphia

~~Bryan/College Station~~Virginia

~~Nevada~~

~~Las Vegas~~Northern Virginia

~~Corpus Christi~~

~~Reno~~Southern Virginia

~~Dallas~~West Virginia

~~Oregon~~

~~Bend~~

~~Fort Worth~~

~~Portland/Salem~~

~~Houston~~

~~Utah~~

~~Salt Lake City~~

~~Killeen/Temple/Waco~~

~~St. George~~

~~Midland/Odessa~~

~~Washington~~

~~Seattle/Tacoma/Everett/Olympia~~

~~New Braunfels/San Marcos~~

~~Spokane~~

~~San Antonio~~

~~Vancouver~~Eastern West Virginia

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The following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting segment as of and for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021. During the fourth quarter of fiscal 2021, we reassessed our operating segments and ~~2020.~~reportable segments and realigned the aggregation of our homebuilding operating segments into six new reportable segments to better allocate our homebuilding operating segments across geographic reporting regions. Segment information for the three and six months ended March 31, 2021 has been reclassified to conform to the current presentation.

Net Sales Orders (1)
Three Months Ended June 30,
Net Homes Sold Value (In millions) Average Selling Price
2021 2020 %
Change 2021 2020 %
Change 2021 2020 %
Change
East 2,158 2,803 (23) % $ 766.3 $ 837.8 (9) % $ 355,100 $ 298,900 19 %
Midwest 789 1,374 (43) % 327.2 483.8 (32) % 414,700 352,100 18 %
Southeast 5,843 6,991 (16) % 1,956.6 1,920.0 2 % 334,900 274,600 22 %
South Central 5,897 6,644 (11) % 1,826.8 1,693.5 8 % 309,800 254,900 22 %
Southwest 830 1,017 (18) % 315.8 285.4 11 % 380,500 280,600 36 %
West 2,435 2,690 (9) % 1,256.2 1,116.8 12 % 515,900 415,200 24 %
17,952 21,519 (17) % $ 6,448.9 $ 6,337.3 2 % $ 359,200 $ 294,500 22 %
Nine Months Ended June 30,
Net Homes Sold Value (In millions) Average Selling Price
2021 2020 %
Change 2021 2020 %
Change 2021 2020 %
Change
East 8,079 7,393 9 % $ 2,702.3 $ 2,188.3 23 % $ 334,500 $ 296,000 13 %
Midwest 3,814 3,514 9 % 1,494.8 1,245.5 20 % 391,900 354,400 11 %
Southeast 22,323 17,381 28 % 6,992.7 4,746.7 47 % 313,300 273,100 15 %
South Central 21,161 16,558 28 % 6,039.7 4,226.7 43 % 285,400 255,300 12 %
Southwest 3,050 2,626 16 % 1,042.8 752.8 39 % 341,900 286,700 19 %
West 7,002 7,260 (4) % 3,441.6 3,147.9 9 % 491,500 433,600 13 %
65,429 54,732 20 % $ 21,713.9 $ 16,307.9 33 % $ 331,900 $ 298,000 11 %


		Sales Order Cancellations											Net Sales Orders (1)
		Three Months Ended June 30,											Three Months Ended March 31,
		Cancelled Sales Orders		Value (In millions)				Cancellation Rate (2)					Net Homes Sold				Value (In millions)						Average Selling Price
		2021	2020	2021		2020		2021		2020			2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest												Northwest	1,342	1,475	(9)	%	$	768.1	$	716.3	7	%	$	572,400	$	485,600	18	%
Southwest												Southwest	2,595	2,966	(13)	%	1,403.2		1,246.6		13	%	540,700		420,300		29	%
South Central												South Central	7,328	7,698	(5)	%	2,511.9		2,180.5		15	%	342,800		283,300		21	%
Southeast												Southeast	6,849	8,642	(21)	%	2,640.9		2,635.8		—	%	385,600		305,000		26	%
East	East	532	841	$	173.3	$	239.7	20	%	23	%	East	3,765	4,397	(14)	%	1,413.1		1,367.4		3	%	375,300		311,000		21	%
Midwest		188	311	68.2		98.8		19	%	18	%
Southeast		1,123	2,005	351.1		556.3		16	%	22	%
South Central		1,438	1,970	417.3		507.4		20	%	23	%
Southwest		164	276	54.0		77.4		16	%	21	%
West		267	565	135.7		243.6		10	%	17	%
North												North	2,461	1,881	31	%	1,012.2		702.4		44	%	411,300		373,400		10	%
		3,712	5,968	$	1,199.6	$	1,723.2	17	%	22	%		24,340	27,059	(10)	%	$	9,749.4	$	8,849.0	10	%	$	400,600	$	327,000	23	%

		Nine Months Ended June 30,											Six Months Ended March 31,
		Cancelled Sales Orders		Value (In millions)				Cancellation Rate (2)					Net Homes Sold				Value (In millions)						Average Selling Price
		2021	2020	2021		2020		2021		2020			2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest												Northwest	2,570	2,472	4	%	$	1,425.3	$	1,187.1	20	%	$	554,600	$	480,200	15	%
Southwest												Southwest	4,896	5,194	(6)	%	2,587.0		2,153.3		20	%	528,400		414,600		27	%
South Central												South Central	13,190	13,870	(5)	%	4,458.0		3,856.3		16	%	338,000		278,000		22	%
Southeast												Southeast	13,243	14,572	(9)	%	4,925.7		4,363.2		13	%	371,900		299,400		24	%
East	East	1,771	1,931	$	549.3	$	551.3	18	%	21	%	East	7,745	8,075	(4)	%	2,868.0		2,486.2		15	%	370,300		307,900		20	%
Midwest		725	696	266.2		225.7		16	%	17	%
Southeast		4,734	4,871	1,404.2		1,340.0		17	%	22	%
South Central		4,483	4,336	1,220.0		1,114.8		17	%	21	%
Southwest		556	660	170.3		187.8		15	%	20	%
West		768	1,251	365.8		552.3		10	%	15	%
North												North	4,218	3,294	28	%	1,741.8		1,218.9		43	%	412,900		370,000		12	%
		13,037	13,745	$	3,975.8	$	3,971.9	17	%	20	%		45,862	47,477	(3)	%	$	18,005.8	$	15,265.0	18	%	$	392,600	$	321,500	22	%


	Sales Order Cancellations
	Three Months Ended March 31,
	Cancelled Sales Orders		Value (In millions)				Cancellation Rate (2)
	2022	2021	2022		2021		2022		2021
Northwest	139	149	$	73.3	$	71.8	9	%	9	%
Southwest	446	355	206.4		135.2		15	%	11	%
South Central	1,450	1,424	476.3		382.0		17	%	16	%
Southeast	1,397	1,769	481.6		515.1		17	%	17	%
East	718	948	249.9		282.0		16	%	18	%
North	358	272	141.2		92.5		13	%	13	%
	4,508	4,917	$	1,628.7	$	1,478.6	16	%	15	%

	Six Months Ended March 31,
	Cancelled Sales Orders		Value (In millions)				Cancellation Rate (2)
	2022	2021	2022		2021		2022		2021
Northwest	287	316	$	150.5	$	149.0	10	%	11	%
Southwest	889	754	411.7		282.1		15	%	13	%
South Central	2,789	2,729	910.0		724.6		17	%	16	%
Southeast	2,480	3,200	842.6		916.6		16	%	18	%
East	1,379	1,811	475.2		528.7		15	%	18	%
North	604	515	238.8		175.2		13	%	14	%
	8,428	9,325	$	3,028.8	$	2,776.2	16	%	16	%

~~________~~________________________

(1)Net sales orders represent the number and dollar value of new sales contracts executed with customers (gross sales orders), net of cancelled sales orders.

(2)Cancellation rate represents the number of cancelled sales orders divided by gross sales orders.

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Net Sales Orders

The number of net sales orders decreased ~~17%~~10% and 3% in the three and six months ended ~~June 30, 2021~~March 31, 2022, respectively, compared to the prior year ~~period, while the~~periods. The value of net sales orders increased 2%10% to ~~$6.4~~$9.7 billion ~~(17,952~~(24,340 homes) and 18% to $18.0 billion (45,862 homes) for the three and six months ended ~~June 30, 2021~~March 31, 2022, respectively, compared to ~~$6.3~~$8.8 billion ~~(21,519~~(27,059 homes) and $15.3 billion (47,477 homes) in the prior year ~~period~~periods, due to the increase in our average selling price. The average selling price of net sales orders during the three and six months ended ~~June 30, 2021~~March 31, 2022 was ~~$359,200,~~$400,600 and $392,600, respectively, up 23% and 22% from the prior year ~~period.~~periods.

~~During~~Demand for our homes during the ~~third quarter~~first half of fiscal ~~2021, demand for homes~~2022 remained strong. However, multiple disruptions in the supply chain, combined with the ~~improvement in economic conditions and~~ strong demand for new homes, have resulted in shortages in certain building materials, ~~and~~which, together with tightness in the labor market, ~~which~~ has caused our construction cycle to lengthen. As a result, ~~during the quarter,~~ we have slowed our home sales pace to more closely align with our production levels, and we are selling homes later in the construction cycle when we have more certainty regarding the home close date for our homebuyers. Based on the stage of completion of our current homes in inventory, production schedules and capacity, we expect to continue restricting the pace of our sales orders ~~during~~as necessary in our ~~fourth~~communities in the near term to match our production levels. Although these challenges may persist to some degree for some time, we currently expect to close more homes in fiscal ~~quarter.~~2022 than we closed in fiscal 2021.

The number of net sales orders ~~increased 20%~~decreased 10% in the ~~nine~~three months ended ~~June 30, 2021~~March 31, 2022 compared to the prior year ~~period,~~period. In regions with a decrease in sales order volume, the markets contributing most to the decreases were: the Seattle and Denver markets in the Northwest; the Phoenix market in the Southwest; the Fort Worth market in the South Central; the Louisiana, Tampa and Orlando markets in the Southeast; and the ~~value of net sales orders increased 33% to $21.7 billion (65,429 homes) for the nine months ended June 30, 2021 compared to $16.3 billion (54,732 homes)~~Charlotte, Greenville and Atlanta markets in the ~~prior year period. The average selling price of net sales orders during the nine months ended June 30, 2021 was $331,900, up 11% from the prior year period.~~

East. The markets contributing most to the ~~year to date increases~~increase in sales ~~volumes in our regions~~order volume in the ~~nine month period~~North were ~~as follows:~~ the ~~Carolina markets~~Indianapolis, Ohio and Chicago markets.

The number of net sales orders decreased 3% in the East; the Denver market in the Midwest; the Florida markets (particularly Tampa) in the Southeast; the San Antonio, Dallas and Louisiana markets in the South Central; and the Phoenix market in the Southwest. The decrease in sales volume in our West region in both periodssix months ended March 31, 2022 compared to the prior year ~~was primarily due~~period. In regions with a decrease in sales order volume, the markets contributing most to ~~our Seattle~~the decreases were: the Arizona markets in the Southwest; the Fort Worth market in the South Central; the Louisiana and Orlando markets in the Southeast; and the Atlanta and Charlotte markets in the East. In regions with an increase in sales order volume, the markets contributing most to the increases were: the Portland ~~markets.~~and Salt Lake City markets in the Northwest and the Indianapolis, Chicago and Iowa markets in the North.

Our sales order cancellation rate (cancelled sales orders divided by gross sales orders for the period) was ~~17%~~16% in both the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 compared to ~~22%~~15% and ~~20%~~16% in the prior year periods.


		Sales Order Backlog																	Sales Order Backlog
		As of June 30,																	As of March 31,
		Homes in Backlog				Value (In millions)						Average Selling Price							Homes in Backlog				Value (In millions)						Average Selling Price
		2021	2020	% Change		2021		2020		% Change		2021		2020		% Change			2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest																		Northwest	1,353	1,648	(18)	%	$	737.6	$	784.5	(6)	%	$	545,200	$	476,000	15	%
Southwest																		Southwest	4,069	4,534	(10)	%	2,036.4		1,756.3		16	%	500,500		387,400		29	%
South Central																		South Central	10,876	10,777	1	%	3,754.6		3,046.9		23	%	345,200		282,700		22	%
Southeast																		Southeast	9,734	10,269	(5)	%	3,703.9		3,156.9		17	%	380,500		307,400		24	%
East	East	3,324	3,028	10	%	$	1,141.2	$	929.3	23	%	$	343,300	$	306,900	12	%	East	5,365	5,845	(8)	%	2,045.9		1,838.9		11	%	381,300		314,600		21	%
Midwest		2,075	1,834	13	%	832.3		646.6		29	%	401,100		352,600		14	%
Southeast		9,831	6,675	47	%	3,275.3		1,873.7		75	%	333,200		280,700		19	%
South Central		11,601	7,380	57	%	3,467.0		1,920.0		81	%	298,900		260,200		15	%
Southwest		2,529	1,348	88	%	872.7		384.8		127	%	345,100		285,500		21	%
West		2,849	2,940	(3)	%	1,433.7		1,259.4		14	%	503,200		428,400		17	%
North																		North	2,462	2,772	(11)	%	1,034.9		1,029.9		—	%	420,300		371,500		13	%
		32,209	23,205	39	%	$	11,022.2	$	7,013.8	57	%	$	342,200	$	302,300	13	%		33,859	35,845	(6)	%	$	13,313.3	$	11,613.4	15	%	$	393,200	$	324,000	21	%

Sales Order Backlog

Sales order backlog represents homes under contract but not yet closed at the end of the period. Many of the contracts in our sales order backlog are subject to contingencies, including mortgage loan approval and buyers selling their existing homes, which can result in cancellations. A portion of the contracts in backlog will not result in closings due to cancellations.

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Homes Closed and Home Sales Revenue
Three Months Ended June 30,
Homes Closed Value (In millions) Average Selling Price
2021 2020 %
Change 2021 2020 %
Change 2021 2020 %
Change
East 3,077 2,500 23 % $ 1,032.6 $ 735.2 40 % $ 335,600 $ 294,100 14 %
Midwest 1,371 1,053 30 % 514.2 372.7 38 % 375,100 353,900 6 %
Southeast 7,456 5,921 26 % 2,276.4 1,627.8 40 % 305,300 274,900 11 %
South Central 6,222 5,397 15 % 1,705.1 1,375.6 24 % 274,000 254,900 7 %
Southwest 946 750 26 % 291.0 213.8 36 % 307,600 285,100 8 %
West 2,516 2,021 24 % 1,220.8 882.5 38 % 485,200 436,700 11 %
21,588 17,642 22 % $ 7,040.1 $ 5,207.6 35 % $ 326,100 $ 295,200 10 %
Nine Months Ended June 30,
Homes Closed Value (In millions) Average Selling Price
2021 2020 %
Change 2021 2020 %
Change 2021 2020 %
Change
East 8,338 6,281 33 % $ 2,698.4 $ 1,835.1 47 % $ 323,600 $ 292,200 11 %
Midwest 3,755 2,743 37 % 1,394.1 963.6 45 % 371,300 351,300 6 %
Southeast 20,748 14,983 38 % 6,095.9 4,092.5 49 % 293,800 273,100 8 %
South Central 17,598 13,344 32 % 4,681.4 3,390.8 38 % 266,000 254,100 5 %
Southwest 2,526 2,093 21 % 766.3 609.5 26 % 303,400 291,200 4 %
West 7,063 5,696 24 % 3,273.1 2,542.7 29 % 463,400 446,400 4 %
60,028 45,140 33 % $ 18,909.2 $ 13,434.2 41 % $ 315,000 $ 297,600 6 %


	Homes Closed and Home Sales Revenue
	Three Months Ended March 31,
	Homes Closed				Value (In millions)						Average Selling Price
	2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest	1,146	1,161	(1)	%	$	636.5	$	548.5	16	%	$	555,400	$	472,400	18	%
Southwest	2,321	2,260	3	%	1,135.0		909.4		25	%	489,000		402,400		22	%
South Central	5,610	5,210	8	%	1,836.4		1,383.5		33	%	327,300		265,500		23	%
Southeast	5,504	5,967	(8)	%	1,946.3		1,710.7		14	%	353,600		286,700		23	%
East	3,469	3,590	(3)	%	1,216.8		1,070.7		14	%	350,800		298,200		18	%
North	1,778	1,513	18	%	728.2		547.6		33	%	409,600		361,900		13	%
	19,828	19,701	1	%	$	7,499.2	$	6,170.4	22	%	$	378,200	$	313,200	21	%

	Six Months Ended March 31,
	Homes Closed				Value (In millions)						Average Selling Price
	2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest	2,171	2,368	(8)	%	$	1,185.4	$	1,095.7	8	%	$	546,000	$	462,700	18	%
Southwest	4,265	4,402	(3)	%	2,046.5		1,738.4		18	%	479,800		394,900		21	%
South Central	11,047	10,431	6	%	3,528.8		2,746.0		29	%	319,400		263,300		21	%
Southeast	10,828	11,225	(4)	%	3,756.5		3,174.9		18	%	346,900		282,800		23	%
East	6,597	7,087	(7)	%	2,291.5		2,073.8		10	%	347,400		292,600		19	%
North	3,316	2,927	13	%	1,346.9		1,040.3		29	%	406,200		355,400		14	%
	38,224	38,440	(1)	%	$	14,155.6	$	11,869.1	19	%	$	370,300	$	308,800	20	%

Home Sales Revenue

Revenues from home sales increased ~~35%~~22% to ~~$7.0~~$7.5 billion ~~(21,588~~(19,828 homes closed) for the three months ended ~~June 30, 2021~~March 31, 2022 from ~~$5.2~~$6.2 billion ~~(17,642~~(19,701 homes closed) in the prior year period. Revenues from home sales increased ~~41%~~19% to ~~$18.9~~$14.2 billion ~~(60,028~~(38,224 homes closed) for the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 from ~~$13.4~~$11.9 billion ~~(45,140~~(38,440 homes closed) in the prior year period. ~~Home~~Although home closings in recent quarters have been negatively impacted by supply chain disruptions, home sales revenues increased in all of our regions due to an increase in ~~the number of homes closed and an increase in~~ average selling ~~prices. Home sales revenues and the number of homes closed exclude sales of single-family and multi-family rental communities.~~price.

The number of homes closed increased ~~22%~~1% in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the prior year period. ~~The~~In regions with an increase in closings volume, the markets contributing most to the increased closing volumes in our regions were as follows: the Carolina markets (particularly Myrtle Beach) in the East; the Indianapolis and Denver markets in the Midwest; the Florida markets (particularly Tampa) in the Southeast; the Houston, Louisiana and Austin markets in the South Central;increases were: the Phoenix market in the Southwest; the Dallas and ~~the Salt Lake City, Reno and Sacramento~~Houston markets in the ~~West.~~South Central; and the Chicago, Iowa and New Jersey markets in the North. In regions with a decrease in closings volume, the markets contributing most to the decreases were: the Seattle market in the Northwest; the Orlando market in the Southeast; and the Atlanta market in the East.

The number of homes closed ~~increased 33%~~decreased 1% in the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 compared to the prior year period. ~~The~~In regions with a decrease in closings volume, the markets contributing most to the ~~increased closing volumes in our regions were as follows:~~decreases were: the ~~Carolina markets (particularly Myrtle Beach)~~Seattle market in the ~~East;~~Northwest; the ~~Denver and Indianapolis markets~~Las Vegas market in the ~~Midwest;~~Southwest; the ~~Florida markets (particularly Tampa)~~Orlando market in the Southeast; and the ~~Houston,~~Atlanta market in the East. In regions with an increase in closings volume, the markets contributing most to the increases were: the Dallas and ~~San Antonio~~Fort Worth markets in the South ~~Central; the Phoenix market in the Southwest;~~Central and the ~~Las Vegas, Southern California~~Chicago and ~~Sacramento~~New Jersey markets in the ~~West.~~North.

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Homebuilding Operating Margin Analysis	Homebuilding Operating Margin Analysis									Homebuilding Operating Margin Analysis
		Percentages of Related Revenues									Percentages of Related Revenues
		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended March 31,				Six Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Gross profit – home sales	Gross profit – home sales	25.9	%	21.6	%	24.9	%	21.3	%	Gross profit – home sales	28.9	%	24.6	%	28.2	%	24.4	%
Gross profit – land/lot sales and other	Gross profit – land/lot sales and other	52.3	%	29.7	%	39.3	%	29.8	%	Gross profit – land/lot sales and other	56.6	%	17.5	%	33.1	%	21.0	%
Inventory and land option charges	Inventory and land option charges	(0.1)	%	(0.1)	%	(0.1)	%	(0.1)	%	Inventory and land option charges	(0.1)	%	(0.1)	%	(0.1)	%	(0.1)	%
Gross profit – total homebuilding	Gross profit – total homebuilding	25.9	%	21.5	%	24.9	%	21.2	%	Gross profit – total homebuilding	28.8	%	24.5	%	28.1	%	24.3	%
Selling, general and administrative expense	Selling, general and administrative expense	7.1	%	7.9	%	7.5	%	8.4	%	Selling, general and administrative expense	6.8	%	7.6	%	7.1	%	7.7	%
Gain on sale of assets		—	%	—	%	(0.1)	%	—	%
Other (income) expense	Other (income) expense	(0.1)	%	—	%	(0.1)	%	(0.1)	%	Other (income) expense	—	%	—	%	(0.1)	%	—	%
Homebuilding pre-tax income	Homebuilding pre-tax income	18.9	%	13.6	%	17.5	%	12.9	%	Homebuilding pre-tax income	22.0	%	17.0	%	21.0	%	16.6	%

Home Sales Gross Profit

Gross profit from home sales increased to ~~$1.8~~$2.2 billion in the three months ended ~~June 30, 2021~~March 31, 2022 from ~~$1.1~~$1.5 billion in the prior year period and increased 430 basis points to ~~25.9%~~28.9% as a percentage of home sales revenues. The percentage increase resulted from improvements of ~~390~~420 basis points due to the average selling price of our homes closed increasing by more than the average cost of those homes and 20 basis points due to a decrease in the amortization of capitalized interest, ~~and 20 basis points due to a decrease in~~partially offset by increased warranty and construction defect ~~costs.~~costs of 10 basis points.

Gross profit from home sales increased to ~~$4.7~~$4.0 billion in the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 from $2.9 billion in the prior year period and increased ~~360~~380 basis points to ~~24.9%~~28.2% as a percentage of home sales revenues. The percentage increase resulted from improvements of ~~330~~380 basis points due to the average selling price of our homes closed increasing by more than the average cost of those homes ~~20 basis points due to a decrease in warranty and construction defect costs~~ and 10 basis points due to a decrease in the amortization of capitalized ~~interest.~~interest, partially offset by increased warranty and construction defect costs of 10 basis points.

We remain focused on managing the pricing, incentives and sales pace in each of our communities to optimize the returns on our inventory investments and adjust to local market conditions and new home demand. These actions could cause our gross profit margins to fluctuate in future periods. If new home demand declines from current levels, we would expect our gross profit margins to also decline.

Land/Lot Sales and Other Revenues

Land/lot sales and other revenues from our homebuilding operations were ~~$30.2~~$7.6 million and ~~$67.4~~$30.5 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, and ~~$14.5~~$15.4 million and ~~$49.7~~$33.3 million in the comparable periods of fiscal 2020. During the current quarter, we began recording bulk sales of single-family rental communities in land/lot sales and other revenues in our homebuilding segment. Revenues during the three and nine months ended June 30, 2021 included our sale of a single-family rental community for $23.1 million in the current quarter, which generated $11.4 million of gross profit.2021.

We continually evaluate our land and lot supply, and fluctuations in revenues and profitability from land sales occur based on how we manage our inventory levels in various markets. We generally purchase land and lots with the intent to build and sell homes on them. However, some of the land that we purchase includes commercially zoned parcels that we may sell to commercial developers. We may also sell residential lots or land parcels to manage our supply or for other strategic reasons. As of ~~June 30, 2021,~~March 31, 2022, our homebuilding operations had ~~$23.5~~$21.6 million of land held for sale that we expect to sell in the next twelve months.

~~Table of Contents~~

Inventory and Land Option Charges

At the end of each quarter, we review the performance and outlook for all of our communities and land inventories for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of ~~June 30, 2021, we determined that~~this review, there were no ~~communities were impaired, and no impairment charges were~~impairments recorded in our homebuilding segment during the three and six months ended ~~June 30, 2021. During the nine months ended June 30, 2021, impairment charges totaled $5.6 million.~~March 31, 2022. There were no impairment charges recorded in the prior year quarter and ~~$1.7~~$5.6 million of impairment charges recorded in our homebuilding segment in the ~~nine~~six months ended ~~June 30, 2020.~~March 31, 2021.

Table of Contents

As we manage our inventory investments across our operating markets to optimize returns and cash flows, we may modify our pricing and incentives, construction and development plans or land sale strategies in individual active communities and land held for development, which could result in the affected communities being evaluated for potential impairment. If the housing market or economic conditions are adversely affected for a prolonged period, we may be required to evaluate additional communities for potential impairment. These evaluations could result in additional impairment charges which could be significant.

During the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, earnest money and pre-acquisition cost write-offs related to land purchase contracts that we have terminated or expect to terminate were ~~$4.9~~$9.8 million and ~~$10.4~~$13.7 million, respectively, compared to ~~$4.9~~$3.2 million and ~~$15.6~~$5.6 million in the same periods of fiscal ~~2020.~~2021.

Selling, General and Administrative (SG&A) Expense

SG&A expense from homebuilding activities increased ~~21%~~8% to ~~$502.0~~$507.3 million and ~~25%~~10% to ~~$1.4~~$1.0 billion in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, from ~~$415.1~~$467.6 million and ~~$1.1 billion~~$917.0 million in the prior year periods. SG&A expense as a percentage of homebuilding revenues was ~~7.1%~~6.8% and ~~7.5%~~7.1% in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~7.9%~~7.6% and ~~8.4%~~7.7% in the prior year periods.

Employee compensation and related costs were $420.4 million and $830.1 million in the three and six months ended March 31, 2022, respectively, compared to $382.3 million and $738.3 million in the same periods of fiscal 2021. Employee compensation and related costs represented ~~82% and 81%~~83% of SG&A costs in both the three and ~~nine~~six months ended ~~June 30, 2021, respectively,~~March 31, 2022 compared to ~~77%~~82% and ~~75%~~81%, respectively, in the prior year periods. These costs increased ~~29% to $411.6 million~~10% and ~~36% to $1.1 billion~~12% in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, from ~~$320.3 million and $848.0 million in~~ the prior year periods. Our homebuilding operations employed ~~8,203~~9,160 and ~~7,077~~7,916 people at ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

We attempt to control our SG&A costs while ensuring that our infrastructure adequately supports our operations; however, we cannot make assurances that we will be able to maintain or improve upon the current SG&A expense as a percentage of revenues.

Interest Incurred

We capitalize interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. Interest incurred by our homebuilding operations was ~~$22.7~~$25.6 million and ~~$69.7~~$50.4 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$22.3~~$22.6 million and ~~$69.5~~$47.0 million in the prior year periods. Interest charged to cost of sales was 0.7% of total cost of sales (excluding inventory and land option charges) in both the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 compared to 0.7% and 0.8% in ~~both~~the prior year periods.

~~Gain on Sale of Assets~~

In December 2020, we sold a single-family rental community for $31.8 million which resulted in a gain on sale of $13.1 million in our homebuilding segment and $0.9 million in our other businesses during the nine months ended June 30, 2021.

~~Table of Contents~~

Other Income

Other income, net of other expenses, included in our homebuilding operations was ~~$7.1~~$1.6 million and ~~$10.4~~$7.9 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$0.2~~$1.8 million and ~~$9.7~~$3.9 million in the prior year periods. Other income consists of interest income and various other types of ancillary income, gains, expenses and losses not directly associated with sales of homes, land and lots. ~~Beginning in the current quarter, rental income of $2.9 million from our single-family rental communities is also included in other income in our homebuilding segment.~~ The activities that result in this ancillary income are not significant, either individually or in the aggregate.

~~Business Acquisition~~

In October 2020, we acquired the homebuilding operations of Braselton Homes in Corpus Christi, Texas for approximately $23.0 million in cash. The assets acquired included approximately 90 homes in inventory, 95 lots and control of approximately 840 additional lots through purchase contracts. We also acquired a sales order backlog of approximately 125 homes.

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Homebuilding Results by Reporting Region


		Three Months Ended June 30,													Three Months Ended March 31,
		2021						2020							2022						2021
		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues			Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues
		(In millions)													(In millions)
Northwest														Northwest	$	637.0	$	148.2	23.3	%	$	548.5	$	93.9	17.1	%
Southwest														Southwest	1,135.1		226.6		20.0	%	912.9		130.5		14.3	%
South Central														South Central	1,838.4		416.0		22.6	%	1,384.7		251.9		18.2	%
Southeast														Southeast	1,946.5		482.2		24.8	%	1,720.7		317.2		18.4	%
East	East	$	1,032.7	$	190.3	18.4	%	$	736.3	$	106.9	14.5	%	East	1,219.5		265.9		21.8	%	1,070.9		185.2		17.3	%
Midwest		514.6		67.2		13.1	%	373.3		34.1		9.1	%
Southeast		2,300.1		465.3		20.2	%	1,629.1		233.5		14.3	%
South Central		1,709.8		323.1		18.9	%	1,376.4		201.8		14.7	%
Southwest		291.0		46.7		16.0	%	216.1		29.7		13.7	%
West		1,222.1		244.3		20.0	%	890.9		103.8		11.7	%
North														North	730.3		113.9		15.6	%	548.1		73.4		13.4	%
		$	7,070.3	$	1,336.9	18.9	%	$	5,222.1	$	709.8	13.6	%		$	7,506.8	$	1,652.8	22.0	%	$	6,185.8	$	1,052.1	17.0	%

		Nine Months Ended June 30,													Six Months Ended March 31,
		2021						2020							2022						2021
		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues			Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues
		(In millions)													(In millions)
Northwest														Northwest	$	1,205.9	$	260.0	21.6	%	$	1,096.5	$	180.7	16.5	%
Southwest														Southwest	2,046.7		385.9		18.9	%	1,751.5		245.7		14.0	%
South Central														South Central	3,532.7		770.3		21.8	%	2,748.2		491.9		17.9	%
Southeast														Southeast	3,757.5		897.7		23.9	%	3,185.7		564.4		17.7	%
East	East	$	2,703.4	$	468.8	17.3	%	$	1,836.5	$	240.1	13.1	%	East	2,294.3		468.2		20.4	%	2,078.6		355.9		17.1	%
Midwest		1,396.1		177.3		12.7	%	964.6		76.4		7.9	%
Southeast		6,133.4		1,147.8		18.7	%	4,096.4		567.4		13.9	%
South Central		4,688.8		854.6		18.2	%	3,401.5		490.7		14.4	%
Southwest		766.7		124.8		16.3	%	626.8		95.0		15.2	%
West		3,288.2		550.9		16.8	%	2,558.1		267.3		10.4	%
North														North	1,349.0		203.8		15.1	%	1,041.9		136.1		13.1	%
		$	18,976.6	$	3,324.2	17.5	%	$	13,483.9	$	1,736.9	12.9	%		$	14,186.1	$	2,985.9	21.0	%	$	11,902.4	$	1,974.7	16.6	%

______________

(1)Expenses maintained at the corporate level consist primarily of interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly, and the expenses related to operating our corporate office. The amortization of capitalized interest and property taxes is allocated to each segment based on the segment’s cost of sales, while expenses associated with the corporate office are allocated to each segment based on the segment’s inventory balances.

~~East~~Northwest Region — Homebuilding revenues increased ~~40%~~16% and ~~47%~~10% in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods, ~~primarily~~ due to increases in the ~~number~~average selling price of homes closed in ~~our Myrtle Beach, Delaware, Raleigh and Suburban Washington, D.C.~~all markets. The region generated pre-tax income of ~~$190.3~~$148.2 million and ~~$468.8~~$260.0 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$106.9~~$93.9 million and ~~$240.1~~$180.7 million in the prior year periods. Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) increased by ~~340~~560 and ~~350~~530 basis points in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 60 and ~~100~~10 basis points in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.

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~~Midwest~~Southwest Region — Homebuilding revenues increased ~~38%~~24% and ~~45%~~17% in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods, primarily due to increases in the ~~number~~average selling price of homes closed in ~~our Denver, Indianapolis and Chicago~~most markets. The region generated pre-tax income of ~~$67.2~~$226.6 million and ~~$177.3~~$385.9 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$34.1~~$130.5 million and ~~$76.4~~$245.7 million in the prior year periods. Home sales gross profit percentage increased by ~~310~~440 and ~~340~~400 basis points in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 10120 and ~~120~~80 basis points in the three and ~~nine~~six months ended ~~June 30, 2021, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.~~

~~Southeast Region~~ — Homebuilding revenues increased 41% and 50% in the three and nine months ended June 30, 2021, respectively, compared to the prior year periods, primarily due to increases in the number of homes closed in all of our markets. The region generated pre-tax income of $465.3 million and $1.1 billion in the three and nine months ended June 30, 2021, respectively, compared to $233.5 million and $567.4 million in the prior year periods. Home sales gross profit percentage increased by 460 and 380 basis points in the three and nine months ended June 30, 2021, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing while the average cost of those homes decreased slightly. As a percentage of homebuilding revenues, SG&A expenses decreased by 90 and 100 basis points in the three and nine months ended June 30, 2021,March 31, 2022, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.

South Central Region — Homebuilding revenues increased ~~24%~~33% and ~~38%~~29% in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods, primarily due to increases in the ~~number~~average selling price of homes closed in ~~our Houston, Dallas, San Antonio and Austin~~all markets. The region generated pre-tax income of ~~$323.1~~$416.0 million and ~~$854.6~~$770.3 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$201.8~~$251.9 million and ~~$490.7~~$491.9 million in the prior year periods. Home sales gross profit percentage increased by 360 and ~~270~~310 basis points in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 100 and 90 basis points in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.

Southeast Region — Homebuilding revenues increased 13% and 18% in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, due to the increases in the average selling price of homes closed in most markets. The region generated pre-tax income of $482.2 million and $897.7 million in the three and six months ended March 31, 2022, respectively, compared to $317.2 million and $564.4 million in the prior year periods. Home sales gross profit percentage increased by 550 and 510 basis points in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 70 and 80 basis points in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.

East Region — Homebuilding revenues increased 14% and 10% in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, due to increases in the average selling price of homes closed in all markets. The region generated pre-tax income of $265.9 million and $468.2 million in the three and six months ended March 31, 2022, respectively, compared to $185.2 million and $355.9 million in the prior year periods. Home sales gross profit percentage increased by 420 and 310 basis points in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 50 and 20 basis points in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.

North Region — Homebuilding revenues increased 33% and 29% in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, primarily due to increases in the average selling price of homes closed in all markets. The region generated pre-tax income of $113.9 million and $203.8 million in the three and six months ended March 31, 2022, respectively, compared to $73.4 million and $136.1 million in the prior year periods. Home sales gross profit percentage increased by 170 and 180 basis points in the three and six months ended March 31, 2022, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 60 and 7030 basis points in the three and ~~nine~~six months ended ~~June 30, 2021, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.~~

~~Southwest Region~~ — Homebuilding revenues increased 35% and 22% in the three and nine months ended June 30, 2021, respectively, compared to the prior year periods, primarily due to increases in the number of homes closed in our Phoenix market. The region generated pre-tax income of $46.7 million and $124.8 million in the three and nine months ended June 30, 2021, respectively, compared to $29.7 million and $95.0 million in the prior year periods. Home sales gross profit percentage increased by 190 and 180 basis points in the three and nine months ended June 30, 2021, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 40 basis points and increased by 50 basis points in the three and nine months ended June 30, 2021, respectively, compared to the prior year periods. The increase in the nine month period was due to increased employee compensation and related costs to support inventory growth.

~~West Region~~ — Homebuilding revenues increased 37% and 29% in the three and nine months ended June 30, 2021, respectively, compared to the prior year periods, primarily due to increases in the number of homes closed in our Southern California, Las Vegas, Sacramento and Reno markets. The region generated pre-tax income of $244.3 million and $550.9 million in the three and nine months ended June 30, 2021, respectively, compared to $103.8 million and $267.3 million in the prior year periods. Home sales gross profit percentage increased by 650 and 500 basis points in the three and nine months ended June 30, 2021, respectively, compared to the prior year periods, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes in the three month period and the average cost of homes closed decreasing while the average selling price increased in the nine month period. As a percentage of homebuilding revenues, SG&A expenses decreased by 170 and 130 basis points in the three and nine months ended June 30, 2021,March 31, 2022, respectively, compared to the prior year periods, primarily due to the increase in homebuilding revenues.

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HOMEBUILDING INVENTORIES, LAND AND LOT POSITION AND HOMES IN INVENTORY

We routinely enter into contracts to purchase land or developed residential lots at predetermined prices on a defined schedule commensurate with planned development or anticipated new home demand. At the time of purchase, the undeveloped land is generally vested with the rights to begin development or construction work, and we plan and coordinate the development of our land into residential lots for use in our homebuilding business. We manage our inventory of owned land and lots and homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.

Our homebuilding segment’s inventories at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020~~2021 are summarized as follows:


		As of June 30, 2021													As of March 31, 2022
		Construction in Progress and Finished Homes		Residential Land/Lots Developed and Under Development		Land Held for Development		Land Held for Sale		Rental Properties (1)		Total Inventory			Construction in Progress and Finished Homes		Residential Land/Lots Developed and Under Development		Land Held for Development		Land Held for Sale		Total Inventory
		(In millions)													(In millions)
Northwest														Northwest	$	726.7	$	838.6	$	—	$	1.7	$	1,567.0
Southwest														Southwest	1,521.0		1,338.9		7.0		18.9		2,885.8
South Central														South Central	2,547.0		1,536.4		0.3		0.7		4,084.4
Southeast														Southeast	2,526.4		1,264.7		13.1		—		3,804.2
East	East	$	955.8	$	611.1	$	5.6	$	1.4	$	31.7	$	1,605.6	East	1,492.7		941.6		—		—		2,434.3
Midwest		697.8		506.1		—		1.8		20.2		1,225.9
Southeast		2,200.7		1,135.7		17.3		0.6		156.3		3,510.6
South Central		2,151.7		1,639.1		0.3		—		33.5		3,824.6
Southwest		417.0		512.1		1.1		—		25.5		955.7
West		1,291.7		1,183.9		5.7		19.4		35.9		2,536.6
North														North	1,107.2		551.3		5.3		—		1,663.8
Corporate and unallocated ~~(2)~~(1)	Corporate and unallocated ~~(2)~~(1)	123.1		87.4		0.4		0.3		—		211.2		Corporate and unallocated ~~(2)~~(1)	126.5		79.3		0.3		0.3		206.4
		$	7,837.8	$	5,675.4	$	30.4	$	23.5	$	303.1	$	13,870.2		$	10,047.5	$	6,550.8	$	26.0	$	21.6	$	16,645.9


		As of September 30, 2020											As of September 30, 2021
		Construction in Progress and Finished Homes		Residential Land/Lots Developed and Under Development		Land Held for Development		Land Held for Sale		Total Inventory			Construction in Progress and Finished Homes		Residential Land/Lots Developed and Under Development		Land Held for Development		Land Held for Sale		Total Inventory
		(In millions)											(In millions)
Northwest												Northwest	$	609.6	$	685.4	$	—	$	12.5	$	1,307.5
Southwest												Southwest	1,113.5		1,315.8		6.9		9.4		2,445.6
South Central												South Central	1,977.4		1,501.5		0.4		—		3,479.3
Southeast												Southeast	2,002.4		1,160.1		16.1		—		3,178.6
East	East	$	785.3	$	531.2	$	5.5	$	6.3	$	1,328.3	East	1,124.6		792.3		1.3		1.4		1,919.6
Midwest		497.0		459.0		1.8		0.7		958.5
Southeast		1,655.5		1,231.5		32.3		0.6		2,919.9
South Central		1,596.3		1,282.3		0.3		1.0		2,879.9
Southwest		244.2		449.7		1.6		0.3		695.8
West		1,137.3		847.1		5.7		19.0		2,009.1
North												North	901.4		460.4		5.3		1.8		1,368.9
Corporate and unallocated ~~(2)~~(1)	Corporate and unallocated ~~(2)~~(1)	121.9		100.6		0.6		0.4		223.5		Corporate and unallocated ~~(2)~~(1)	119.1		88.5		0.4		0.3		208.3
		$	6,037.5	$	4,901.4	$	47.8	$	28.3	$	11,015.0		$	7,848.0	$	6,004.0	$	30.4	$	25.4	$	13,907.8

__________

(1)These inventory amounts relate to our single-family rental communities that are reported in our homebuilding segment. Multi-family rental property inventory totaling $436.3 million at June 30, 2021 is included in our other segment.

~~(2)~~Corporate and unallocated inventory consists primarily of capitalized interest and property taxes.

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Our ~~homebuilding segment’s~~ land and lot position and homes in inventory at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020~~2021 are summarized as follows:

As of June 30, 2021
Land/Lots
Owned (1) Lots Controlled
Through
Land and Lot
Purchase
Contracts (2)(3) Total
Land/Lots
Owned and
Controlled Homes
in
Inventory (4)
East 12,800 78,100 90,900 5,600
Midwest 8,400 29,600 38,000 3,700
Southeast 25,600 139,700 165,300 14,600
South Central 47,200 93,300 140,500 15,500
Southwest 7,000 16,100 23,100 3,000
West 22,900 36,400 59,300 4,900
123,900 393,200 517,100 47,300
24 % 76 % 100 %


	As of March 31, 2022
	Land/Lots Owned (1)		Lots Controlled Through Land and Lot Purchase Contracts (2)(3)		Total Land/Lots Owned and Controlled		Homes in Inventory (4)
Northwest	10,500		32,200		42,700		3,100
Southwest	22,300		38,000		60,300		7,200
South Central	41,400		68,600		110,000		17,500
Southeast	26,200		131,900		158,100		17,100
East	20,200		107,000		127,200		9,200
North	10,600		65,100		75,700		5,700
	131,200		442,800		574,000		59,800
	23	%	77	%	100	%


		As of September 30, 2020								As of September 30, 2021
		Land/Lots Owned (1)		Lots Controlled Through Land and Lot Purchase Contracts (2)(3)		Total Land/Lots Owned and Controlled		Homes in Inventory (4)		Land/Lots Owned (1)		Lots Controlled Through Land and Lot Purchase Contracts (2)(3)		Total Land/Lots Owned and Controlled		Homes in Inventory (4)
Northwest									Northwest	9,000		31,400		40,400		2,600
Southwest									Southwest	22,800		34,300		57,100		5,500
South Central									South Central	42,800		79,000		121,800		14,000
Southeast									Southeast	26,700		125,500		152,200		13,600
East	East	11,300		50,500		61,800		4,900	East	17,300		83,100		100,400		7,300
Midwest		8,000		17,800		25,800		2,600
Southeast		28,700		95,700		124,400		11,500
South Central		40,100		65,200		105,300		12,600
Southwest		7,200		7,600		14,800		1,800
West		17,300		27,500		44,800		4,600
North									North	9,200		49,200		58,400		4,800
		112,600		264,300		376,900		38,000		127,800		402,500		530,300		47,800
		30	%	70	%	100	%			24	%	76	%	100	%

___________________

(1)Land/lots owned included approximately ~~31,100~~30,200 and ~~33,800~~30,800 owned lots that are fully developed and ready for home construction at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively. Land/lots owned also included land held for development representing ~~1,400~~600 and ~~1,600~~1,300 lots at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020, respectively. Land/lots owned exclude 3,400 and 100 lots related to our single-family rental operations at June 30,~~ 2021, ~~and September 30, 2020,~~ respectively.

(2)The total remaining purchase price of lots controlled through land and lot purchase contracts at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020~~2021 was ~~$15.0~~$18.7 billion and ~~$9.9~~$15.5 billion, respectively, secured by earnest money deposits of ~~$999.8 million~~$1.4 billion and ~~$653.4 million,~~$1.1 billion, respectively. The total remaining purchase price of lots controlled through land and lot purchase contracts at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020~~2021 included ~~$1.6~~$1.5 billion and ~~$1.0~~$1.6 billion, respectively, related to lot purchase contracts with Forestar, secured by ~~$152.7~~$137.7 million and ~~$98.2~~$151.0 million, respectively, of earnest money.

(3)Lots controlled at ~~June 30, 2021~~March 31, 2022 included approximately ~~39,400~~36,700 lots owned or controlled by Forestar, ~~21,500~~19,100 of which our homebuilding divisions have under contract to purchase and ~~17,900~~17,600 of which our homebuilding divisions have a right of first offer to purchase. Of these, approximately ~~20,500~~15,500 lots were in our Southeast region, ~~5,100~~6,300 lots were in our East region, 5,400 lots were in our Southwest region, 4,600 lots were in our South Central region, ~~4,900~~3,600 lots were in our ~~West~~North region ~~4,000~~and 1,300 lots were in our ~~East region, 2,500 lots were in our Southwest region and 2,400 lots were in our Midwest~~Northwest region. Lots controlled at September 30, ~~2020~~2021 included approximately ~~30,400~~39,200 lots owned or controlled by Forestar, ~~14,000~~21,000 of which our homebuilding divisions had under contract to purchase and ~~16,400~~18,200 of which our homebuilding divisions had a right of first offer to purchase.

(4)Approximately ~~15,400~~26,000 and ~~14,900~~21,700 of our homes in inventory were unsold at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively. At ~~June~~March 31, 2022, approximately 600 of our unsold homes were completed, of which approximately 60 homes had been completed for more than six months. At September 30, 2021, approximately ~~500~~900 of our unsold homes were completed, of which approximately 100 homes had been completed for more than six months. ~~At September 30, 2020, approximately 1,900 of our unsold homes were completed, of which approximately 300 homes had been completed for more than six months.~~ Homes in inventory ~~exclude 1,300 and 600 homes related to our single-family rental operations at June 30, 2021 and September 30, 2020, respectively, and also~~ exclude approximately 1,800 model homes at both ~~dates.~~March 31, 2022 and September 30, 2021.

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RESULTS OF OPERATIONS – FORESTAR

In fiscal 2018, we acquired 75% of the outstanding shares of Forestar and at ~~June 30, 2021,~~March 31, 2022, we owned ~~64%~~63% of its outstanding shares. Forestar is a publicly traded residential lot development company with operations in 5553 markets across 2223 states as of ~~June 30, 2021.~~March 31, 2022. Forestar’s segment results are presented on their historical cost basis, consistent with the manner in which management evaluates segment performance. (See Note B to the accompanying financial statements for additional Forestar segment information.)

Results of operations for the Forestar segment for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:

Three Months Ended
June 30, Nine Months Ended
June 30,
2021 2020 2021 2020
(In millions)
Residential lot sales $ 307.4 $ 164.4 $ 894.5 $ 537.9
Tract sales and other 5.5 13.5 12.6 46.4
Total revenues $ 312.9 $ 177.9 $ 907.1 $ 584.3
Cost of sales 257.1 157.1 753.8 510.3
Selling, general and administrative expense 16.9 11.2 48.7 32.8
Gain on sale of assets — — — (0.1)
Loss on extinguishment of debt 18.1 — 18.1 —
Other (income) expense (0.3) (0.7) (1.4) (4.8)
Income before income taxes $ 21.1 $ 10.3 $ 87.9 $ 46.1


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
	(In millions)
Total revenues	$	421.6	$	287.1	$	829.2	$	594.2
Cost of land/lot sales and other	328.7		233.2		662.3		495.8
Inventory and land option charges	5.4		0.6		6.0		0.9
Total cost of sales	$	334.1	$	233.8	$	668.3	$	496.7
Selling, general and administrative expense	24.3		16.3		45.8		31.8
Other (income) expense	—		(0.6)		(1.6)		(1.1)
Income before income taxes	$	63.2	$	37.6	$	116.7	$	66.8

~~Residential land and lot~~Revenues are primarily derived from sales ~~primarily consist of the sale~~ of single-family residential lots to local, regional and national homebuilders. During the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022, Forestar sold 5,788 and ~~2020, Forestar’s land~~10,304 single-family lots, respectively, compared to 3,588 and ~~lot sales, including~~7,155 single-family lots in the ~~portion~~prior year periods. Of the total lots sold, Forestar sold 4,771 lots to D.R. Horton for $389.7 million and 8,785 lots for $719.8 million during the ~~revenues generated from those sales, were as follows:~~

Three Months Ended
June 30, Nine Months Ended
June 30,
2021 2020 2021 2020
($ in millions)
Total residential single-family lots sold 3,858 2,023 11,013 6,396
Residential single-family lots sold to D.R. Horton 3,719 1,991 10,466 6,287
Residential lot sales revenues from sales to D.R. Horton $ 300.2 $ 162.1 $ 859.8 $ 528.0
Tract acres sold to D.R. Horton 7 30 21 66
Tract sales revenues from sales to D.R. Horton $ 3.0 $ 13.4 $ 6.0 $ 20.6
three and six months ended March 31, 2022, respectively, compared to 3,358 lots for $265.3 million and 6,747 lots for $559.5 million in the prior year periods.

SG&A expense for the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 included charges of $1.0 million and ~~$2.9~~$2.0 million, respectively, related to the shared services agreement between Forestar and D.R. Horton whereby D.R. Horton provides Forestar with certain administrative, compliance, operational and procurement services. Shared services charges were ~~$1.2~~$0.9 million and ~~$3.8~~$2.0 million, respectively, in the same periods of fiscal ~~2020.~~

Loss on extinguishment of debt of $18.1 million in the three and nine months ended June 30, 2021 was due to Forestar’s redemption of its $350 million principal amount of 8.0% senior notes due 2024 in May 2021.

At ~~June 30, 2021,~~March 31, 2022, Forestar owned directly or controlled through land and lot purchase contracts approximately ~~96,600~~96,500 residential lots, of which ~~approximately 4,400~~5,100 are fully developed. Approximately ~~39,400~~36,700 of these lots are under contract to sell to D.R. Horton or subject to a right of first offer under the master supply agreement with D.R. ~~Horton. Approximately 900~~Horton, and 1,000 of these lots are under contract to sell to other builders.

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RESULTS OF OPERATIONS – FINANCIAL SERVICES

The following tables and related discussion set forth key operating and financial data for our financial services operations, comprising DHI Mortgage and our subsidiary title companies, for the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.


		Three Months Ended June 30,						Nine Months Ended June 30,							Three Months Ended March 31,						Six Months Ended March 31,
		2021		2020		% Change		2021		2020		% Change			2022		2021		% Change		2022		2021		% Change
Number of first-lien loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	Number of first-lien loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	14,313		12,487		15	%	40,262		30,628		31	%	Number of first-lien loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	13,551		13,227		2	%	25,640		25,949		(1)	%
Number of homes closed by D.R. Horton	Number of homes closed by D.R. Horton	21,588		17,642		22	%	60,028		45,140		33	%	Number of homes closed by D.R. Horton	19,828		19,701		1	%	38,224		38,440		(1)	%
Percentage of D.R. Horton homes financed by DHI Mortgage	Percentage of D.R. Horton homes financed by DHI Mortgage	66	%	71	%			67	%	68	%			Percentage of D.R. Horton homes financed by DHI Mortgage	68	%	67	%			67	%	68	%
Number of total loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	Number of total loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	14,337		12,511		15	%	40,315		30,745		31	%	Number of total loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	13,571		13,240		3	%	25,682		25,978		(1)	%
Total number of loans originated or brokered by DHI Mortgage	Total number of loans originated or brokered by DHI Mortgage	14,668		12,920		14	%	41,294		31,672		30	%	Total number of loans originated or brokered by DHI Mortgage	13,777		13,553		2	%	26,191		26,626		(2)	%
Captive business percentage	Captive business percentage	98	%	97	%			98	%	97	%			Captive business percentage	99	%	98	%			98	%	98	%
Loans sold by DHI Mortgage to third parties	Loans sold by DHI Mortgage to third parties	15,261		12,661		21	%	41,090		30,180		36	%	Loans sold by DHI Mortgage to third parties	12,527		12,371		1	%	25,598		25,829		(1)	%


		Three Months Ended June 30,						Nine Months Ended June 30,							Three Months Ended March 31,						Six Months Ended March 31,
		2021		2020		% Change		2021		2020		% Change			2022		2021		% Change		2022		2021		% Change
		(In millions)													(In millions)
Loan origination and other fees	Loan origination and other fees	$	12.9	$	11.0	17	%	$	35.8	$	26.0	38	%	Loan origination and other fees	$	11.4	$	11.7	(3)	%	$	20.9	$	22.9	(9)	%
Gains on sale of mortgage loans and mortgage servicing rights	Gains on sale of mortgage loans and mortgage servicing rights	135.4		116.7		16	%	453.0		263.7		72	%	Gains on sale of mortgage loans and mortgage servicing rights	168.0		178.6		(6)	%	302.0		317.4		(5)	%
Servicing income	Servicing income	0.8		—		—	%	3.1		—		—	%	Servicing income	0.5		—		—	%	1.1		2.4		(54)	%
Total mortgage operations revenues	Total mortgage operations revenues	149.1		127.7		17	%	491.9		289.7		70	%	Total mortgage operations revenues	179.9		190.3		(5)	%	324.0		342.7		(5)	%
Title policy premiums	Title policy premiums	39.6		28.9		37	%	109.2		74.3		47	%	Title policy premiums	42.2		34.8		21	%	82.4		69.6		18	%
Total revenues	Total revenues	188.7		156.6		20	%	601.1		364.0		65	%	Total revenues	222.1		225.1		(1)	%	406.4		412.3		(1)	%
General and administrative expense	General and administrative expense	127.0		93.9		35	%	360.4		257.7		40	%	General and administrative expense	138.0		123.7		12	%	263.2		233.3		13	%
Other (income) expense	Other (income) expense	(8.6)		(6.1)		41	%	(21.4)		(17.7)		21	%	Other (income) expense	(8.7)		(6.3)		38	%	(16.7)		(12.8)		30	%
Financial services pre-tax income	Financial services pre-tax income	$	70.3	$	68.8	2	%	$	262.1	$	124.0	111	%	Financial services pre-tax income	$	92.8	$	107.7	(14)	%	$	159.9	$	191.8	(17)	%

Financial Services Operating Margin Analysis


		Percentages of Financial Services Revenues									Percentages of Financial Services Revenues
		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended March 31,				Six Months Ended March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
General and administrative expense	General and administrative expense	67.3	%	60.0	%	60.0	%	70.8	%	General and administrative expense	62.1	%	55.0	%	64.8	%	56.6	%
Other (income) expense	Other (income) expense	(4.6)	%	(3.9)	%	(3.6)	%	(4.9)	%	Other (income) expense	(3.9)	%	(2.8)	%	(4.1)	%	(3.1)	%
Financial services pre-tax income	Financial services pre-tax income	37.3	%	43.9	%	43.6	%	34.1	%	Financial services pre-tax income	41.8	%	47.8	%	39.3	%	46.5	%

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Mortgage Loan Activity

The volume of loans originated by our mortgage operations is directly related to the number of homes closed by our homebuilding operations. In the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers increased ~~15%~~2% and ~~31%~~decreased 1%, respectively, from the prior year periods ~~due~~corresponding to ~~increases~~the change in the number of homes closed by our homebuilding ~~operations of 22% and 33%.~~operations.

Homes closed by our homebuilding operations constituted 99% and 98% of DHI Mortgage loan originations in ~~both~~ the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022, respectively, compared to ~~97%~~98% in ~~the~~both prior year periods. These percentages reflect DHI Mortgage’s consistent focus on the captive business provided by our homebuilding operations.

The number of loans sold increased ~~21%~~1% and ~~36%~~decreased 1% in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to the prior year periods. Virtually all of the mortgage loans held for sale on ~~June 30, 2021~~March 31, 2022 were eligible for sale to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Government National Mortgage Association (Ginnie Mae). During the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, approximately ~~55%~~68% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and ~~37%~~24% were sold to ~~two~~one other major financial ~~entities.~~entity. Changes in market conditions could result in a greater concentration of our mortgage sales in future periods to fewer financial entities and directly to Fannie Mae, Freddie Mac or Ginnie Mae, and we may need to make other adjustments to our mortgage operations.

Financial Services Revenues and Expenses

Revenues from our mortgage operations ~~increased 17%~~decreased 5% to ~~$149.1~~$179.9 million and ~~70% to $491.9~~$324.0 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, from ~~$127.7~~$190.3 million and ~~$289.7~~$342.7 million in the prior year periods, primarily due to ~~increases of 14% and 30% in loan originations. In the nine month period, higher net gains achieved on the sale of loan originations~~competitive pricing pressure in the secondary ~~market also contributed to the increase. Net gains on the sale of~~ mortgage ~~loan originations decreased in the third quarter due to competitive pricing pressures in the marketplace.~~market. Revenues from our title operations increased ~~37%~~21% to ~~$39.6~~$42.2 million and ~~47%~~18% to ~~$109.2~~$82.4 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, from ~~$28.9~~$34.8 million and ~~$74.3~~$69.6 million in the prior year periods, primarily due to ~~increases of 26% and 38%~~an increase in ~~escrow closings.~~the average premium collected on closing transactions.

General and administrative (G&A) expense related to our financial services operations increased ~~35%~~12% to ~~$127.0~~$138.0 million and ~~40%~~13% to ~~$360.4~~$263.2 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, from ~~$93.9~~$123.7 million and ~~$257.7~~$233.3 million in the prior year periods. The increases were primarily due to increases in employee related costs to support a higher volume of transactions. Our financial services operations employed 2,755 and 1,979 people at June 30, 2021 and 2020, respectively.

As a percentage of financial services revenues, G&A expense was ~~67.3%~~62.1% and ~~60.0%~~64.8% in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~60.0%~~55.0% and ~~70.8%~~56.6% in the prior year periods. ~~Fluctuations~~The increase was primarily due to an increase in the number of employees to support expected increased volume for the remainder of fiscal 2022. Additionally, fluctuations in financial services G&A expense as a percentage of revenues can occur because some components of revenue fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned. Our financial services operations employed 2,990 and 2,578 people at March 31, 2022 and 2021, respectively.

Other income, net of other expense, included in our financial services operations consists primarily of the interest income of our mortgage subsidiary.

As a result of the revenue decrease from competitive pricing pressure in the secondary mortgage market and an increase ~~from a higher volume of mortgage originations and escrow closings and better leverage of our~~in employee related G&A expenses, pre-tax income from our financial services operations ~~increased 111%~~decreased 17% to ~~$262.1~~$159.9 million in the ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 from ~~$124.0~~$191.8 million in the prior year period.

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RESULTS OF OPERATIONS - RENTAL

Our rental segment consists of multi-family and single-family rental operations. The multi-family rental operations develop, construct, lease and sell residential rental properties, with a primary focus on constructing garden style multi-family rental communities typically accommodating 200 to 400 dwelling units in high growth suburban markets. The single-family rental operations primarily construct and lease single-family homes and then market the community for a bulk sale of rental homes. Multi-family and single-family rental property sales are recognized as revenues, and rental income is recognized as other income. Results of operations for the rental segment for the three and six months ended March 31, 2022 and 2021 were as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
	(In millions)
Revenues
Single-family rental	$	172.9	$	—	$	253.2	$	31.8
Multi-family rental	50.0		—		126.2		—
Total revenues	222.9		—		379.4		31.8
Cost of sales
Single-family rental	77.5		—		113.8		17.8
Multi-family rental	25.0		—		61.5		—
Total cost of sales	102.5		—		175.3		17.8
Selling, general and administrative expense	22.8		11.6		41.4		20.9
Other (income) expense	(4.9)		(5.2)		(9.8)		(9.1)
Income before income taxes	$	102.5	$	(6.4)	$	172.5	$	2.2

During the three months ended March 31, 2022, we sold one multi-family rental property (126 total units) for $50.0 million, and during the six months ended March 31, 2022, we sold two multi-family rental properties (477 total units) for $126.2 million. There were no sales of multi-family rental properties during the prior year periods. During the three months ended March 31, 2022, we sold three single-family rental properties (368 total homes) for $172.9 million, and during the six months ended March 31, 2022, we sold five single-family rental properties (594 total homes) for $253.2 million. There were no sales of single-family rental properties during the prior year quarter and one property (124 total homes) sold for $31.8 million in the prior year six month period.

At March 31, 2022, our rental property inventory of $1.5 billion included $597.4 million of inventory related to our multi-family rental operations and $902.7 million of inventory related to our single-family rental operations. At March 31, 2022, we had 16 multi-family rental properties, consisting of 4,830 units, under active construction and one community, consisting of 300 units, that was substantially complete and in the lease-up phase. At March 31, 2022, we had 98 single-family rental properties that included 6,350 homes and finished lots, of which 1,300 homes were completed, and 4,000 expected lots that were unimproved or under development.

At September 30, 2021, our rental property inventory of $840.9 million included $425.1 million of assets related to our multi-family rental operations and $415.8 million of assets related to our single-family rental operations. At September 30, 2021, we had 15 multi-family rental properties, consisting of 4,340 units, under active construction and one community, consisting of 350 units, that was substantially complete and in the lease-up phase. At September 30, 2021, we had 55 single-family rental properties that included 2,650 homes and finished lots, of which 865 homes were completed, and 3,200 expected lots that were unimproved or under development.

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RESULTS OF OPERATIONS - OTHER BUSINESSES

In addition to our homebuilding, Forestar, financial services and rental operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own non-residential real estate including ranch land and improvements and own and operate energy-related assets. The pre-tax income of all of our subsidiaries engaged in other business activities was ~~$7.7~~$13.6 million and ~~$10.1~~$24.3 million in the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~a pre-tax loss of $0.6~~$6.5 million and ~~pre-tax income of $56.9~~$12.7 million in the prior year periods. Income generated by our other businesses can vary significantly based on the timing of multi-family rental property sales. There were no multi-family rental properties sold during the current year periods or in the prior year quarter. There were two multi-family rental properties sold during the prior year nine month period for a total of $128.5 million with gains on sale totaling $59.4 million.

Our multi-family rental operations develop, construct, lease, own and sell multi-family residential properties that produce rental income. We primarily focus on constructing garden style multi-family communities, which typically accommodate 200 to 400 dwelling units, in high growth suburban markets. After we complete construction and achieve a stabilized level of leased occupancy, the property is typically marketed for sale. At June 30, 2021, we had eleven multi-family rental projects under active construction and four projects that were substantially complete and in the lease-up phase. These 15 projects represent 4,540 multi-family units, of which 3,230 units were under active construction and 1,310 units were completed.

RESULTS OF OPERATIONS - CONSOLIDATED

Income before Income Taxes

Pre-tax income for the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 was ~~$1.4~~$1.9 billion and ~~$3.6~~$3.4 billion, respectively, compared to ~~$782.4 million~~$1.2 billion and ~~$1.9~~$2.2 billion in the prior year periods. The ~~increases were~~increase was primarily due to ~~increases~~an increase in pre-tax income generated by our homebuilding operations as a result of higher revenues from increased ~~home closings~~average selling prices and an increase in home sales gross margin.

Income Taxes

Our income tax expense for the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 was ~~$299.1~~$441.0 million and ~~$784.1~~$792.5 million, respectively, compared to ~~$149.5~~$246.0 million and ~~$377.6~~$485.1 million in the prior year periods. Our effective tax rate was ~~21.1% and 21.6%~~23.4% for both the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 compared to ~~19.1%~~20.8% and ~~19.6%~~21.9%, respectively, in the prior year periods. The effective tax rates for all periods include an expense for state income taxes and tax benefits related to stock-based compensation and the federal energy efficient homes tax credit. ~~For the three and nine months ended June 30, 2020, the fiscal 2020 retroactive reinstatement of the~~The federal energy efficient homes tax credit ~~reduced our effective tax rate by 3.1% and 2.8%, respectively. For the three and nine months ended June 30, 2021, a change in the estimate of~~expired for homes ~~qualifying for the fiscal 2020 energy efficient tax credit and the retroactive extension of the energy efficient tax credit reduced our effective tax rate by 1.9% and 0.9%, respectively.~~closed after December 31, 2021.

Our deferred tax assets, net of deferred tax liabilities, were ~~$154.4~~$135.7 million at ~~June 30, 2021~~March 31, 2022 compared to ~~$152.4~~$159.5 million at September 30, ~~2020.~~2021. We have a valuation allowance of ~~$7.3~~$4.0 million and ~~$7.5~~$4.2 million at ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, respectively, related to state deferred tax assets for net operating loss (NOL) carryforwards that are more likely than not to expire before being realized. We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to our remaining state NOL carryforwards. Any reversal of the valuation allowance in future periods will impact our effective tax rate.

The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on our consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of our deferred tax assets.

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CAPITAL RESOURCES AND LIQUIDITY

We have historically funded our operations with cash flows from operating activities, borrowings under bank credit facilities and the issuance of new debt securities. Our current levels of cash, borrowing capacity and balance sheet leverage provide us with the operational flexibility to adjust to changes in economic and market conditions.

~~Currently, we are increasing~~We have continued to increase our investments in homebuilding inventories and single-family and multi-family rental properties to expand our operations and grow our revenues and ~~profitability, as well as considering opportunistic strategic investments as they arise.~~profitability. We are also returning capital to our shareholders through dividend payments and repurchases of our common stock. We are maintaining ~~higher~~significant homebuilding cash balances ~~than in prior years~~ to support the increased scale and level of activity in our business and to provide flexibility to adjust to changing conditions and opportunities.

As of March 31, 2022, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $5.6 billion, with $2.4 billion payable within 12 months, including $1.6 billion outstanding under the mortgage repurchase facility. At ~~June 30, 2021,~~March 31, 2022, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was ~~24.2%~~24.9% compared to ~~26.6%~~26.7% at September 30, ~~2020~~2021 and ~~28.0%~~25.7% at ~~June~~March 31, 2021. Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 18.9% at March 31, 2022 compared to 12.9% at September 30, ~~2020. Our~~2021 and 14.9% and March 31, 2021.

At March 31, 2022, our ratio of homebuilding debt to total capital (homebuilding notes payable divided by stockholders’ equity plus homebuilding notes payable) was ~~16.0%~~16.4% compared to ~~17.5%~~17.8% at September 30, ~~2020~~2021 and ~~18.4%~~16.8% at ~~June~~March 31, 2021. Our net homebuilding debt to total capital (homebuilding notes payable net of cash divided by stockholders’ equity plus homebuilding notes payable net of cash) was 11.2% at March 31, 2022 compared to 1.7% at September 30, ~~2020.~~2021 and 5.3% at March 31, 2021. Over the long term, we intend to maintain our ratio of homebuilding debt to total capital below ~~35%~~30%, and we expect it to remain significantly lower than ~~35% in the fourth quarter of fiscal 2021 and~~30% throughout fiscal 2022. We believe that the ratio of homebuilding debt to total capital is useful in understanding the leverage employed in our homebuilding operations and comparing our capital structure with other homebuilders. We exclude the debt of Forestar and our financial services business because they are separately capitalized and not guaranteed by our parent company or any of our homebuilding entities.

At March 31, 2022, we had outstanding letters of credit of $236.1 million and surety bonds of $2.5 billion, issued by third parties to secure performance under various contracts. We expect that our performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms. When we complete our performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving us with no continuing obligations. We have no material third-party guarantees.

We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations, pay dividends, repurchase our common stock and maintain sufficient cash levels to support our other operational needs, and we regularly evaluate our opportunities to raise additional capital. D.R. Horton has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in ~~August 2018,~~July 2021, registering debt and equity securities that may be issued from time to time in amounts to be determined. Forestar also has an effective shelf registration statement filed with the SEC in ~~September 2018,~~October 2021, registering ~~$500~~$750 million of equity ~~securities.~~securities, of which $300 million was reserved for sales under its at-the-market equity offering program that became effective in November 2021. At ~~June 30, 2021, $361.0~~March 31, 2022, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which ~~$66.7~~$298.2 million iswas reserved for sales under its at-the-market equity offering program. As market conditions permit, we may issue new debt or equity securities through the capital markets or obtain additional bank financing to fund our projected capital requirements or provide additional liquidity. We believe that our existing cash resources, revolving credit facilities, mortgage repurchase facility and ability to access the capital markets or obtain additional bank financing will provide sufficient liquidity to fund our near-term working capital needs and debt obligations.

Capital Resources - Homebuilding

Cash and Cash Equivalents — At ~~June 30, 2021,~~March 31, 2022, cash and cash equivalents of our homebuilding segment totaled ~~$1.7~~$1.2 billion.

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Bank Credit ~~Facilities~~Facility — ~~In April 2021, our~~We have a $2.19 billion senior unsecured homebuilding revolving credit facility ~~was amended to increase its capacity to $2.19 billion~~ with an uncommitted accordion feature that could increase the size of the facility to $3.0 billion, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to 100% of the total revolving credit ~~commitment.~~commitments. Letters of credit issued under the facility reduce the available borrowing capacity. The interest rate on borrowings under the revolving credit facility may be based on either the Prime Rate or London Interbank Offered Rate (LIBOR) plus an applicable margin, as defined in the credit agreement governing the facility. The maturity date of the facility ~~was extended to~~is April 20, 2026. Borrowings and repayments under the facility totaled $750 million each during the six months ended March 31, 2022. At ~~June 30, 2021,~~March 31, 2022, there were no borrowings outstanding and ~~$159.3~~$175.6 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$2.03~~$2.0 billion.

~~Our $375 million 364-day senior unsecured homebuilding revolving credit facility was not renewed upon its maturity on May 27, 2021.~~

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Our homebuilding revolving credit facility imposes restrictions on our operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if our leverage ratio exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens. At ~~June 30, 2021,~~March 31, 2022, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility.

Public Unsecured Debt — We have ~~$2.55~~$3.15 billion principal amount of homebuilding senior notes outstanding as of ~~June 30, 2021~~March 31, 2022 that mature from September 2022 through October 2027. In October 2020, we issued $500 million principal amount of 1.4% senior notes due October 15, 2027, with interest payable semi-annually. The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 1.6%. In December 2020, we repaid $400 million principal amount of our 2.55% senior notes at maturity. The indentures governing our senior notes impose restrictions on the creation of secured debt and liens. At ~~June 30, 2021,~~March 31, 2022, we were in compliance with all of the limitations and restrictions associated with our public debt obligations.

Our homebuilding revolving credit facility and senior notes are guaranteed by D.R. Horton, Inc.’s significant wholly-owned homebuilding subsidiaries.

Debt and ~~Equity~~Stock Repurchase Authorizations — In July 2019, our Board of Directors authorized the repurchase of up to $500 million of debt securities. In April 2021, our Board of Directors authorized the repurchase of up to $1.0 billion of our common ~~stock, replacing~~stock. During the ~~prior authorization. We~~six months ended March 31, 2022, we repurchased ~~2.6~~5.8 million shares of our common stock for ~~$241.2 million during the current quarter for a total of 8.1 million shares repurchased for $661.4 million during the nine months ended June 30, 2021.~~$544.2 million. At ~~June 30, 2021,~~March 31, 2022, the full amount of the debt repurchase authorization was remaining, and ~~$758.8~~$2.0 million of the ~~equity~~stock repurchase authorization was remaining. In April 2022, our Board of Directors authorized the repurchase of up to $1.0 billion of our common stock, replacing the prior stock repurchase authorization. These authorizations have no expiration date.

Capital Resources - Forestar

The achievement of Forestar’s long-term growth objectives will depend on its ability to obtain financing in sufficient capacities. As market conditions permit, Forestar may issue new debt or equity securities through the capital markets or obtain additional bank financing to provide capital for future growth and additional liquidity. At ~~June 30, 2021,~~March 31, 2022, Forestar’s ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was ~~42.1%~~38.9% compared to ~~42.4%~~41.0% at both September 30, ~~2020~~2021 and ~~43.1% at June 30, 2020.~~March 31, 2021. Forestar’s ratio of net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was ~~37.8%~~29.9% compared to ~~22.1%~~35.2% at September 30, ~~2020~~2021 and ~~25.2%~~34.1% at ~~June 30, 2020.~~March 31, 2021.

Cash and Cash Equivalents — At ~~June 30, 2021,~~March 31, 2022, Forestar had cash and cash equivalents of ~~$116.0~~$233.7 million.

Bank Credit Facility — ~~In April 2021, Forestar’s~~Forestar has a $410 million senior unsecured revolving credit facility ~~was amended to increase its capacity to $410 million~~ with an uncommitted accordion feature that could increase the size of the facility to $600 million, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit ~~commitment.~~commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on ~~Forestar’s~~the book value of ~~its~~Forestar’s real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility ~~was extended to~~is April 16, 2025. ~~Borrowings and repayments under the facility were $25 million each during the nine months ended June 30, 2021.~~ At ~~June 30, 2021,~~March 31, 2022, there were no borrowings outstanding and ~~$60.2~~$60.5 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$349.8~~$349.5 million.

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Unsecured Debt — As of ~~June 30, 2021,~~March 31, 2022, Forestar had $700 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, which represent unsecured obligations of Forestar. These notes include $400 million principal amount of 3.85% senior notes ~~issued in April 2021~~ that mature May 15, 2026 with interest payable semiannually. The annual effective interest rate of the notes after giving effect to the amortization of financing costs is 4.1%. The net proceeds from this issuance were primarily used to redeem Forestar’s $350 million principal amount of 8.0% senior notes due 2024 in May ~~2021. The redemption price of $365.6 million included a call premium of $14.0 million~~2026 and ~~accrued and unpaid interest of $1.6 million. Forestar recognized an $18.1 million loss on extinguishment of debt during the current quarter upon redemption of the notes. Forestar also has~~ $300 million principal amount of 5.0% senior notes ~~due~~that mature in March 2028.

Forestar’s revolving credit facility and its senior notes are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, ~~debt.~~financial services or rental operations. At ~~June 30, 2021,~~March 31, 2022, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Debt Repurchase Authorization — ~~Effective~~In April ~~30,~~ 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities. All of the $30 million authorization was remaining at ~~June 30, 2021,~~March 31, 2022, and the authorization has no expiration date.

Issuance of Common Stock — During the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, Forestar issued ~~1.4 million~~84,547 shares of common stock under its at-the-market equity offering program for proceeds of ~~$32.6~~$1.7 million, net of commissions and other issuance ~~costs.~~costs totaling $0.1 million. At ~~June 30, 2021, $361.0~~March 31, 2022, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which ~~$66.7~~$298.2 million iswas reserved for sales under its at-the-market equity offering program.

Capital Resources - Financial Services

Cash and Cash Equivalents — At ~~June 30, 2021,~~March 31, 2022, cash and cash equivalents of our financial services operations totaled ~~$101.1~~$102.1 million.

Mortgage Repurchase Facility — Our mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that provides financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties upon receipt of funds from the counterparties. DHI Mortgage then has the right and obligation to repurchase the purchased loans upon their sale to third-party purchasers in the secondary market or within specified time frames from 45 to 60 days in accordance with the terms of the mortgage repurchase facility. In February ~~2021,~~2022, the mortgage repurchase facility was amended to increase its capacity and extend its maturity date to February ~~18, 2022.~~17, 2023. The total capacity of the facility is ~~$1.4~~$1.6 billion; however, the capacity automatically increases ~~without requiring additional commitments, to $1.6 billion for approximately 30 days at each quarter end~~during certain higher volume periods and ~~45 days at fiscal year end. The capacity of the facility~~ can ~~also~~ be further increased ~~to $1.8 billion, subject to the availability of~~through additional commitments. ~~Through additional commitments, the~~The total capacity of the facility at March 31, 2022 was temporarily increased to $1.6 billion effective June 11, 2021 through November 4, 2021. During this period, the capacity increases, without requiring additional commitments, to $1.8 billion for approximately 30 days at the end of the third quarter and for 45 days at fiscal year end.$2.1 billion.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, ~~debt.~~Forestar or rental operations. The facility contains financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable leverage ratio and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At ~~June 30, 2021,~~March 31, 2022, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.

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In the past, DHI Mortgage has been able to renew or extend its mortgage credit facility at a sufficient capacity and on satisfactory terms prior to its maturity and obtain temporary additional commitments through amendments to the credit agreement during periods of higher than normal volumes of mortgages held for sale. The liquidity of our financial services business depends upon its continued ability to renew and extend the mortgage repurchase facility or to obtain other additional financing in sufficient capacities.

Capital Resources - Rental

Cash and Cash Equivalents — At March 31, 2022, cash and cash equivalents of our rental operations segment totaled $141.1 million. During fiscal 2021 and through the first half of fiscal 2022, we substantially increased the investment in our rental operations. The inventory in our rental segment totaled $1.5 billion at March 31, 2022 compared to $840.9 million at September 30, 2021 and $543.5 million at March 31, 2021. To date, we have funded our rental operations with capital from our homebuilding operations.

Bank Credit Facility — In March 2022, our rental subsidiary, DRH Rental, entered into a $625 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.25 billion, subject to certain conditions and availability of additional bank commitments. On March 17, 2022, DRH Rental utilized the accordion feature and increased the size of the facility to $750 million through an additional commitment. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Availability under the revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental’s real estate assets and unrestricted cash. At March 31, 2022, the borrowing base limited the available capacity under the facility to $486 million and there were no borrowings outstanding or letters of credit issued under the facility. The maturity date of the facility is March 4, 2026.

DRH Rental’s revolving credit facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or financial services operations.

Operating Cash Flow Activities

In the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, net cash used in operating activities was ~~$34.5~~$834.6 million compared to ~~$588.9~~$154.9 million ~~of cash provided by operating activities~~ in the prior year period. Cash used in operating activities in the current year period primarily consisted of ~~$340.6~~$416.2 million, $409.1 million and ~~$58.2~~$63.0 million of cash used in our ~~Forestar segment~~homebuilding, rental and ~~other businesses,~~financial services segments, respectively, partially offset by ~~$276.1 million and $96.2~~$76.6 million of cash provided by our ~~homebuilding and financial services segments, respectively. The most significant source of cash provided by operating activities in both periods was net income.~~Forestar segment.

Cash used to increase construction in progress and finished home inventory was ~~$1.7~~$2.1 billion in the current year period compared to ~~$602.3 million~~$1.3 billion in the prior year ~~period. In both periods, the expenditures were made to~~period, reflecting an increase in our homes in inventory in ~~response to~~ the ~~strength of homebuyer demand.~~current period. Cash used to increase residential land and lots was $528.4 million in the current year period ~~was $1.3 billion~~ compared to ~~$361.9~~$975.2 million in the prior year period. Of these amounts, ~~$541.7~~$61.1 million and ~~$259.8~~$377.2 million, respectively, related to Forestar.

During the ~~three~~six months ended ~~June 30, 2021, we increased~~March 31, 2022, cash used to increase our single-family and multi-family rental properties ~~by $196.0~~was $655.9 million ~~which~~and is reflected as cash used in operating activities. Prior to the third quarter of fiscal 2021, cash activities related to rental properties were presented as investing activities. During the six month period ended March 31, 2021, ~~and in the prior year nine month period ended June 30, 2020,~~ expenditures related to rental properties were $173.9 ~~million and $153.6 million, respectively, and are reflected as cash used in investing activities.~~million.

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Investing Cash Flow Activities

In the ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, net cash used in investing activities was ~~$206.9~~$68.7 million compared to ~~$100.4~~$196.1 million in the prior year period. In the current year period, uses of cash included ~~expenditures related to our rental operations totaling $173.9 million,~~ purchases of property and equipment totaling $46.0 million and the acquisition of the homebuilding operations of Braselton Homes for $23.0 million, partially offset by proceeds from the sale of a single-family rental community for $31.8 million in the first quarter of fiscal 2021.$72.5 million. In the prior year period, uses of cash included expenditures related to our rental operations totaling ~~$153.6~~$173.9 million, the acquisition of the homebuilding operations of Braselton Homes for $23.0 million and purchases of property and equipment totaling ~~$66.8~~$30.5 million, partially offset by proceeds from the sale of ~~assets, primarily consisting of $128.5 million related to the sale of two multi-family~~a single-family rental ~~properties.~~community for $31.8 million.

Financing Cash Flow Activities

We expect the short-term financing needs of our operations will be funded with existing cash, cash generated from operations and borrowings under our credit facilities. Long-term financing needs for our ~~homebuilding and Forestar~~ operations may be funded with the issuance of senior unsecured debt securities or equity securities through the capital markets.

During the ~~nine~~six months ended ~~June 30,~~March 31, 2022, net cash used in financing activities was $644.8 million, consisting primarily of repayments of amounts drawn on our homebuilding revolving credit facility totaling $750 million, cash used to repurchase shares of our common stock of $569.8 million and payment of cash dividends totaling $159.2 million. These uses of cash were partially offset by draws on our homebuilding revolving credit facility of $750 million and net advances of $84.3 million on our mortgage repurchase facility.

During the six months ended March 31, 2021, net cash used in financing activities was ~~$829.6~~$457.2 million, consisting primarily of repayment of $400 million principal amount of our 2.55% homebuilding senior notes at maturity, ~~Forestar’s redemption of its $350 million principal amount of 8.0% senior notes,~~ cash used to repurchase shares of our common stock of ~~$661.4~~$420.2 million and payment of cash dividends totaling ~~$217.7~~$145.6 million. These uses of cash were partially offset by note proceeds from our issuance of $500 million principal amount of 1.4% homebuilding senior notes and ~~Forestar’s issuance of $400 million principal amount of 3.85% senior notes.~~

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During the nine months ended June 30, 2020, net cash provided by financing activities was $370.2 million, consisting primarily of note proceeds of $1.1 billion from draws on our homebuilding revolving credit facility, our issuance of $500 million principal amount of 2.5% homebuilding senior notes, our issuance of $500 million principal amount of 2.6% homebuilding senior notes, Forestar’s issuance of $300 million principal amount of 5.0% senior notes and net advances of ~~$284.0~~$70.9 million on our mortgage repurchase facility. Note proceeds were partially offset by repayment of amounts drawn on our homebuilding revolving credit facility totaling $1.1 billion, repayment of $500 million principal amount of our 4.0% senior notes at maturity, Forestar’s repayment of $118.9 million principal amount of its 3.75% convertible senior notes at maturity, cash used to repurchase shares of our common stock of $360.4 million and payment of cash dividends totaling $192.3 million.

During each of the first ~~three~~two quarters of fiscal ~~2021,~~2022, our Board of Directors approved a quarterly cash dividend of ~~$0.20~~$0.225 per common share, the most recent of which was paid on ~~May 20, 2021~~February 25, 2022 to stockholders of record on ~~May 10, 2021.~~February 17, 2022. In ~~July 2021,~~April 2022, our Board of Directors approved a quarterly cash dividend of ~~$0.20~~$0.225 per common share, payable on ~~August 17, 2021~~May 18, 2022 to stockholders of record on ~~August 10, 2021.~~May 9, 2022. Cash dividends of ~~$0.175~~$0.20 per common share were approved and paid in each quarter of fiscal ~~2020.~~2021. The declaration of future cash dividends is at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, cash flows, capital requirements, financial condition and general business conditions.

~~CONTRACTUAL CASH OBLIGATIONS, COMMERCIAL COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS~~

Our primary contractual cash obligations are payments under our debt agreements and lease payments under operating leases. We expect to fund our contractual obligations in the ordinary course of business through a combination of our existing cash resources, cash flows generated from profits, our credit facilities or other bank financing and the issuance of new debt or equity securities through the public capital markets as market conditions may permit.

At June 30, 2021, we had outstanding letters of credit of $219.5 million and surety bonds of $2.1 billion, issued by third parties to secure performance under various contracts. We expect that our performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms. When we complete our performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving us with no continuing obligations. We have no material third-party guarantees.

Our mortgage subsidiary enters into various commitments related to the lending activities of our mortgage operations. Further discussion of these commitments is provided in Item 3 “Quantitative and Qualitative Disclosures About Market Risk” under Part I of this quarterly report on Form 10-Q.

We enter into land and lot purchase contracts to acquire land or lots for the construction of homes. Lot purchase contracts enable us to control significant lot positions with limited capital investment. Among our homebuilding land and lot purchase contracts at June 30, 2021, there were a limited number of contracts with $136.9 million of remaining purchase price subject to specific performance provisions that may require us to purchase the land or lots upon the land sellers meeting their respective contractual obligations. Of this amount, $67.8 million related to contracts between our homebuilding segment and Forestar. Further information about our land purchase contracts is provided in the “Homebuilding Inventories, Land and Lot Position and Homes in Inventory” section included herein.

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SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

As of ~~June 30, 2021,~~March 31, 2022, D.R. Horton, Inc. had ~~$2.55~~$3.15 billion principal amount of homebuilding senior notes outstanding due through October 2027 and 0no amounts outstanding on its homebuilding revolving credit facility.

All of the homebuilding senior notes and the homebuilding revolving credit facility are fully and unconditionally guaranteed, on a joint and several basis, by certain subsidiaries of D.R. Horton, Inc. (Guarantors or Guarantor Subsidiaries). Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by D.R. Horton, Inc. Our subsidiaries associated with the Forestar lot development operations, financial services operations, multi-family ~~residential construction~~and single-family rental operations and certain other subsidiaries do not guarantee the homebuilding senior notes or the homebuilding revolving credit facility (collectively, Non-Guarantor Subsidiaries). The guarantees are senior unsecured obligations of each Guarantor and rank equal with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees are effectively subordinated to any secured debt of such Guarantor to the extent of the value of the assets securing such debt. The guarantees will be structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries of the Guarantors.

The guarantees by a Guarantor Subsidiary will be automatically and unconditionally released and discharged upon: (1) the sale or other disposition of its common stock whereby it is no longer a subsidiary of ours; (2) the sale or other disposition of all or substantially all of its assets (other than to us or another Guarantor); (3) its merger or consolidation with an entity other than us or another Guarantor; or (4) its ceasing to guarantee any of our publicly traded debt securities and ceasing to guarantee any of our obligations under our homebuilding revolving credit facility.

The ~~following tables present summarized financial information for D.R. Horton, Inc. and~~enforceability of the obligations of the Guarantor Subsidiaries onunder their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. In certain circumstances, a combined basis after intercompany transactions and balances have been eliminated among D.R. Horton, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.
D.R. Horton, Inc. and Guarantor Subsidiaries
Summarized Balance Sheet Data June 30,
2021 September 30,
2020
(In millions)
Assets
Cash $ 1,615.7 $ 2,498.5
Inventories 13,773.3 10,921.8
Amount due from Non-Guarantor Subsidiaries 651.1 524.6
Total assets 17,961.9 15,503.9
Liabilities & Stockholders’ Equity
Notes payable $ 2,620.0 $ 2,514.4
Total liabilities 5,476.9 4,746.9
Stockholders’ equity 12,485.0 10,757.0
Summarized Statement of Operations Data Nine Months Ended
June 30, 2021 Year Ended
September 30, 2020
(In millions)
Revenues $ 18,942.3 $ 19,630.0
Cost of sales 14,233.0 15,379.2
Selling, general and administrative expense 1,374.5 1,584.4
Income before income taxes 3,313.2 2,666.4
Net income 2,605.1 2,134.7

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A court could void orthe guarantees, subordinate ~~any Guarantor’s guarantee~~amounts owing under the ~~fraudulent conveyance laws if existing~~guarantees or ~~future creditors~~order other relief detrimental to the holders of any such Guarantor were successful in establishing that: (i) such guarantee was incurred with fraudulent intent; or (ii) such Guarantor did not receive fair consideration or reasonably equivalent value for issuing its guarantee and was insolvent at the time of the guarantee, was rendered insolvent by reason of the guarantee, was engaged in a business or transaction for which its assets constituted unreasonably small capital to carry on its business, or intended to incur, or believed that it would incur, debt beyond its ability to pay such debt as it matured.

The measures of insolvency for purposes of determining whether a fraudulent conveyance occurred would vary depending upon the laws of the relevant jurisdiction and upon the valuation assumptions and methodology applied by the court. Generally, however, a company would be considered insolvent for purposes of the foregoing if the sum of the company’s debts, including contingent, unliquidated and unmatured liabilities, is greater than all of such company’s property at a fair valuation, or if the present fair saleable value of the company’s assets is less than the amount that will be required to pay the probable liability on its existing debts as they become absolute and matured.

our guaranteed obligations. The indentures governing our homebuilding senior notes contain a “savings clause,” which limits the liability of each Guarantor on its guarantee to the maximum amount that such Guarantor can incur without risk that its guarantee will be subject to avoidance as a fraudulent transfer. This provision may not be effective to protect such guarantees from fraudulent transfer challenges or, if it does, it may reduce such Guarantor’s obligation such that the remaining amount due and collectible under the guarantees would not suffice, if necessary, to pay the notes in full when due.

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The following tables present summarized financial information ~~operating history~~for D.R. Horton, Inc. and ~~other factors, we believe that each of~~ the ~~Guarantors,~~Guarantor Subsidiaries on a combined basis after ~~giving effect to~~intercompany transactions and balances have been eliminated among D.R. Horton, Inc. and the ~~issuance of~~Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the guarantees when such guarantees were issued, was not insolvent, did not have unreasonably small capital for the business in which it engaged and did not and has not incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.Non-Guarantor Subsidiaries.


D.R. Horton, Inc. and Guarantor Subsidiaries

Summarized Balance Sheet Data	March 31, 2022		September 30, 2021
	(In millions)
Assets
Cash	$	1,106.3	$	2,893.3
Inventories	17,247.6		14,203.2
Amount due from Non-Guarantor Subsidiaries	763.9		592.4
Total assets	21,611.3		19,724.9
Liabilities & Stockholders’ Equity
Notes payable	$	3,222.0	$	3,214.0
Total liabilities	6,463.1		6,157.4
Stockholders’ equity	15,148.2		13,567.5

Summarized Statement of Operations Data	Six Months Ended March 31, 2022		Year Ended September 30, 2021
	(In millions)
Revenues	$	14,180.7	$	26,566.8
Cost of sales	10,200.6		19,824.1
Selling, general and administrative expense	977.0		1,889.4
Income before income taxes	2,995.1		4,825.6
Net income	2,294.5		3,786.5

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

As disclosed in our annual report on Form 10-K for the fiscal year ended September 30, ~~2020,~~2021, our most critical accounting policies relate to revenue recognition, inventories and cost of sales, warranty and legal claims and insurance. Since September 30, ~~2020,~~2021, there have been no significant changes to those critical accounting policies.

As disclosed in our critical accounting policies in our Form 10-K for the fiscal year ended September 30, ~~2020,~~2021, our reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims. At ~~June~~March 31, 2022 and September 30, 2021, we had reserves for approximately 455 and 380 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the six months ended March 31, 2022, we established reserves for approximately 180 new construction defect claims and resolved 105 construction defect claims for a total cost of $12.8 million. At March 31, 2021 and September 30, 2020, we had reserves for approximately ~~350~~320 and 260 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the ~~nine~~six months ended ~~June 30,~~March 31, 2021, we established reserves for approximately ~~165~~115 new construction defect claims and resolved 7555 construction defect claims for a total cost of $13.3 million. At June 30, 2020 and September 30, 2019, we had reserves for approximately 240 and 180 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the nine months ended June 30, 2020, we established reserves for approximately 120 new construction defect claims and resolved 60 construction defect claims for a total cost of $20.6$6.2 million.

SEASONALITY

Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again in the future, we generally close more homes and generate greater revenues and ~~operating~~pre-tax income in the third and fourth quarters of our fiscal year. The seasonal nature of our business can also cause significant variations in the working capital requirements offor our homebuilding, lot development, ~~and~~ financial services and rental operations. As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular fiscal quarter are not necessarily representative of the balance of our fiscal year.

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Forward-Looking Statements

Some of the statements contained in this report, as well as in other materials we have filed or will file with the ~~SEC,~~Securities and Exchange Commission, statements made by us in periodic press releases and oral statements we make to analysts, stockholders and the press in the course of presentations about us, may be construed as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “projection,” “seek,” “should,” “strategy,” “target,” “will,” “would” or other words of similar meaning. Any or all of the forward-looking statements included in this report and in any other of our reports or public statements may not approximate actual experience, and the expectations derived from them may not be realized, due to risks, uncertainties and other factors. As a result, actual results may differ materially from the expectations or results we discuss in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:

•the ~~effects of public health issues such as a major epidemic or pandemic, including the impact of COVID-19 on the economy and our businesses;~~

•~~the~~ cyclical nature of the homebuilding, ~~and~~ lot development and rental housing industries and changes in economic, real estate ~~and~~or other conditions;

•constriction of the credit and public capital markets, which could limit our ability to access capital and increase our costs of capital;

•reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs, a decrease in our ability to sell mortgage loans on attractive terms or an increase in mortgage interest rates;

•the risks associated with our land, lot and ~~lot~~rental inventory;

•our ability to effect our growth strategies, acquisitions or investments successfully;

•the impact of an inflationary, deflationary or higher interest rate environment;

•supply shortages and other risks of acquiring land, building materials and skilled labor;

•the effects of public health issues such as a major epidemic or pandemic, including the impact of COVID-19 on the economy and our businesses;

•the effects of weather conditions and natural disasters on our business and financial results;

•home warranty and construction defect claims;

•the effects of health and safety incidents;

•~~supply shortages and other risks of acquiring land, building materials and skilled labor;~~

•reductions in the availability of performance bonds;

•increases in the costs of owning a home;

•the effects of governmental regulations and environmental matters on our homebuilding and land development operations;

•the effects of governmental regulations on our financial services operations;

•competitive conditions within the ~~homebuilding, lot development and financial services industries;~~industries in which we operate;

•our ability to manage and service our debt and comply with related debt covenants, restrictions and limitations;

•the effects of negative publicity;

•the effects of the loss of key personnel;

•actions by activist stockholders; and

•information technology failures, data security breaches and our ability to satisfy privacy and data protection laws and regulations.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. Additional information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained in our annual report on Form 10-K for the fiscal year ended September 30, ~~2020,~~2021, including the section entitled “Risk Factors,” which is filed with the SEC.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to interest rate risk on our long-term debt. We monitor our exposure to changes in interest rates and utilize both fixed and variable rate debt. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but may affect our future earnings and cash flows. Except in very limited circumstances, we do not have an obligation to prepay fixed-rate debt prior to maturity and, as a result, interest rate risk and changes in fair value would not have a significant impact on our cash flows related to our fixed-rate debt until such time as we are required to refinance, repurchase or repay such debt.

We are exposed to interest rate risk associated with our mortgage loan origination services. We manage interest rate risk through the use of forward sales of mortgage-backed securities (MBS), which are referred to as “hedging instruments” in the following discussion. We do not enter into or hold derivatives for trading or speculative purposes.

Interest rate lock commitments (IRLCs) are extended to borrowers who have applied for loan funding and who meet defined credit and underwriting criteria. Typically, the IRLCs have a duration of less than six months. Some IRLCs are committed immediately to a specific purchaser through the use of best-efforts whole loan delivery commitments, while other IRLCs are funded prior to being committed to third-party purchasers. The hedging instruments related to IRLCs are classified and accounted for as derivative instruments in an economic hedge, with gains and losses recognized in revenues in the consolidated statements of operations. Hedging instruments related to funded, uncommitted loans are accounted for at fair value, with changes recognized in revenues in the consolidated statements of operations, along with changes in the fair value of the funded, uncommitted loans. The fair value change related to the hedging instruments generally offsets the fair value change in the uncommitted loans. The net fair value change, which for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ was not significant, is recognized in current earnings. At ~~June 30, 2021,~~March 31, 2022, hedging instruments used to mitigate interest rate risk related to uncommitted mortgage loans held for sale and uncommitted IRLCs totaled a notional amount of ~~$2.9~~$4.8 billion. Uncommitted IRLCs totaled a notional amount of approximately ~~$1.9~~$3.7 billion and uncommitted mortgage loans held for sale totaled a notional amount of approximately ~~$1.0~~$1.4 billion at ~~June 30, 2021.~~March 31, 2022.

We also use hedging instruments as part of a program to offer below market interest rate financing to our homebuyers. At ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, we had MBS totaling ~~$862.4~~$784.2 million and ~~$1.1 billion,~~$834.6 million, respectively, that did not yet have IRLCs or closed loans created or assigned and recorded ~~a liability~~an asset of ~~$1.9~~$9.8 million and ~~$5.3~~$1.1 million, respectively, for the fair value of such MBS position.

The following table sets forth principal cash flows by scheduled maturity, effective weighted average interest rates and estimated fair value of our debt obligations as of ~~June 30, 2021.~~March 31, 2022. Because the mortgage repurchase facility is effectively secured by certain mortgage loans held for sale that are typically sold within 60 days, its outstanding balance is included in the most current period presented. The interest rate for our variable rate debt represents the weighted average interest rate in effect at ~~June 30, 2021.~~March 31, 2022.


		Three Months Ending September 30, 2021		Fiscal Year Ending September 30,													Fair Value at June 30, 2021				Six Months Ending September 30, 2022		Fiscal Year Ending September 30,														Fair Value at March 31, 2022
			2022		2023		2024		2025		2026		Thereafter		Total				2023				2024		2025		2026		2027		Thereafter		Total
			($ in millions)																			($ in millions)
Debt:	Debt:																	Debt:
Fixed rate	Fixed rate	$—		$429.5		$700.3		$14.3		$500.4		$900.4		$800.4		$3,345.3		$3,469.2		Fixed rate		$436.0		$764.6		$13.0		$500.4		$900.4		$600.4		$800.0		$4,014.8		$3,862.7
Average interest rate	Average interest rate	—%		4.3%		5.4%		3.6%		2.7%		3.4%		3.0%		3.7%		Average interest rate			4.2%		5.2%		4.0%		2.7%		3.4%		1.5%		3.0%		3.4%
Variable rate	Variable rate	$1,093.6		$—		$—		$—		$—		$—		$—		$1,093.6	$1,093.6	Variable rate			$1,578.9		$—		$—		$—		$—		$—		$—		$1,578.9		$1,578.9
Average interest rate	Average interest rate	2.1%		—%		—%		—%		—%		—%		—%		2.1%		Average interest rate			1.9%		—%		—%		—%		—%		—%		—%		1.9%

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures as of ~~June 30, 2021~~March 31, 2022 were effective in providing reasonable assurance that information required to be disclosed in the reports the Company files, furnishes, submits or otherwise provides the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed in reports filed by the Company under the Exchange Act is accumulated and communicated to the Company’s management, including the CEO and CFO, in such a manner as to allow timely decisions regarding the required disclosure.

There have been no changes in the Company’s internal controls over financial reporting during the quarter ended ~~June 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in lawsuits and other contingencies in the ordinary course of business. While the outcome of such contingencies cannot be predicted with certainty, we believe that the liabilities arising from these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds our estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

In fiscal 2013, our mortgage subsidiary was subpoenaed by the United States Department of Justice (DOJ) regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years. We provided information related to these loans and our processes to theDOJ. In July 2021, we agreed to make an indemnification payment to the U.S. Department of Housing and Urban Development related to a certain number of mortgage loans for an amount that was fully reserved at June 30, 2021. We are not aware of any remaining loans, complaint, demand or lawsuit related to the original matter.

With respect to administrative or judicial proceedings involving the environment, we have determined that we will disclose any such proceeding if we reasonably believe such proceeding will result in monetary sanctions, exclusive of interest and costs, at or in excess of $1 million.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

We may repurchase shares of our common stock from time to time pursuant to our common stock repurchase authorization. The following table sets forth information concerning our common stock repurchases during the three months ended ~~June 30, 2021.~~March 31, 2022. All share repurchases were made in accordance with the safe harbor provisions of Rule 10b-18 under the Securities Exchange Act of 1934.

Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1)
(In millions)
April 1, 2021 - April 30, 2021 — $ — — $ 1,000.0
May 1, 2021 - May 31, 2021 2,000,000 93.34 2,000,000 813.3
June 1, 2021 - June 30, 2021 617,766 88.15 617,766 758.8
Total 2,617,766 $ 92.11 2,617,766 $ 758.8


	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1) (In millions)
January 1, 2022 - January 31, 2022	—	$	—	—	$	268.0
February 1, 2022 - February 28, 2022	3,100,000	85.82		3,100,000	2.0
March 1, 2022 - March 31, 2022	—	—		—	2.0
Total	3,100,000	$	85.82	3,100,000	$	2.0

_________________

(1) Effective April 20, 2021, our Board of Directors authorized the repurchase of $1.0 billion of our common stock. During the three months ended March 31, 2022, we repurchased 3.1 million shares of our common stock for $266.0 million. At March 31, 2022, there was $2.0 million remaining on the repurchase authorization. In April 2022, our Board of Directors authorized the repurchase of up to $1.0 billion of our common stock, replacing the prior ~~authorization that was effective as of July 30, 2019.~~authorization. The authorization has no expiration date. ~~Share repurchases totaling $241.2 million during the three months ended June 30, 2021 were made under the new authorization, leaving $758.8 million remaining on the authorization at June 30, 2021.~~

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ITEM 6. EXHIBITS


(a)	Exhibits.
	2.1		Agreement and Plan of Merger dated June 29, 2017 by and among D.R. Horton, Inc., Force Merger Sub, Inc. and Forestar Group Inc. (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 29, 2017).
	3.1		Certificate of Amendment of the Amended and Restated Certificate of Incorporation, as amended, of the Company dated January 31, 2006, and the Amended and Restated Certificate of Incorporation, as amended, of the Company dated March 18, 1992 (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2005, filed with the SEC on February 2, 2006).
	3.2		Amended and Restated Bylaws of the Company (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 8, 2017).
	~~4.1~~10.1		~~Indenture,~~Fourth Amended and Restated Master Repurchase Agreement, dated ~~as of April 21, 2021, by and~~February 1 8 , 202 2 , among ~~Forestar Group Inc.~~DHI Mortgage Company, Ltd., ~~the subsidiary guarantors party thereto and~~ U.S. Bank National Association, as ~~trustee~~Administrative Agent, Sole Book Runner, Lead Arranger, and a Buyer and all other Buyers (incorporated by reference from Exhibit 10.1 to ~~Exhibit 4.1 of Forestar’s~~the Company’s Current Report on Form 8-K filed with the SEC on ~~April 21, 2021)~~February 18 , 202 2 ).
	~~10.1~~10.2		~~Amendment No. 10 to~~ Credit Agreement, dated ~~April 20, 2021 by~~March 4, 2022, among DRH Rental, Inc., the lenders party thereto and ~~among the Company,~~ Mizuho Bank, Ltd., as ~~successor~~ Administrative Agent ~~and the Lenders named therein~~ (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~April 22, 2021)~~March 7, 2022).
	~~10.2~~10.3	†	~~Amendment No. 2 to Credit Agreement, dated April 16, 2021 by~~Executive Compensation Notice and ~~among Forestar Group Inc., JPMorgan Chase Bank, N.A., as administrative agent,~~Summary – Chairman, CEO and ~~the Lenders named therein~~Co-COOs (incorporated by reference from Exhibit 10.1 to ~~Forestar’s~~the Company’s Current Report on Form 8-K filed with the SEC on ~~April 20, 2021)~~March 29, 2022).
	10.4	†	Form of Performance Restricted Stock Unit Agreement – Named Executive Officers (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 29, 2022).
	22.1	*	List of Guarantor ~~Subsidiaries.~~Subsidiaries (incorporated by reference from Exhibit 22.1 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2021, filed with the SEC on November 18, 2021).
	31.1	*	~~Certificate~~Certification of Chief Executive Officer ~~provided~~ pursuant to Section ~~302(a)~~302 of the Sarbanes-Oxley Act of 2002.
	31.2	*	~~Certificate~~Certification of Chief Financial Officer ~~provided~~ pursuant to Section ~~302(a)~~302 of the Sarbanes-Oxley Act of 2002.
	32.1	*	~~Certificate provided pursuant to 18 U.S.C. Section 1350, as adopted~~Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002, by the Company’s Chief Executive Officer.~~2002.
	32.2	*	~~Certificate provided pursuant to 18 U.S.C. Section 1350, as adopted~~Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002, by the Company’s Chief Financial Officer.~~2002.
	101.INS	**	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
	101.SCH	**	Inline XBRL Taxonomy Extension Schema Document.
	101.CAL	**	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
	101.DEF	**	Inline XBRL Taxonomy Extension Definition Linkbase Document.
	101.LAB	**	Inline XBRL Taxonomy Extension Label Linkbase Document.
	101.PRE	**	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
	104	**	Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101).

	*		Filed or furnished herewith.
	**		Submitted electronically herewith.
	†		Management contract or compensatory plan arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			D.R. HORTON, INC.
Date:	~~July 23, 2021~~April 27, 2022	By:	/s/ Bill W. Wheat
			Bill W. Wheat
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)
Date:	~~July 23, 2021~~April 27, 2022	By:	/s/ Aron M. Odom
			Aron M. Odom
			Vice President and Controller
			(Principal Accounting Officer)

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D.R. HORTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

	Nine Months Ended June 30,
	2021		2020
	(In millions) (Unaudited)
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Notes payable issued for inventory	$	12.5	$	2.8
Stock issued under employee incentive plans	$	124.7	$	84.4
Accrual for holdback payments related to acquisitions	$	1.2	$	1.9


		Fair Value at June 30, 2021
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Mortgage loans held for sale (1)	Mortgage loans held for sale	$	0	$	1,624.7	$	9.4	$	1,634.1
Mortgage servicing rights (2)	Other assets	0		13.9		0.3		14.2
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments	Other assets	0		22.1		0		22.1
Forward sales of mortgage-backed securities	Other liabilities	0		(16.9)		0		(16.9)


		Fair Value at September 30, 2020
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Debt securities collateralized by residential real estate	Other assets	$	0	$	0	$	3.9	$	3.9
Mortgage loans held for sale (1)	Mortgage loans held for sale	0		1,503.2		15.1		1,518.3
Mortgage servicing rights (2)	Other assets	0		0		17.1		17.1
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments	Other assets	0		31.3		0		31.3
Forward sales of mortgage-backed securities	Other liabilities	0		(16.2)		0		(16.2)


		Fair Value at June 30, 2021				Fair Value at September 30, 2020
	Balance Sheet Location	Level 2		Level 3		Level 2		Level 3
		(In millions)

Mortgage loans held for sale (1) (2)	Mortgage loans held for sale	$	0.6	$	0.6	$	1.5	$	2.2
Other mortgage loans (1) (3)	Other assets	2.7		1.3		0.6		2.0
Real estate owned (1) (3)	Other assets	0		0.2		0		0


	Carrying Value		Fair Value at June 30, 2021
			Level 1		Level 2		Level 3		Total
	(In millions)
Cash and cash equivalents (1)	$	1,942.7	$	1,942.7	$	0	$	0	$	1,942.7
Restricted cash (1)	26.4		26.4		0		0		26.4
Notes payable (2) (3)	4,416.3		0		3,373.9		1,188.9		4,562.8