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 ~~March~~December 31, 2023


☐			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 ~~April 20, 2023,~~January 18, 2024, there were ~~341,071,172~~331,817,282 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 ~~March~~December 31, ~~202~~3 2023 and September 30, ~~2022~~2023			3
Consolidated Statements of Operations for the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022			4
Consolidated Statements of Total Equity for the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022			5
Consolidated Statements of Cash Flows for the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022			76
Notes to Consolidated Financial Statements			87
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2825
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			6053
ITEM 4. Controls and Procedures			6154
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings			6255
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			6255
ITEM 5. Other Information			56
ITEM 6. Exhibits			6356
SIGNATURES			6457

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


		March 31, 2023		September 30, 2022			December 31, 2023		September 30, 2023
		(In millions) (Unaudited)					(In millions) (Unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	3,051.1	$	2,540.5	Cash and cash equivalents	$	3,323.4	$	3,873.6
Restricted cash	Restricted cash	23.5		32.4		Restricted cash	21.2		26.5
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	3,074.6		2,572.9		Total cash, cash equivalents and restricted cash	3,344.6		3,900.1
Inventories:	Inventories:					Inventories:
Construction in progress and finished homes	Construction in progress and finished homes	9,290.6		9,798.2		Construction in progress and finished homes	9,467.7		9,001.4
Residential land and lots — developed and under development	Residential land and lots — developed and under development	9,940.4		9,173.1		Residential land and lots — developed and under development	11,497.1		10,621.9
Land held for development	Land held for development	88.3		110.8		Land held for development	134.5		50.0
Land held for sale	Land held for sale	20.4		29.4		Land held for sale	3.5		8.7
Rental properties	Rental properties	3,232.0		2,544.2		Rental properties	2,947.5		2,691.3
Total inventory	Total inventory	22,571.7		21,655.7		Total inventory	24,050.3		22,373.3
Mortgage loans held for sale	Mortgage loans held for sale	2,124.0		2,386.0		Mortgage loans held for sale	2,044.1		2,519.9
Deferred income taxes, net of valuation allowance of $17.8 million and $17.9 million at March 31, 2023 and September 30, 2022, respectively		112.3		141.1
Deferred income taxes, net of valuation allowance of $14.8 million at December 31, 2023 and September 30, 2023						Deferred income taxes, net of valuation allowance of $14.8 million at December 31, 2023 and September 30, 2023	175.9		187.2
Property and equipment, net	Property and equipment, net	509.6		471.6		Property and equipment, net	475.5		445.4
Other assets	Other assets	2,615.1		2,960.3		Other assets	3,127.7		2,993.0
Goodwill	Goodwill	163.5		163.5		Goodwill	163.5		163.5
Total assets	Total assets	$	31,170.8	$	30,351.1	Total assets	$	33,381.6	$	32,582.4
LIABILITIES	LIABILITIES					LIABILITIES
Accounts payable	Accounts payable	$	1,251.3	$	1,360.3	Accounts payable	$	1,260.3	$	1,246.2
Accrued expenses and other liabilities	Accrued expenses and other liabilities	2,830.8		3,138.3		Accrued expenses and other liabilities	3,227.4		3,103.8
Notes payable	Notes payable	5,966.9		6,066.9		Notes payable	5,290.4		5,094.5
Total liabilities	Total liabilities	10,049.0		10,565.5		Total liabilities	9,778.1		9,444.5
Commitments and contingencies (Note K)	Commitments and contingencies (Note K)					Commitments and contingencies (Note K)
EQUITY	EQUITY					EQUITY
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	—		—		Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued	—		—
Common stock, $.01 par value, 1,000,000,000 shares authorized, 400,830,778 shares issued and 341,070,276 shares outstanding at March 31, 2023 and 399,172,937 shares issued and 343,953,023 shares outstanding at September 30, 2022		4.0		4.0
Common stock, $.01 par value, 1,000,000,000 shares authorized, 401,869,172 shares issued and 332,190,334 shares outstanding at December 31, 2023 and 401,202,253 shares issued and 334,848,565 shares outstanding at September 30, 2023						Common stock, $.01 par value, 1,000,000,000 shares authorized, 401,869,172 shares issued and 332,190,334 shares outstanding at December 31, 2023 and 401,202,253 shares issued and 334,848,565 shares outstanding at September 30, 2023	4.0		4.0
Additional paid-in capital	Additional paid-in capital	3,358.0		3,349.5		Additional paid-in capital	3,440.2		3,432.2
Retained earnings	Retained earnings	20,914.5		19,185.3		Retained earnings	24,437.3		23,589.8
Treasury stock, 59,760,502 shares and 55,219,914 shares at March 31, 2023 and September 30, 2022, respectively, at cost		(3,563.8)		(3,142.5)
Treasury stock, 69,678,838 shares and 66,353,688 shares at December 31, 2023 and September 30, 2023, respectively, at cost						Treasury stock, 69,678,838 shares and 66,353,688 shares at December 31, 2023 and September 30, 2023, respectively, at cost	(4,728.1)		(4,329.8)
Stockholders’ equity	Stockholders’ equity	20,712.7		19,396.3		Stockholders’ equity	23,153.4		22,696.2
Noncontrolling interests	Noncontrolling interests	409.1		389.3		Noncontrolling interests	450.1		441.7
Total equity	Total equity	21,121.8		19,785.6		Total equity	23,603.5		23,137.9
Total liabilities and equity	Total liabilities and equity	$	31,170.8	$	30,351.1	Total liabilities and equity	$	33,381.6	$	32,582.4
											See accompanying notes to consolidated financial statements.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
		(In millions, except per share data) (Unaudited)									(In millions, except per share data) (Unaudited)
Revenues	Revenues	$	7,972.9	$	7,999.0	$	15,230.6	$	15,052.4	Revenues	$	7,726.0	$	7,257.8
Cost of sales	Cost of sales	5,996.2		5,429.9		11,287.5		10,335.6		Cost of sales	5,719.8		5,291.3
Selling, general and administrative expense	Selling, general and administrative expense	773.6		695.1		1,510.5		1,361.0		Selling, general and administrative expense	835.0		737.0
Other (income) expense	Other (income) expense	(42.2)		(9.3)		(79.9)		(24.8)		Other (income) expense	(76.3)		(37.7)
Income before income taxes	Income before income taxes	1,245.3		1,883.3		2,512.5		3,380.6		Income before income taxes	1,247.5		1,267.2
Income tax expense	Income tax expense	295.7		441.0		594.6		792.5		Income tax expense	291.8		298.9
Net income	Net income	949.6		1,442.3		1,917.9		2,588.1		Net income	955.7		968.3
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	7.4		6.0		17.0		10.2		Net income attributable to noncontrolling interests	8.3		9.6
Net income attributable to D.R. Horton, Inc.	Net income attributable to D.R. Horton, Inc.	$	942.2	$	1,436.3	$	1,900.9	$	2,577.9	Net income attributable to D.R. Horton, Inc.	$	947.4	$	958.7

Basic net income per common share attributable to D.R. Horton, Inc.	Basic net income per common share attributable to D.R. Horton, Inc.	$	2.75	$	4.07	$	5.54	$	7.27	Basic net income per common share attributable to D.R. Horton, Inc.	$	2.84	$	2.79
Weighted average number of common shares	Weighted average number of common shares	342.1		353.1		343.2		354.6		Weighted average number of common shares	333.3		344.2

Diluted net income per common share attributable to D.R. Horton, Inc.	Diluted net income per common share attributable to D.R. Horton, Inc.	$	2.73	$	4.03	$	5.50	$	7.20	Diluted net income per common share attributable to D.R. Horton, Inc.	$	2.82	$	2.76
Adjusted weighted average number of common shares	Adjusted weighted average number of common shares	344.9		356.3		345.9		358.2		Adjusted weighted average number of common shares	335.7		346.9
															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, 2022 (343,953,023 shares) $ 4.0 $ 3,349.5 $ 19,185.3 $ (3,142.5) $ 389.3 $ 19,785.6
Net income — — 958.7 — 9.6 968.3
Exercise of stock options (108,457 shares) — 2.6 — — — 2.6
Stock issued under employee benefit plans (601,371 shares) — 2.9 — — — 2.9
Cash paid for shares withheld for taxes — (25.7) — — — (25.7)
Stock-based compensation expense — 22.9 — — — 22.9
Cash dividends declared ($0.25 per share) — — (86.1) — — (86.1)
Repurchases of common stock (1,384,290 shares) — — — (118.1) — (118.1)
Change of ownership interest in Forestar — (0.2) — — 0.2 —
Balances at December 31, 2022 (343,278,561 shares) $ 4.0 $ 3,352.0 $ 20,057.9 $ (3,260.6) $ 399.1 $ 20,552.4
Net income — — 942.2 — 7.4 949.6
Exercise of stock options (234,796 shares) — 5.6 — — — 5.6
Stock issued under employee benefit plans (713,217 shares) — 4.7 — — — 4.7
Cash paid for shares withheld for taxes — (30.1) — — — (30.1)
Stock-based compensation expense — 28.4 — — — 28.4
Cash dividends declared ($0.25 per share) — — (85.6) — — (85.6)
Repurchases of common stock (3,156,298 shares) — — — (303.2) — (303.2)
Change of ownership interest in Forestar — (2.6) — — 2.6 —
Balances at March 31, 2023 (341,070,276 shares) $ 4.0 $ 3,358.0 $ 20,914.5 $ (3,563.8) $ 409.1 $ 21,121.8
See accompanying notes to consolidated financial statements.


	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, 2023 (334,848,565 shares)	$	4.0	$	3,432.2	$	23,589.8	$	(4,329.8)	$	441.7	$	23,137.9
Net income	—		—		947.4		—		8.3		955.7
Exercise of stock options (68,095 shares)	—		1.6		—		—		—		1.6
Stock issued under employee benefit plans (598,824 shares)	—		3.1		—		—		—		3.1
Cash paid for shares withheld for taxes	—		(37.5)		—		—		—		(37.5)
Stock-based compensation expense	—		40.9		—		—		—		40.9
Cash dividends declared ($0.30 per share)	—		—		(99.9)		—		—		(99.9)
Repurchases of common stock (3,325,150 shares)	—		—		—		(398.3)		—		(398.3)
Change of ownership interest in Forestar	—		(0.1)		—		—		0.1		—
Balances at December 31, 2023 (332,190,334 shares)	$	4.0	$	3,440.2	$	24,437.3	$	(4,728.1)	$	450.1	$	23,603.5


	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, 2022 (343,953,023 shares)	$	4.0	$	3,349.5	$	19,185.3	$	(3,142.5)	$	389.3	$	19,785.6
Net income	—		—		958.7		—		9.6		968.3
Exercise of stock options (108,457 shares)	—		2.6		—		—		—		2.6
Stock issued under employee benefit plans (601,371 shares)	—		2.9		—		—		—		2.9
Cash paid for shares withheld for taxes	—		(25.7)		—		—		—		(25.7)
Stock-based compensation expense	—		22.9		—		—		—		22.9
Cash dividends declared ($0.25 per share)	—		—		(86.1)		—		—		(86.1)
Repurchases of common stock (1,384,290 shares)	—		—		—		(118.1)		—		(118.1)
Change of ownership interest in Forestar	—		(0.2)		—		—		0.2		—
Balances at December 31, 2022 (343,278,561 shares)	$	4.0	$	3,352.0	$	20,057.9	$	(3,260.6)	$	399.1	$	20,552.4




















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, 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 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 CASH FLOWS


		Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022			2023		2022
		(In millions) (Unaudited)					(In millions) (Unaudited)
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	1,917.9	$	2,588.1	Net income	$	955.7	$	968.3
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:						Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	46.5		39.3		Depreciation and amortization	20.0		19.8
Stock-based compensation expense	Stock-based compensation expense	51.3		54.6		Stock-based compensation expense	40.9		22.9
Deferred income taxes	Deferred income taxes	28.7		23.6		Deferred income taxes	11.3		3.2
Inventory and land option charges	Inventory and land option charges	51.4		20.0		Inventory and land option charges	6.1		27.5
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Decrease (increase) in construction in progress and finished homes		537.3		(2,137.4)
(Increase) decrease in construction in progress and finished homes						(Increase) decrease in construction in progress and finished homes	(466.4)		320.7
Increase in residential land and lots – developed, under development, held for development and held for sale	Increase in residential land and lots – developed, under development, held for development and held for sale	(668.7)		(528.4)		Increase in residential land and lots – developed, under development, held for development and held for sale	(937.8)		(637.5)
Increase in rental properties	Increase in rental properties	(689.2)		(655.9)		Increase in rental properties	(256.5)		(357.0)
Decrease (increase) in other assets		339.8		(616.7)
Decrease (increase) in mortgage loans held for sale		262.0		(215.5)
(Decrease) increase in accounts payable, accrued expenses and other liabilities		(403.4)		593.7
Net cash provided by (used in) operating activities		1,473.6		(834.6)
(Increase) decrease in other assets						(Increase) decrease in other assets	(130.0)		330.2
Decrease in mortgage loans held for sale						Decrease in mortgage loans held for sale	475.8		603.3
Increase (decrease) in accounts payable, accrued expenses and other liabilities						Increase (decrease) in accounts payable, accrued expenses and other liabilities	127.5		(472.3)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(153.4)		829.1
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Expenditures for property and equipment	Expenditures for property and equipment	(79.2)		(72.5)		Expenditures for property and equipment	(47.6)		(47.5)
Payments related to business acquisitions		(103.5)		—
Proceeds from sale of assets						Proceeds from sale of assets	9.9		—
Payments related to business acquisitions, net of cash acquired						Payments related to business acquisitions, net of cash acquired	(1.0)		(97.1)
Other investing activities	Other investing activities	2.1		3.8		Other investing activities	(0.6)		1.7
Net cash used in investing activities	Net cash used in investing activities	(180.6)		(68.7)		Net cash used in investing activities	(39.3)		(142.9)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Proceeds from notes payable	Proceeds from notes payable	575.0		750.0		Proceeds from notes payable	720.0		300.0
Repayment of notes payable	Repayment of notes payable	(650.0)		(750.8)		Repayment of notes payable	(170.0)		(300.0)
(Payments) borrowings on mortgage repurchase facility, net		(63.4)		84.3
Payments on mortgage repurchase facilities, net						Payments on mortgage repurchase facilities, net	(389.9)		(404.4)
Proceeds from stock associated with certain employee benefit plans	Proceeds from stock associated with certain employee benefit plans	12.9		22.2		Proceeds from stock associated with certain employee benefit plans	1.6		5.5
Cash paid for shares withheld for taxes	Cash paid for shares withheld for taxes	(55.8)		(61.7)		Cash paid for shares withheld for taxes	(37.5)		(25.7)
Cash dividends paid	Cash dividends paid	(171.7)		(159.2)		Cash dividends paid	(99.9)		(86.1)
Repurchases of common stock	Repurchases of common stock	(419.8)		(569.8)		Repurchases of common stock	(376.9)		(118.1)
Net proceeds from issuance of Forestar common stock		—		1.7
Net other financing activities	Net other financing activities	(18.5)		38.5		Net other financing activities	(10.2)		(17.8)
Net cash used in financing activities	Net cash used in financing activities	(791.3)		(644.8)		Net cash used in financing activities	(362.8)		(646.6)
Net increase (decrease) in cash, cash equivalents and restricted cash		501.7		(1,548.1)
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	(555.5)		39.6
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	2,572.9		3,237.2		Cash, cash equivalents and restricted cash at beginning of period	3,900.1		2,572.9
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	3,074.6	$	1,689.1	Cash, cash equivalents and restricted cash at end of period	$	3,344.6	$	2,612.5

SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:	SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:					SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Notes payable issued for inventory	Notes payable issued for inventory	$	31.2	$	64.3	Notes payable issued for inventory	$	21.9	$	31.2
Stock issued under employee incentive plans	Stock issued under employee incentive plans	$	107.4	$	124.4	Stock issued under employee incentive plans	$	66.5	$	46.9

Repurchases of common stock not settled						Repurchases of common stock not settled	$	18.3	$	—
											See accompanying notes to consolidated financial statements.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~March~~December 31, 2023

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited, consolidated financial statements include the accounts of D.R. Horton, Inc. and all of its 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. As of ~~March~~December 31, 2023, the Company owned a 63% controlling interest in Forestar Group Inc. (Forestar) and therefore is required to consolidate 100% of Forestar within its consolidated financial statements, and the 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, ~~2022,~~2023, 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, ~~2022.~~2023.

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 six~~ months ended ~~March~~December 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, ~~2023~~2024 or subsequent periods.

~~Business Acquisition~~

In December 2022, the Company acquired the homebuilding operations of Riggins Custom Homes in Northwest Arkansas for approximately $107 million in cash. The assets acquired included approximately 170 homes in inventory, 3,000 lots and a sales order backlog of 100 homes. The purchase price was recorded to inventory and no goodwill was recorded as a result of this transaction.

Pending Accounting Standards

In ~~October 2021,~~November 2023, the Financial Accounting Standards Board (FASB) issued ASU ~~2021-08,~~2023-07, “Segment Reporting - Improvements to Reportable Segment Disclosures,” which ~~requires application~~is intended to improve reportable segment disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure 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 exceptionsignificant segment expenses that are regularly provided to the ~~general recognition~~chief operating decision maker and ~~measurement principle in ASC 805~~included within each reported measure of segment profit or loss. It also requires disclosure of the amount and ~~will result in recognition~~description of ~~contract assets~~the composition of other segment items and ~~contract liabilities consistent with those recorded by the acquiree immediately before the acquisition date.~~interim disclosures of a reportable segment’s profit or loss and assets. The guidance is effective for the Company beginning October 1, ~~2023,~~2024, 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.~~statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. The guidance is effective for the Company beginning October 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

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 ~~110~~118 markets across 33 states. The Company’s operating segments are its 8083 homebuilding divisions, its rental operations, 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 rental operations segment, its Forestar lot development segment and its financial services ~~segment and its rental operations~~ segment.

Homebuilding

The homebuilding operating segments are aggregated into six reporting segments. The reporting segments and the states in which the Company has homebuilding operations are as follows:


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

Rental

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

Forestar

The Forestar segment is a residential lot development company with operations in 5257 markets across 2023 states. The Company’s 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 related servicing rights to third-party purchasers.

~~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 within a community and then market each community for a bulk sale of rental homes.

Other

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

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

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, ~~2022.~~2023. Financial information relating to the Company’s reporting segments is as follows:


		March 31, 2023													December 31, 2023
		Homebuilding		Forestar		Financial Services		Rental		Eliminations and Other (1)		Consolidated			Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
		(In millions)													(In millions)
Assets	Assets													Assets
Cash and cash equivalents	Cash and cash equivalents	$	2,364.5	$	286.7	$	285.5	$	89.8	$	24.6	$	3,051.1	Cash and cash equivalents	$	2,504.1	$	117.7	$	458.9	$	226.9	$	15.8	$	3,323.4
Restricted cash	Restricted cash	8.5		—		12.6		2.4		—		23.5		Restricted cash	6.0		2.2		—		13.0		—		21.2
Inventories:	Inventories:													Inventories:
Construction in progress and finished homes	Construction in progress and finished homes	9,437.0		—		—		—		(146.4)		9,290.6		Construction in progress and finished homes	9,602.5		—		—		—		(134.8)		9,467.7
Residential land and lots — developed and under development	Residential land and lots — developed and under development	8,093.0		1,920.4		—		—		(73.0)		9,940.4		Residential land and lots — developed and under development	9,740.5		—		1,895.7		—		(139.1)		11,497.1
Land held for development	Land held for development	20.7		67.6		—		—		—		88.3		Land held for development	20.4		—		114.1		—		—		134.5
Land held for sale	Land held for sale	20.4		—		—		—		—		20.4		Land held for sale	3.5		—		—		—		—		3.5
Rental properties	Rental properties	—		—		—		3,257.2		(25.2)		3,232.0		Rental properties	—		2,962.7		—		—		(15.2)		2,947.5
		17,571.1		1,988.0		—		3,257.2		(244.6)		22,571.7			19,366.9		2,962.7		2,009.8		—		(289.1)		24,050.3
Mortgage loans held for sale	Mortgage loans held for sale	—		—		2,124.0		—		—		2,124.0		Mortgage loans held for sale	—		—		—		2,044.1		—		2,044.1
Deferred income taxes, net	Deferred income taxes, net	117.4		—		—		(7.1)		2.0		112.3		Deferred income taxes, net	218.0		(19.9)		—		—		(22.2)		175.9
Property and equipment, net	Property and equipment, net	381.0		5.6		4.0		2.5		116.5		509.6		Property and equipment, net	444.8		2.4		5.8		4.3		18.2		475.5
Other assets	Other assets	2,477.5		56.0		135.1		37.6		(91.1)		2,615.1		Other assets	2,670.6		35.6		59.3		386.9		(24.7)		3,127.7
Goodwill	Goodwill	134.3		—		—		—		29.2		163.5		Goodwill	134.3		—		—		—		29.2		163.5
		$	23,054.3	$	2,336.3	$	2,561.2	$	3,382.4	$	(163.4)	$	31,170.8		$	25,344.7	$	3,100.7	$	2,533.8	$	2,675.2	$	(272.8)	$	33,381.6
Liabilities	Liabilities													Liabilities
Accounts payable	Accounts payable	$	1,030.7	$	67.7	$	—	$	558.7	$	(405.8)	$	1,251.3	Accounts payable	$	1,017.0	$	424.0	$	65.3	$	—	$	(246.0)	$	1,260.3
Accrued expenses and other liabilities	Accrued expenses and other liabilities	2,508.7		313.0		123.1		30.2		(144.2)		2,830.8		Accrued expenses and other liabilities	2,761.4		34.6		354.4		354.4		(277.4)		3,227.4
Notes payable	Notes payable	2,680.2		706.8		1,554.9		1,025.0		—		5,966.9		Notes payable	2,355.4		950.0		705.3		1,279.7		—		5,290.4
		$	6,219.6	$	1,087.5	$	1,678.0	$	1,613.9	$	(550.0)	$	10,049.0		$	6,133.8	$	1,408.6	$	1,125.0	$	1,634.1	$	(523.4)	$	9,778.1

______________

(1)Amounts include the balances of the Company’s other businesses and the elimination of intercompany ~~transactions~~transactions.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

December 31, 2023


	September 30, 2023
	Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
	(In millions)
Assets
Cash and cash equivalents	$	2,920.2	$	136.1	$	616.0	$	189.1	$	12.2	$	3,873.6
Restricted cash	6.5		3.3		—		16.7		—		26.5
Inventories:
Construction in progress and finished homes	9,134.3		—		—		—		(132.9)		9,001.4
Residential land and lots — developed and under development	8,992.3		—		1,760.8		—		(131.2)		10,621.9
Land held for development	20.5		—		29.5		—		—		50.0
Land held for sale	8.7		—		—		—		—		8.7
Rental properties	—		2,708.4		—		—		(17.1)		2,691.3
	18,155.8		2,708.4		1,790.3		—		(281.2)		22,373.3
Mortgage loans held for sale	—		—		—		2,519.9		—		2,519.9
Deferred income taxes, net	229.8		(19.9)		—		—		(22.7)		187.2
Property and equipment, net	415.0		2.4		5.9		4.1		18.0		445.4
Other assets	2,838.5		29.8		58.5		250.3		(184.1)		2,993.0
Goodwill	134.3		—		—		—		29.2		163.5
	$	24,700.1	$	2,860.1	$	2,470.7	$	2,980.1	$	(428.6)	$	32,582.4
Liabilities
Accounts payable	$	1,033.7	$	698.6	$	68.4	$	0.1	$	(554.6)	$	1,246.2
Accrued expenses and other liabilities	2,585.5		43.2		337.4		280.4		(142.7)		3,103.8
Notes payable	2,329.9		400.0		695.0		1,669.6		—		5,094.5
	$	5,949.1	$	1,141.8	$	1,100.8	$	1,950.1	$	(697.3)	$	9,444.5

______________

(1)Amounts include the balances of the Company’s other businesses and ~~to a lesser extent, purchase accounting adjustments.~~the elimination of intercompany transactions.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

September 30, 2022
Homebuilding Forestar Financial Services Rental Eliminations and Other (1) Consolidated
(In millions)
Assets
Cash and cash equivalents $ 2,040.7 $ 264.8 $ 103.3 $ 109.9 $ 21.8 $ 2,540.5
Restricted cash 11.3 — 19.7 1.4 — 32.4
Inventories:
Construction in progress and finished homes 9,951.5 — — — (153.3) 9,798.2
Residential land and lots — developed and under development 7,322.5 1,932.6 — — (82.0) 9,173.1
Land held for development 21.0 89.8 — — — 110.8
Land held for sale 29.4 — — — — 29.4
Rental properties — — — 2,572.1 (27.9) 2,544.2

17,324.4 2,022.4 — 2,572.1 (263.2) 21,655.7
Mortgage loans held for sale — — 2,386.0 — — 2,386.0
Deferred income taxes, net 146.3 — — (7.1) 1.9 141.1
Property and equipment, net 361.8 5.7 4.3 2.0 97.8 471.6
Other assets 2,266.5 50.1 492.5 18.4 132.8 2,960.3
Goodwill 134.3 — — — 29.2 163.5
$ 22,285.3 $ 2,343.0 $ 3,005.8 $ 2,696.7 $ 20.3 $ 30,351.1
Liabilities
Accounts payable $ 1,149.1 $ 72.2 $ 0.2 $ 233.6 $ (94.8) $ 1,360.3
Accrued expenses and other liabilities 2,365.7 365.4 596.2 25.0 (214.0) 3,138.3
Notes payable 2,942.6 706.0 1,618.3 800.0 — 6,066.9
$ 6,457.4 $ 1,143.6 $ 2,214.7 $ 1,058.6 $ (308.8) $ 10,565.5

~~______________~~

~~(1)Amounts include the balances of the Company’s other businesses, the elimination of intercompany transactions and, to a lesser extent, purchase accounting adjustments.~~

~~Table of Contents~~

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

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

~~March 31, 2023~~


		Three Months Ended March 31, 2023													Three Months Ended December 31, 2023
		Homebuilding		Forestar		Financial Services		Rental		Eliminations and Other (1)		Consolidated			Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
		(In millions)													(In millions)
Revenues	Revenues													Revenues
Home sales	Home sales	$	7,449.7	$	—	$	—	$	—	$	—	$	7,449.7	Home sales	$	7,276.4	$	—	$	—	$	—	$	—	$	7,276.4
Land/lot sales and other	Land/lot sales and other	19.9		301.5		—		—		(238.7)		82.7		Land/lot sales and other	20.3		—		305.9		—		(264.5)		61.7
Rental property sales	Rental property sales	—		—		—		224.1		—		224.1		Rental property sales	—		195.3		—		—		—		195.3
Financial services	Financial services	—		—		216.4		—		—		216.4		Financial services	—		—		—		192.6		—		192.6
		7,469.6		301.5		216.4		224.1		(238.7)		7,972.9			7,296.7		195.3		305.9		192.6		(264.5)		7,726.0
Cost of sales	Cost of sales													Cost of sales
Home sales (2)	Home sales (2)	5,843.0		—		—		—		(61.8)		5,781.2		Home sales (2)	5,608.0		—		—		—		(54.2)		5,553.8
Land/lot sales and other	Land/lot sales and other	13.4		225.3		—		—		(204.3)		34.4		Land/lot sales and other	13.2		—		232.8		—		(222.6)		23.4
Rental property sales	Rental property sales	—		—		—		157.6		(0.8)		156.8		Rental property sales	—		141.3		—		—		(4.8)		136.5
Inventory and land option charges	Inventory and land option charges	14.2		20.3		—		0.4		(11.1)		23.8		Inventory and land option charges	5.5		0.4		0.2		—		—		6.1
		5,870.6		245.6		—		158.0		(278.0)		5,996.2			5,626.7		141.7		233.0		—		(281.6)		5,719.8
Selling, general and administrative expense	Selling, general and administrative expense	545.6		22.0		146.9		53.5		5.6		773.6		Selling, general and administrative expense	603.4		47.4		28.0		151.5		4.7		835.0
Other (income) expense	Other (income) expense	(14.5)		(2.0)		(16.1)		(22.0)		12.4		(42.2)		Other (income) expense	(29.5)		(25.1)		(6.3)		(24.9)		9.5		(76.3)
Income before income taxes	Income before income taxes	$	1,067.9	$	35.9	$	85.6	$	34.6	$	21.3	$	1,245.3	Income before income taxes	$	1,096.1	$	31.3	$	51.2	$	66.0	$	2.9	$	1,247.5

Summary Cash Flow Information														Summary Cash Flow Information
Depreciation and amortization														Depreciation and amortization	$	18.0	$	0.6	$	0.8	$	0.5	$	0.1	$	20.0
Cash provided by (used in) operating activities														Cash provided by (used in) operating activities	$	31.2	$	(516.2)	$	(156.7)	$	464.7	$	23.6	$	(153.4)

______________

(1)Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.

(2)Amount in the Eliminations and Other 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.

1211

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023


		Six Months Ended March 31, 2023													Three Months Ended December 31, 2022
		Homebuilding		Forestar		Financial Services		Rental		Eliminations and Other (1)		Consolidated			Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
		(In millions)													(In millions)
Revenues	Revenues													Revenues
Home sales	Home sales	$	14,158.9	$	—	$	—	$	—	$	—	$	14,158.9	Home sales	$	6,709.2	$	—	$	—	$	—	$	—	$	6,709.2
Land/lot sales and other	Land/lot sales and other	54.7		518.2		—		—		(406.2)		166.7		Land/lot sales and other	34.8		—		216.7		—		(167.4)		84.1
Rental property sales	Rental property sales	—		—		—		551.6		—		551.6		Rental property sales	—		327.5		—		—		—		327.5
Financial services	Financial services	—		—		353.4		—		—		353.4		Financial services	—		—		—		137.0		—		137.0
		14,213.6		518.2		353.4		551.6		(406.2)		15,230.6			6,744.0		327.5		216.7		137.0		(167.4)		7,257.8
Cost of sales	Cost of sales													Cost of sales
Home sales (2)	Home sales (2)	10,949.7		—		—		—		(110.9)		10,838.8		Home sales (2)	5,106.7		—		—		—		(49.0)		5,057.7
Land/lot sales and other	Land/lot sales and other	18.3		392.1		—		—		(352.1)		58.3		Land/lot sales and other	4.9		—		166.8		—		(147.7)		24.0
Rental property sales	Rental property sales	—		—		—		341.4		(2.4)		339.0		Rental property sales	—		183.8		—		—		(1.7)		182.1
Inventory and land option charges	Inventory and land option charges	38.4		22.7		—		1.4		(11.1)		51.4		Inventory and land option charges	24.2		0.9		2.4		—		—		27.5
		11,006.4		414.8		—		342.8		(476.5)		11,287.5			5,135.8		184.7		169.2		—		(198.4)		5,291.3
Selling, general and administrative expense	Selling, general and administrative expense	1,072.6		44.9		281.0		101.0		11.0		1,510.5		Selling, general and administrative expense	527.1		47.5		22.9		134.1		5.4		737.0
Other (income) expense	Other (income) expense	(27.7)		(5.3)		(31.4)		(37.1)		21.6		(79.9)		Other (income) expense	(13.3)		(15.0)		(3.3)		(15.3)		9.2		(37.7)
Income before income taxes	Income before income taxes	$	2,162.3	$	63.8	$	103.8	$	144.9	$	37.7	$	2,512.5	Income before income taxes	$	1,094.4	$	110.3	$	27.9	$	18.2	$	16.4	$	1,267.2

Summary Cash Flow Information	Summary Cash Flow Information													Summary Cash Flow Information
Depreciation and amortization	Depreciation and amortization	$	30.7	$	1.5	$	1.1	$	1.0	$	12.2	$	46.5	Depreciation and amortization	$	15.2	$	0.5	$	0.7	$	0.5	$	2.9	$	19.8
Cash provided by (used in) operating activities	Cash provided by (used in) operating activities	$	1,456.4	$	21.3	$	232.2	$	(263.3)	$	27.0	$	1,473.6	Cash provided by (used in) operating activities	$	313.9	$	49.4	$	(49.8)	$	493.1	$	22.5	$	829.1

______________

(1)Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.

1312

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

Three Months Ended March 31, 2022
Homebuilding Forestar Financial Services Rental Eliminations and Other (1) Consolidated
(In millions)
Revenues
Home sales $ 7,499.2 $ — $ — $ — $ — $ 7,499.2
Land/lot sales and other 7.6 421.6 — — (374.4) 54.8
Rental property sales — — — 222.9 — 222.9
Financial services — — 222.1 — — 222.1
7,506.8 421.6 222.1 222.9 (374.4) 7,999.0
Cost of sales
Home sales (2) 5,335.2 — — — (43.7) 5,291.5
Land/lot sales and other 3.3 328.7 — — (307.0) 25.0
Rental property sales — — — 102.5 (4.3) 98.2
Inventory and land option charges 9.8 5.4 — — — 15.2
5,348.3 334.1 — 102.5 (355.0) 5,429.9
Selling, general and administrative expense 507.3 24.3 138.0 22.8 2.7 695.1
Other (income) expense (1.6) — (8.7) (4.9) 5.9 (9.3)
Income before income taxes $ 1,652.8 $ 63.2 $ 92.8 $ 102.5 $ (28.0) $ 1,883.3

~~______________~~

~~(1)Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.~~

~~(2)~~Amount in the Eliminations and Other 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.

~~Table of Contents~~

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

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

~~March 31, 2023~~

Six Months Ended March 31, 2022
Homebuilding Forestar Financial Services Rental Eliminations and Other (1) Consolidated
(In millions)
Revenues
Home sales $ 14,155.6 $ — $ — $ — $ — $ 14,155.6
Land/lot sales and other 30.5 829.2 — — (748.7) 111.0
Rental property sales — — — 379.4 — 379.4
Financial services — — 406.4 — — 406.4
14,186.1 829.2 406.4 379.4 (748.7) 15,052.4
Cost of sales
Home sales (2) 10,169.1 — — — (81.3) 10,087.8
Land/lot sales and other 20.4 662.3 — — (624.8) 57.9
Rental property sales — — — 175.0 (5.1) 169.9
Inventory and land option charges 13.7 6.0 — 0.3 — 20.0
10,203.2 668.3 — 175.3 (711.2) 10,335.6
Selling, general and administrative expense 1,004.9 45.8 263.2 41.4 5.7 1,361.0
Other (income) expense (7.9) (1.6) (16.7) (9.8) 11.2 (24.8)
Income before income taxes $ 2,985.9 $ 116.7 $ 159.9 $ 172.5 $ (54.4) $ 3,380.6
Summary Cash Flow Information
Depreciation and amortization $ 30.9 $ 1.3 $ 0.9 $ 0.2 $ 6.0 $ 39.3
Cash (used in) provided by operating activities $ (416.2) $ 76.6 $ (63.0) $ (409.1) $ (22.9) $ (834.6)

~~______________~~

~~(1)Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.~~

~~Table of Contents~~

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

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

~~March 31, 2023~~


Homebuilding Inventories by Reporting Segment (1)	Homebuilding Inventories by Reporting Segment (1)	March 31, 2023		September 30, 2022		Homebuilding Inventories by Reporting Segment (1)	December 31, 2023		September 30, 2023
		(In millions)					(In millions)
Northwest	Northwest	$	1,777.0	$	1,802.2	Northwest	$	1,990.0	$	1,907.5
Southwest	Southwest	3,020.0		2,801.7		Southwest	3,311.4		3,133.0
South Central	South Central	3,801.4		3,931.7		South Central	3,950.6		3,810.5
Southeast	Southeast	3,979.1		4,091.1		Southeast	4,186.5		3,958.5
East	East	2,754.1		2,542.7		East	3,367.4		3,024.7
North	North	2,007.2		1,935.7		North	2,302.3		2,078.0
Corporate and unallocated (2)	Corporate and unallocated (2)	232.3		219.3		Corporate and unallocated (2)	258.7		243.6
		$	17,571.1	$	17,324.4		$	19,366.9	$	18,155.8

____________________________

(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)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 March 31,				Six Months Ended March 31,				Homebuilding Results by Reporting Segment	Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
		(In millions)									(In millions)
Revenues	Revenues									Revenues
Northwest	Northwest	$	691.1	$	637.0	$	1,211.5	$	1,205.9	Northwest	$	577.9	$	520.4
Southwest	Southwest	920.9		1,135.1		1,723.9		2,046.7		Southwest	1,051.4		803.0
South Central	South Central	1,805.8		1,838.4		3,447.9		3,532.7		South Central	1,669.2		1,642.1
Southeast	Southeast	2,106.1		1,946.5		4,102.4		3,757.5		Southeast	1,999.6		1,996.3
East	East	1,206.9		1,219.5		2,350.8		2,294.3		East	1,268.3		1,143.9
North	North	738.8		730.3		1,377.1		1,349.0		North	730.3		638.3
		$	7,469.6	$	7,506.8	$	14,213.6	$	14,186.1		$	7,296.7	$	6,744.0
Income before Income Taxes	Income before Income Taxes									Income before Income Taxes
Northwest	Northwest	$	96.4	$	148.2	$	155.0	$	260.0	Northwest	$	69.5	$	58.7
Southwest	Southwest	81.7		226.6		165.7		385.9		Southwest	134.9		84.0
South Central	South Central	267.9		416.0		549.5		770.3		South Central	271.6		281.6
Southeast	Southeast	381.7		482.2		793.0		897.7		Southeast	329.4		411.3
East	East	183.5		265.9		373.0		468.2		East	204.6		189.4
North	North	56.7		113.9		126.1		203.8		North	86.1		69.4
		$	1,067.9	$	1,652.8	$	2,162.3	$	2,985.9		$	1,096.1	$	1,094.4

1613

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

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 of ~~March~~December 31, 2023, the Company ~~performed detailed impairment evaluations of communities and land inventories and~~ determined that no communities ~~with a combined carrying value of $30.6 million~~ were ~~impaired. As a result,~~impaired, and no impairment charges ~~of $9.2 million~~ were recorded during the three months ended ~~March~~December 31, ~~2023 to reduce the carrying value of the related inventory to fair value. During the six months ended March 31, 2023, impairment charges totaled $14.0 million.~~2023. There were ~~$3.8~~$4.8 million of impairment charges recorded in the ~~three and six months ended March 31, 2022.~~prior year quarter.

During the three ~~and six~~ months ended ~~March~~December 31, 2023, earnest money and pre-acquisition cost write-offs related to land purchase contracts that the Company has terminated or expects to terminate were ~~$14.6~~$6.1 million ~~and $37.4 million, respectively,~~ compared to ~~$11.4 million and $16.2~~$22.7 million in the same ~~periods~~period of fiscal ~~2022.~~2023. Inventory impairments and land option charges are included in cost of sales in the consolidated statements of operations.

1714

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

NOTE D – NOTES PAYABLE

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


		March 31, 2023		September 30, 2022			December 31, 2023		September 30, 2023
		(In millions)					(In millions)
Homebuilding	Homebuilding					Homebuilding
Unsecured:	Unsecured:					Unsecured:
Revolving credit facility	Revolving credit facility	$	—	$	—	Revolving credit facility	$	—	$	—
4.75% senior notes due 2023 (1)		—		299.9
5.75% senior notes due 2023 (1)		399.8		399.6
2.5% senior notes due 2024 (1)	2.5% senior notes due 2024 (1)	498.6		498.2		2.5% senior notes due 2024 (1)	499.3		499.0
2.6% senior notes due 2025 (1)	2.6% senior notes due 2025 (1)	497.6		497.1		2.6% senior notes due 2025 (1)	498.3		498.0
1.3% senior notes due 2026 (1)	1.3% senior notes due 2026 (1)	596.0		595.5		1.3% senior notes due 2026 (1)	596.9		596.6
1.4% senior notes due 2027 (1)	1.4% senior notes due 2027 (1)	496.1		495.7		1.4% senior notes due 2027 (1)	496.7		496.5
Other secured notes	Other secured notes	192.1		156.6		Other secured notes	264.2		239.8
							2,355.4		2,329.9
Rental						Rental
Unsecured:						Unsecured:
Revolving credit facility						Revolving credit facility	950.0		400.0
		2,680.2		2,942.6
Forestar	Forestar					Forestar
Unsecured:	Unsecured:					Unsecured:
Revolving credit facility	Revolving credit facility	—		—		Revolving credit facility	—		—
3.85% senior notes due 2026 (2)	3.85% senior notes due 2026 (2)	397.0		396.5		3.85% senior notes due 2026 (2)	397.7		397.4
5.0% senior notes due 2028 (2)	5.0% senior notes due 2028 (2)	297.3		297.0		5.0% senior notes due 2028 (2)	297.7		297.6
Other secured notes	Other secured notes	12.5		12.5		Other secured notes	9.9		—
		706.8		706.0			705.3		695.0
Financial Services	Financial Services					Financial Services
Mortgage repurchase facility		1,554.9		1,618.3
Mortgage repurchase facilities:						Mortgage repurchase facilities:
Committed facility						Committed facility	1,160.7		1,373.3
Uncommitted facility						Uncommitted facility	119.0		296.3
							1,279.7		1,669.6
Rental
Unsecured:
Revolving credit facility		1,025.0		800.0
Total (3)		$	5,966.9	$	6,066.9
Total notes payable (3)						Total notes payable (3)	$	5,290.4	$	5,094.5

_____________

(1)Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled ~~$10.2~~$7.5 million and ~~$12.2~~$8.4 million at ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, respectively.

(2)Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled ~~$5.7~~$4.6 million and ~~$6.5~~$5.0 million at ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, respectively.

(3)The fair value of notes payable at ~~March~~December 31, 2023 totaled ~~$5.7~~$5.1 billion, of which ~~$2.9~~$2.6 billion were measured using Level 2 inputs and ~~$2.8~~$2.5 billion were measured using Level 3 inputs. The fair value of notes payable at September 30, ~~2022~~2023 totaled ~~$5.7~~$4.8 billion, of which ~~$3.1~~$2.5 billion were measured using Level 2 inputs and ~~$2.6~~$2.3 billion were measured using Level 3 inputs.

1815

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

Homebuilding

The Company has a $2.19 billion senior unsecured homebuilding revolving credit facility 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 commitments. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility is October 28, 2027. At ~~March~~December 31, 2023, there were no borrowings outstanding and ~~$202.6~~$229.6 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$1.99~~$1.96 billion.

~~In February 2023, the Company repaid $300 million principal amount of its 4.75% senior notes at maturity.~~

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 ~~March~~December 31, 2023, 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 and homebuilding senior notes are 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 Securities and Exchange Commission (SEC) in July 2021, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

In July 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 ~~March~~December 31, 2023.

Rental

The Company’s rental subsidiary, DRH Rental, has a $1.05 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $2.0 billion, subject to certain conditions and availability of additional bank commitments. Availability under the rental 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. 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. The maturity date of the facility is October 10, 2027. Borrowings and repayments under the facility totaled $720 million and $170 million, respectively, during the three months ended December 31, 2023. At December 31, 2023, there were $950 million of borrowings outstanding at a 7.2% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $100 million.

The rental 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 December 31, 2023, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

December 31, 2023

The rental revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. The rental 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.

Forestar

Forestar has a $410 million senior unsecured revolving credit facility 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 commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of 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 is October 28, 2026. At ~~March~~December 31, 2023, there were no borrowings outstanding and ~~$42.6~~$24.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$367.4~~$385.7 million.

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 December 31, 2023, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

~~Table of Contents~~

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

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

~~March 31, 2023~~

Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. They are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, rental or financial services ~~or rental~~ operations. ~~At March 31, 2023, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.~~

In April 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 ~~March~~December 31, 2023.

Financial Services

The Company’s mortgage subsidiary, DHI Mortgage, has atwo mortgage repurchase ~~facility~~facilities, one of which is committed and the other of which is uncommitted, that ~~provides~~provide 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 2023, the~~facilities.

The committed mortgage repurchase facility ~~was amended to increase its~~has a total capacity toof $2.0 billion and ~~extend its~~a maturity date toof February 16, 2024. The capacity of the committed mortgage repurchase facility can be increased to $2.3 billion subject to the availability of additional commitments. At December 31, 2023, DHI Mortgage had an obligation of $1.2 billion under the committed mortgage repurchase facility at a 7.0% annual interest rate.

~~As of March~~At December 31, 2023, ~~$2.14~~the uncommitted mortgage repurchase facility had a borrowing capacity of $300 million, of which DHI Mortgage had an obligation of $119 million at a 6.6% annual interest rate.

At December 31, 2023, $1.82 billion of mortgage loans held for sale with a collateral value of ~~$2.10~~$1.79 billion were pledged under the ~~mortgage repurchase facility. As a result of advance paydowns totaling $541.0 million, DHI Mortgage had an obligation of $1.55 billion outstanding under the~~committed mortgage repurchase facility, ~~at March 31, 2023 at~~and $127.3 million of mortgage loans held for sale with a ~~6.4% annual interest rate.~~

~~The~~collateral value of $121.5 million were pledged under the uncommitted 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, 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 March 31, 2023, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.

~~Rental~~

The Company’s rental subsidiary, DRH Rental, has a $1.025 billion 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. Availability under the rental 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. 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. The maturity date of the facility is March 4, 2026. Borrowings and repayments under the facility totaled $575 million and $350 million, respectively, during the six months ended March 31, 2023. At March 31, 2023, the capacity of the facility was fully utilized, with $1.025 billion of borrowings outstanding at a 7.2% annual interest rate.

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, 2023, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

2017

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

~~DRH Rental’s revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that~~The facilities contain financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity. At December 31, 2023, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

These mortgage repurchase facilities are ~~not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. The rental 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~~rental or ~~financial services~~Forestar operations.

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 ~~six~~three months of fiscal ~~2023~~2024 and fiscal ~~2022,~~2023, 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 six~~ months ended ~~March~~December 31, 2023 and 2022:


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
		(In millions)									(In millions)
Capitalized interest, beginning of period	Capitalized interest, beginning of period	$	255.1	$	221.3	$	237.4	$	217.7	Capitalized interest, beginning of period	$	286.4	$	237.4
Interest incurred (1)	Interest incurred (1)	50.6		36.7		96.8		73.6		Interest incurred (1)	42.6		46.2
Interest charged to cost of sales	Interest charged to cost of sales	(34.0)		(34.7)		(62.5)		(68.0)		Interest charged to cost of sales	(28.0)		(28.5)
Capitalized interest, end of period	Capitalized interest, end of period	$	271.7	$	223.3	$	271.7	$	223.3	Capitalized interest, end of period	$	301.0	$	255.1

__________________

(1) Interest incurred in the three months ended December 31, 2023 and 2022 includes (a) interest on the Company's mortgage repurchase ~~facility~~facilities of ~~$9.7~~$14.9 million and ~~$17.8~~$8.1 million, ~~in the three and six months ended March 31, 2023, respectively, and $3.0 million and $7.0 million in the same periods of fiscal 2022;~~respectively; (b) Forestar interest of ~~$8.2 million and $16.4 million in the three and six months ended March 31, 2023, respectively, and~~ $8.1 million and ~~$16.2~~$8.2 million, ~~in the same periods of fiscal 2022;~~respectively; and (c) interest on DRH Rental’s revolving credit facility of ~~$13.7~~$8.2 million and ~~$22.7~~$9.0 million, ~~in the three and six months ended March 31, 2023,~~ respectively.

2118

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

NOTE F – 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 ~~March~~December 31, 2023, mortgage loans held for sale of ~~$2.12~~$2.0 billion had an aggregate outstanding principal balance of ~~$2.14~~$2.0 billion. At September 30, ~~2022,~~2023, mortgage loans held for sale of ~~$2.39~~$2.5 billion had an aggregate outstanding principal balance of ~~$2.51~~$2.6 billion. Mortgage loans held for sale at both dates were primarily composed of mortgage loans measured at fair value on a recurring basis using Level 2 inputs.

During the ~~six~~three months ended ~~March~~December 31, 2023 and 2022, mortgage loans originated totaled ~~$9.6~~$5.1 billion and ~~$8.4~~$4.6 billion, respectively, and mortgage loans sold totaled ~~$9.9~~$5.7 billion and ~~$8.1~~$5.2 billion, respectively. The Company had gains on sales of loans and servicing rights of ~~$154.5 million and $233.8~~$128.7 million during the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$168.0 million and $302.0~~$79.2 million in the prior year ~~periods.~~period. Net gains on sales of loans and servicing rights are included in revenues in the consolidated statements of operations. During the ~~six~~three months ended ~~March~~December 31, 2023, approximately ~~53%~~71% 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 ~~43%~~28% were sold to one other major financial entity.

The Company also uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers. At ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, the Company had mortgage-backed securities (MBS) totaling $765.6 million and $1.1 billion, ~~and $532.4 million,~~ respectively, that did not yet have interest rate lock commitments (IRLCs) or closed loans created or assigned. The Company recorded a liability of ~~$2.4~~$16.5 million at ~~March~~December 31, 2023 and an asset of ~~$4.8~~$15.7 million at September 30, ~~2022~~2023 for the fair value of such MBS position, which is measured using Level 2 inputs.

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~~December 31, 2023 and September 30, ~~2022,~~2023, the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value using Level 23 inputs, totaled ~~$3.0~~$2.3 billion and ~~$4.0~~$2.7 billion, respectively.

NOTE G – INCOME TAXES

The Company’s income tax expense for the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022 was ~~$295.7~~$291.8 million and ~~$594.6~~$298.9 million, ~~respectively, compared to $441.0 million and $792.5 million in the prior year periods.~~respectively. The effective tax rate was ~~23.7%~~23.4% for ~~both~~ the three ~~and six~~ months ended ~~March~~December 31, 2023 compared to ~~23.4%~~23.6% in ~~both of~~ the prior year ~~periods.~~period. The effective tax rates for ~~all~~both periods include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient homes tax credits.

The Company’s deferred tax assets, net of deferred tax liabilities, were ~~$130.1~~$190.7 million at ~~March~~December 31, 2023 compared to ~~$159.0~~$202.0 million at September 30, ~~2022.~~2023. The Company has a valuation allowance of ~~$17.8 million and $17.9~~$14.8 million at ~~March~~December 31, 2023 and September 30, ~~2022, respectively,~~2023 related to deferred tax assets for state net operating loss (NOL)~~, state capital loss~~ and tax credit carryforwards that are expected 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 ~~state capital loss~~ and tax credit 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.

2219

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

NOTE H – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share.


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
		(In millions)									(In millions)
Numerator:	Numerator:									Numerator:
Net income attributable to D.R. Horton, Inc.	Net income attributable to D.R. Horton, Inc.	$	942.2	$	1,436.3	$	1,900.9	$	2,577.9	Net income attributable to D.R. Horton, Inc.	$	947.4	$	958.7
Denominator:	Denominator:									Denominator:
Denominator for basic earnings per share — weighted average common shares	Denominator for basic earnings per share — weighted average common shares	342.1		353.1		343.2		354.6		Denominator for basic earnings per share — weighted average common shares	333.3		344.2
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Employee stock awards	Employee stock awards	2.8		3.2		2.7		3.6		Employee stock awards	2.4		2.7
Denominator for diluted earnings per share — adjusted weighted average common shares	Denominator for diluted earnings per share — adjusted weighted average common shares	344.9		356.3		345.9		358.2		Denominator for diluted earnings per share — adjusted weighted average common shares	335.7		346.9
Basic net income per common share attributable to D.R. Horton, Inc.	Basic net income per common share attributable to D.R. Horton, Inc.	$	2.75	$	4.07	$	5.54	$	7.27	Basic net income per common share attributable to D.R. Horton, Inc.	$	2.84	$	2.79
Diluted net income per common share attributable to D.R. Horton, Inc.	Diluted net income per common share attributable to D.R. Horton, Inc.	$	2.73	$	4.03	$	5.50	$	7.20	Diluted net income per common share attributable to D.R. Horton, Inc.	$	2.82	$	2.76

NOTE I – STOCKHOLDERS’ EQUITY

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

~~In April 2022, the Board of Directors authorized the repurchase of up to $1.0 billion of the Company’s common stock. During the six months ended March~~Effective October 31, 2023, the Company repurchased 4.5 million shares at a total cost including commissions and excise taxes of $421.3 million, leaving $17.0 million remaining on the repurchase authorization at March 31, 2023. In April 2023, the Board of Directors authorized the repurchase of up to ~~$1.0~~$1.5 billion of the Company’s common stock, replacing the previous ~~authorization.~~authorization that was effective as of April 18, 2023. The authorization has no expiration date. During the three months ended December 31, 2023, the Company repurchased 3.3 million shares of its common stock at a total cost, including commissions and excise taxes, of $398.3 million, of which $201.6 million was repurchased under the previous authorization. At December 31, 2023, there was $1.3 billion remaining on the repurchase authorization.

During ~~each of~~ the ~~first two quarters of fiscal~~three months ended December 31, 2023, the Board of Directors approved a quarterly cash dividend of ~~$0.25~~$0.30 per common share ~~the most recent of~~totaling $99.9 million, which was paid on ~~February 14,~~November 28, 2023 to stockholders of record on ~~February 7,~~November 21, 2023. In ~~April 2023,~~January 2024, the Board of Directors approved a quarterly cash dividend of ~~$0.25~~$0.30 per common share, payable on ~~May 10, 2023~~February 13, 2024 to stockholders of record on ~~May 3, 2023. Cash dividends of $0.225 per common share were approved and paid in each quarter of fiscal 2022.~~February 6, 2024.

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 (ATM) program that became effective in November 2021. During the ~~six~~three months ended ~~March~~December 31, 2023, there were no shares issued under Forestar’s ATM program. At ~~March~~December 31, 2023, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its ATM program.

2320

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

NOTE J – EMPLOYEE BENEFIT PLANS

Stock-Based Compensation

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). 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 October ~~2022,~~2023, the Company granted ~~600,000~~277,779 performance-based RSUs to its executive officers. These awards vest at the end of a three-year performance period ending September 30, ~~2025.~~2026. 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 for the October 2023 grants are total shareholder ~~return;~~return, return on ~~investment; selling, general~~assets and ~~administrative expense containment; and gross profit.~~operating margin. The grant date fair value of these equity awards was ~~$79.97~~$108.74 per unit. Compensation expense related to this grant was ~~$4.5 million and $8.9~~$2.5 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~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 three months ended ~~March~~December 31, 2023, the Company granted approximately ~~790,000~~150,000 time-based ~~RSUs to approximately 1,370 employees.~~RSUs. The weighted average grant date fair value of these equity awards was ~~$92.34~~$118.42 per unit, and they vest annually in equal installments over periods of three to five years. Compensation expense related to these grants was ~~$2.3~~$13.9 million in ~~both~~ the three ~~and six~~ months ended ~~March~~December 31, 2023, which ~~primarily related to~~included $13.8 million of 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 RSUs was ~~$26.0 million and $47.1~~$37.3 million during the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$28.9 million and $50.9~~$21.1 million during the three ~~and six~~ months ended ~~March~~December 31, 2022.

2421

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

NOTE K – 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.~~operates.

Changes in the Company’s warranty liability during the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022 were as follows:


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
		(In millions)									(In millions)
Warranty liability, beginning of period	Warranty liability, beginning of period	$	464.0	$	390.0	$	454.3	$	376.3	Warranty liability, beginning of period	$	512.4	$	454.3
Warranties issued	Warranties issued	44.0		43.6		83.9		82.5		Warranties issued	45.1		39.9
Changes in liability for pre-existing warranties	Changes in liability for pre-existing warranties	(4.0)		3.0		(2.9)		7.3		Changes in liability for pre-existing warranties	4.5		1.1
Settlements made	Settlements made	(29.3)		(28.8)		(60.6)		(58.3)		Settlements made	(30.2)		(31.3)
Warranty liability, end of period	Warranty liability, end of period	$	474.7	$	407.8	$	474.7	$	407.8	Warranty liability, end of period	$	531.8	$	464.0

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 ~~$768.3~~$814.5 million and ~~$729.1~~$858.9 million at ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, respectively, and are included in accrued expenses and other liabilities in the consolidated balance sheets. Approximately ~~99%~~97% of these reserves related to construction defect matters at both ~~March~~December 31, 2023 and September 30, ~~2022.~~2023. Expenses related to the Company’s legal contingencies were ~~$53.3~~$26.4 million and ~~$44.1~~$18.8 million in the ~~six~~three months ended ~~March~~December 31, 2023 and 2022, respectively.

Changes in the Company’s legal claims reserves during the ~~six~~three months ended ~~March~~December 31, 2023 and 2022 were as follows:


		Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022			2023		2022
		(In millions)					(In millions)
Reserves for legal claims, beginning of period	Reserves for legal claims, beginning of period	$	729.1	$	577.5	Reserves for legal claims, beginning of period	$	858.9	$	729.1
Increase in reserves		58.7		55.7
(Decrease) increase in reserves						(Decrease) increase in reserves	(4.7)		26.9
Payments	Payments	(19.5)		(16.1)		Payments	(39.7)		(7.5)
Reserves for legal claims, end of period	Reserves for legal claims, end of period	$	768.3	$	617.1	Reserves for legal claims, end of period	$	814.5	$	748.5

2522

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

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, and the limits of the policies are finite, the Company anticipates it ~~will largely~~may be in large part self-insured. Since June 1, 2021, except for contractual risk transfer, the Company is almost exclusively self-insured for construction defect exposures. The Company’s estimated insurance receivables from estimated losses for pending legal claims and anticipated future claims related to previously closed homes totaled ~~$139.0~~$131.5 million, ~~$137.9~~$165.8 million and ~~$112.0~~$143.6 million at ~~March~~December 31, 2023, September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively, and are included in other assets in the consolidated balance sheets. ~~Additionally, the~~The Company ~~may~~also contractually requires major subcontractors in most markets to have ~~the ability to recover a portion of its losses from its subcontractors and their~~general liability insurance, ~~carriers when the Company has been named as an additional insured on their insurance policies.~~which includes construction defect coverage.

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 ~~March~~December 31, 2023, the Company had total deposits of ~~$1.6~~$1.9 billion, consisting of cash deposits of ~~$1.5~~$1.7 billion and promissory notes and surety bonds of ~~$94.7~~$131.9 million, related to contracts to purchase land and lots with a total remaining purchase price of approximately ~~$19.2~~$22.5 billion. ~~The majority of land and lots under contract are currently expected to be purchased within three years.~~ Of these amounts, ~~$124.3~~$161.7 million of the deposits related to contracts with Forestar to purchase land and lots with a remaining purchase price of ~~$1.2~~$1.5 billion. A limited number of the homebuilding land and lot purchase contracts at ~~March~~December 31, 2023, representing ~~$76.7~~$301.3 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 ~~$76.7~~$301.3 million remaining purchase price subject to specific performance provisions, ~~$44.5~~$259.5 million related to contracts between the homebuilding segment and Forestar.

During the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022, Forestar reimbursed the homebuilding segment ~~$5.7~~$13.3 million and ~~$10.4~~$0.1 million, respectively, for previously paid earnest money and $4.6 million and $4.7 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 six months ended March 31, 2022, Forestar reimbursed the homebuilding segment $16.2 million and $37.8 million, respectively, for such pre-acquisition and due diligence costs and also reimbursed the homebuilding segment $2.7 million and $5.4 million, respectively, for previously paid earnest money.

Other Commitments

At ~~March~~December 31, 2023, the Company had outstanding surety bonds of ~~$2.9~~$3.2 billion and letters of credit of ~~$245.2~~$253.9 million to secure performance under various contracts. Of the total letters of credit, ~~$202.6~~$229.6 million were issued under the homebuilding revolving credit facility and ~~$42.6~~$24.3 million were issued under Forestar’s revolving credit facility.

2623

Table of Contents

D.R. HORTON, INC. AND SUBSIDIARIES

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

~~March~~December 31, 2023

NOTE L – OTHER ASSETS, ACCRUED EXPENSES AND OTHER LIABILITIES

The Company’s other assets at ~~March~~December 31, 2023 and September 30, ~~2022~~2023 were as follows:


		March 31, 2023		September 30, 2022			December 31, 2023		September 30, 2023
		(In millions)					(In millions)
Earnest money and refundable deposits	Earnest money and refundable deposits	$	1,684.5	$	1,685.7	Earnest money and refundable deposits	$	1,943.8	$	1,859.6
Mortgage hedging instruments and commitments	Mortgage hedging instruments and commitments	10.6		330.2		Mortgage hedging instruments and commitments	16.5		153.6
Water rights and other water-related assets	Water rights and other water-related assets	319.3		286.6		Water rights and other water-related assets	310.6		319.6
Margin deposits related to hedging instruments						Margin deposits related to hedging instruments	181.1		—
Other receivables	Other receivables	143.3		210.9		Other receivables	163.9		167.2
Insurance receivables	Insurance receivables	139.0		137.9		Insurance receivables	131.5		165.8
Prepaid assets	Prepaid assets	83.1		77.4		Prepaid assets	100.8		93.0
Contract assets - insurance agency commissions	Contract assets - insurance agency commissions	77.3		74.3		Contract assets - insurance agency commissions	97.9		93.9
Interest rate lock commitments	Interest rate lock commitments	58.8		47.7		Interest rate lock commitments	81.1		2.3
Lease right of use assets	Lease right of use assets	43.4		46.6		Lease right of use assets	43.3		46.6
Mortgage servicing rights	Mortgage servicing rights	4.6		10.6		Mortgage servicing rights	18.0		11.1
Other	Other	51.2		52.4		Other	39.2		80.3
		$	2,615.1	$	2,960.3		$	3,127.7	$	2,993.0

The Company’s accrued expenses and other liabilities at ~~March~~December 31, 2023 and September 30, ~~2022~~2023 were as follows:


		March 31, 2023		September 30, 2022			December 31, 2023		September 30, 2023
		(In millions)					(In millions)
Reserves for legal claims	Reserves for legal claims	$	768.3	$	729.1	Reserves for legal claims	$	814.5	$	858.9
Employee compensation and related liabilities	Employee compensation and related liabilities	465.4		524.3		Employee compensation and related liabilities	470.3		531.0
Warranty liability	Warranty liability	474.7		454.3		Warranty liability	531.8		512.4
Inventory related accruals	Inventory related accruals	349.4		403.6		Inventory related accruals	363.0		353.6
Broker deposits related to hedging instruments	Broker deposits related to hedging instruments	6.6		240.9		Broker deposits related to hedging instruments	—		118.9
Customer deposits	Customer deposits	171.6		224.2		Customer deposits	122.4		147.1
Interest rate lock commitments	Interest rate lock commitments	1.5		183.5		Interest rate lock commitments	—		33.9
Federal and state income tax liabilities	Federal and state income tax liabilities	330.0		110.9		Federal and state income tax liabilities	517.3		233.8
Accrued property taxes	Accrued property taxes	34.9		60.1		Accrued property taxes	49.5		69.2
Lease liabilities	Lease liabilities	44.7		47.9		Lease liabilities	44.5		48.1
Accrued interest	Accrued interest	32.0		33.8		Accrued interest	21.5		33.6
Mortgage hedging instruments and commitments	Mortgage hedging instruments and commitments	22.7		12.4		Mortgage hedging instruments and commitments	170.6		15.7
Other	Other	129.0		113.3		Other	122.0		147.6
		$	2,830.8	$	3,138.3		$	3,227.4	$	3,103.8

2724

Table of Contents

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, ~~2022.~~2023. 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 ~~110~~118 markets across 33 ~~states, primarily under the names of D.R. Horton,~~ ~~America’s Builder,~~ ~~Emerald Homes, Express Homes and Freedom Homes.~~states. 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, rental, 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 $200,000 to more than $1,000,000, with an average closing price of ~~$382,600~~$376,200 during the ~~six~~three months ended ~~March~~December 31, 2023. Approximately ~~90%~~88% of our home sales revenue in the ~~six~~three months ended ~~March~~December 31, 2023 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~~We have closed more than one million homes during our 45-year history, and we have been the ~~most geographically diverse and~~ largest volume homebuilder in the United States ~~provides a strong platform for us to compete for new home sales.~~every year since 2002. Our product offerings include a broad range of homes for entry-level, move-up, active adult and luxury buyers.

At ~~March~~December 31, 2023, we owned 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 operates across many of our homebuilding operating markets and is a key part of our homebuilding strategy to ~~enhance operational and capital efficiency and returns by expanding~~maintain relationships with land developers and ~~controlling~~to control a large portion of our land and lot position through land purchase contracts. ~~Forestar has significantly expanded its business across many of our homebuilding operating markets over the last five years.~~

Our financial services operations provide mortgage financing and title agency services to homebuyers in many of our homebuilding markets. DHI Mortgage, our wholly-owned subsidiary, provides mortgage financing services primarily to our homebuyers and sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers after origination. Our 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.~~

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. The single-family rental operations primarily construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes.customers.

In addition to our homebuilding, rental, Forestar and financial services ~~and rental~~ operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own water rights and other water-related assets and own non-residential real estate including ranch land and ~~improvements and own and operate energy-related assets.~~improvements. The results of these operations are immaterial for separate reporting and therefore are grouped together and presented as other.

2825

Table of Contents

OVERVIEW

During the ~~six~~three months ended ~~March~~December 31, 2023, our number of homes closed ~~decreased 3%~~increased 12%, ~~while~~and our home sales revenues ~~were essentially flat~~increased 8% compared to the prior year period. Our consolidated revenues increased 1%6% to ~~$15.2~~$7.7 billion in the ~~six~~three months ended ~~March~~December 31, 2023 compared to ~~$15.1~~$7.3 billion in the prior year period. Our pre-tax income was ~~$2.5~~$1.2 billion in the ~~six~~three months ended ~~March~~December 31, 2023 compared to ~~$3.4~~$1.3 billion in the prior year period, and our pre-tax operating margin was ~~16.5%~~16.1% compared to ~~22.5%~~17.5%. Net income was ~~$1.9 billion~~$955.7 million in the ~~six~~three months ended ~~March~~December 31, 2023 compared to ~~$2.6 billion~~$968.3 million in the prior year period, and our diluted earnings per share ~~was $5.50~~were $2.82 compared to ~~$7.20.~~$2.76.

In the trailing twelve months ended ~~March~~December 31, 2023, our return on equity (ROE) was ~~27.2%~~21.8% compared to ~~34.0%~~31.5% in the prior year period, and our homebuilding return on inventory (ROI) was ~~35.1%~~29.0% compared to ~~40.3%~~39.5%. 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.

~~As the spring selling season began during the three months ended March 31, 2023, our net sales orders increased 73% from the first quarter.~~ Although ~~inflationary pressures~~inflation and mortgage interest rates remain elevated, demand ~~improved~~for new homes remained solid during the ~~quarter due~~three months ended December 31, 2023, and our net sales orders increased 35% from the prior year quarter. We are continuing to ~~typical seasonal factors, coupled with our~~ use of incentives and pricing adjustments to adapt to current market ~~conditions and higher mortgage interest rates.~~conditions. The disruptions in the supply chain for certain building materials and tightness in the labor market ~~that caused our construction cycle to lengthen during the past two~~we experienced in recent years have largely subsided, and our construction cycle times ~~on more recent home starts are improving.~~have improved. Although higher interest rates and economic uncertainty may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. We believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply and will manage our home pricing, sales incentives and number of homes in inventory based on the level of homebuyer demand.

Within our homebuilding land and lot portfolio, our lots controlled through purchase contracts represent ~~75%~~76% of the lots owned and controlled at ~~March~~December 31, 2023 compared to ~~77%~~75% at both September 30, ~~2022~~2023 and ~~March~~December 31, 2022. We remain focused on our relationships with Forestar and other land developers across the country and expect to continue to control a substantial majority of our lot pipeline through purchase contracts.

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.

2926

Table of Contents

STRATEGY

Our operating strategy focuses on consistently enhancing long-term value to our shareholders by leveraging our financial and competitive position 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. 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 significant cash balance and strong overall liquidity position 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 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 lots, 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 control~~Controlling a significant portion of our land and finished lot position through purchase contracts with Forestar and other land developers.

•Controlling the cost of labor and goods ~~purchased from both~~provided by 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.

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

•Investing 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 and maintain our strong financial performance 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.

3027

Table of Contents

KEY RESULTS

Key financial results as of and for the three months ended ~~March~~December 31, 2023, as compared to the same period of 2022 unless otherwise indicated, were as follows:

Homebuilding:

•Homebuilding revenues ~~were $7.5~~increased 8% to $7.3 billion ~~in both periods.~~compared to $6.7 billion.

•Homes closed ~~decreased 1%~~increased 12% to ~~19,664~~19,340 homes, while the average closing price of those homes ~~increased slightly~~decreased 3% to ~~$378,800.~~$376,200.

•Net sales orders ~~decreased 5%~~increased 35% to ~~23,142~~18,069 homes, and the value of net sales orders ~~decreased 11%~~increased 38% to ~~$8.6~~$6.8 billion.

•Sales order backlog decreased ~~43%~~11% to ~~19,237~~13,965 homes, and the value of sales order backlog decreased ~~44%~~12% to ~~$7.4~~$5.4 billion.

•Home sales gross margin was ~~21.6%~~22.9% compared to ~~28.9%~~23.9%.

•Homebuilding SG&A expense was ~~7.3%~~8.3% of homebuilding revenues compared to ~~6.8%~~7.8%.

•Homebuilding pre-tax income was $1.1 billion ~~compared to $1.7 billion.~~in both periods.

•Homebuilding pre-tax income was ~~14.3%~~15.0% of homebuilding revenues compared to ~~22.0%~~16.2%.

•Homebuilding cash and cash equivalents totaled ~~$2.4~~$2.5 billion compared to ~~$2.0~~$2.9 billion and ~~$1.2~~$2.0 billion at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

•Homebuilding inventories totaled ~~$17.6~~$19.4 billion compared to ~~$17.3~~$18.2 billion and ~~$16.6~~$17.7 billion at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

•Homes in inventory totaled ~~43,600~~42,600 compared to ~~46,400~~42,000 and ~~59,800~~43,200 at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

•Owned lots totaled ~~136,300~~145,000 compared to ~~131,100~~141,100 and ~~131,200~~136,400 at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively. Lots controlled through purchase contracts totaled ~~410,700~~462,200 compared to ~~442,100~~427,300 and ~~442,800~~414,600 at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

•Homebuilding debt was ~~$2.7~~$2.4 billion compared to ~~$2.9~~$2.3 billion and ~~$3.3~~$3.0 billion at September 30, 2023 and December 31, 2022, respectively.

Rental:

•Rental revenues were $195.3 million compared to $327.5 million.

•Rental pre-tax income was $31.3 million compared to $110.3 million.

•Rental inventory totaled $3.0 billion compared to $2.7 billion and ~~March~~$2.9 billion at September 30, 2023 and December 31, 2022, respectively.

•~~Homebuilding debt to total capital was 11.5%~~Multi-family rental units closed totaled 300 in both periods.

•Single-family rental homes closed totaled 379 compared to 13.2% and 16.4% at September 30, 2022 and March 31, 2022, respectively. Net homebuilding debt to total capital was 1.5% compared to 4.4% and 11.2% at September 30, 2022 and March 31, 2022, respectively.694.

Forestar:

•Forestar’s revenues ~~decreased 28%~~increased 41% to ~~$301.5~~$305.9 million compared to ~~$421.6~~$216.7 million. Revenues in the current and prior year quarters included ~~$253.1~~$273.5 million and ~~$389.7~~$189.8 million, respectively, of revenue from land and lot sales to our homebuilding segment.

•~~Forestar’s lots sold decreased 49% to 2,979 compared to 5,788. Lots sold to D.R. Horton totaled 2,666 compared to 4,771.~~

•~~Forestar’s pre-tax income was $35.9 million compared to $63.2 million.~~

•~~Forestar’s pre-tax income was 11.9% of revenues compared to 15.0%.~~

•~~Forestar’s cash and cash equivalents totaled $286.7 million compared to $264.8 million and $233.7 million at September 30, 2022 and March 31, 2022, respectively.~~

3128

Table of Contents

•Forestar’s lots sold increased 39% to 3,150 compared to 2,263. Lots sold to D.R. Horton totaled 2,834 compared to 2,094.

•Forestar’s pre-tax income increased 84% to $51.2 million compared to $27.9 million.

•Forestar’s pre-tax income was 16.7% of revenues compared to 12.9%.

•Forestar’s cash and cash equivalents totaled $458.9 million compared to $616.0 million and $216.4 million at September 30, 2023 and December 31, 2022, respectively.

•Forestar’s inventories totaled $2.0 billion ~~consistent with $2.0~~compared to $1.8 billion and $2.1 billion at ~~both~~ September 30, 2023 and December 31, 2022, ~~and March 31, 2022.~~respectively.

•Forestar’s owned and controlled lots totaled ~~76,400~~82,400 compared to ~~90,100~~79,200 and ~~96,500~~82,300 at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively. Of these lots, ~~31,500~~33,700 were under contract to sell to or subject to a right of first offer with D.R. Horton compared to ~~36,700~~31,400 and 35,000 at ~~both~~ September 30, 2023 and December 31, 2022, ~~and March 31, 2022.~~respectively.

•Forestar’s debt was ~~$706.8~~$705.3 million compared to ~~$706.0~~$695.0 million and ~~$705.3~~$706.4 million at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

•Forestar’s debt to total capital was ~~36.2%~~33.4% compared to ~~37.1%~~33.7% and ~~38.9%~~36.7% at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively. Forestar’s net debt to total capital was ~~25.2%~~14.9% compared to ~~26.9%~~5.5% and ~~29.9%~~28.7% at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

Financial Services:

•Financial services revenues ~~decreased 3%~~increased 41% to ~~$216.4~~$192.6 million compared to ~~$222.1~~$137.0 million.

•Financial services pre-tax income ~~decreased 8%~~increased 263% to ~~$85.6~~$66.0 million compared to ~~$92.8~~$18.2 million.

•Financial services pre-tax income was ~~39.6%~~34.3% of financial services revenues compared to ~~41.8%~~13.3%.

~~Rental:~~

•~~Rental revenues were $224.1 million compared to $222.9 million.~~

•~~Rental pre-tax income was $34.6 million compared to $102.5 million.~~

•~~Rental inventory totaled $3.3 billion compared to $2.6 billion and $1.5 billion at September 30, 2022 and March 31, 2022, respectively.~~

•~~There were no multi-family rental units closed compared to 126.~~

•~~Single-family rental homes closed totaled 721 compared to 368.~~

Consolidated Results:

•Consolidated revenues ~~were $8.0~~increased 6% to $7.7 billion ~~in both periods.~~compared to $7.3 billion.

•Consolidated pre-tax income decreased ~~34%~~2% to $1.2 billion compared to ~~$1.9~~$1.3 billion.

•Consolidated pre-tax income was ~~15.6%~~16.1% of consolidated revenues compared to ~~23.5%~~17.5%.

•Income tax expense was ~~$295.7~~$291.8 million compared to ~~$441.0~~$298.9 million, and our effective tax rate was ~~23.7%~~23.4% compared to ~~23.4%~~23.6%.

•Net income attributable to D.R. Horton decreased ~~34%~~1% to ~~$942.2~~$947.4 million compared to ~~$1.4 billion.~~$958.7 million.

•Diluted net income per common share attributable to D.R. Horton ~~decreased 32%~~increased 2% to ~~$2.73~~$2.82 compared to ~~$4.03.~~$2.76.

•Stockholders’ equity was ~~$20.7~~$23.2 billion compared to ~~$19.4~~$22.7 billion and ~~$16.8~~$20.2 billion at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

•Book value per common share increased to ~~$60.73~~$69.70 compared to ~~$56.39~~$67.78 and ~~$47.66~~$58.71 at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

•Debt to total capital was ~~22.4%~~18.6% compared to ~~23.8%~~18.3% and ~~24.9%~~22.0% at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively. Net debt to total capital was ~~12.3%~~7.8% compared to ~~15.4%~~5.1% and ~~18.9%~~13.3% at September 30, ~~2022~~2023 and ~~March~~December 31, 2022, respectively.

~~Table of Contents~~

~~Key financial results for the six months ended March 31, 2023, as compared to the same period of 2022, were as follows:~~

~~Homebuilding:~~

•~~Homebuilding revenues were $14.2 billion in both periods.~~

•~~Homes closed decreased 3% to 37,004 homes, while the average closing price of those homes increased 3% to $382,600.~~

•~~Net sales orders decreased 20% to 36,524 homes, and the value of net sales orders decreased 25% to $13.6 billion.~~

•~~Home sales gross margin was 22.7% compared to 28.2%.~~

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

•~~Homebuilding pre-tax income was $2.2 billion compared to $3.0 billion.~~

•~~Homebuilding pre-tax income was 15.2% of homebuilding revenues compared to 21.0%.~~

•~~Net cash provided by homebuilding operations was $1.5 billion compared to net cash used of $416.2 million.~~

~~Forestar:~~

•Forestar’s revenues decreased 38% to $518.2 million compared to $829.2 million. Revenues in the current and prior year periods included $442.9 million and $719.8 million, respectively, of revenue from land and lot sales to our homebuilding segment.

•~~Forestar’s lots sold decreased 49% to 5,242 compared to 10,304. Lots sold to D.R. Horton totaled 4,760 compared to 8,785.~~

•~~Forestar’s pre-tax income was $63.8 million compared to $116.7 million.~~

•~~Forestar’s pre-tax income was 12.3% of revenues compared to 14.1%.~~

~~Financial Services:~~

•~~Financial services revenues decreased 13% to $353.4 million compared to $406.4 million.~~

•~~Financial services pre-tax income decreased 35% to $103.8 million compared to $159.9 million.~~

•~~Financial services pre-tax income was 29.4% of financial services revenues compared to 39.3%.~~

~~Rental:~~

•~~Rental revenues were $551.6 million compared to $379.4 million.~~

•~~Rental pre-tax income was $144.9 million compared to $172.5 million.~~

•~~Multi-family rental units closed totaled 300 compared to 477.~~

•~~Single-family rental homes closed totaled 1,415 compared to 594.~~

~~Consolidated Results:~~

•~~Consolidated revenues increased 1% to $15.2 billion compared to $15.1 billion.~~

•~~Consolidated pre-tax income decreased 26% to $2.5 billion compared to $3.4 billion.~~

•~~Consolidated pre-tax income was 16.5% of consolidated revenues compared to 22.5%.~~

•~~Income tax expense was $594.6 million compared to $792.5 million, and our effective tax rate was 23.7% compared to 23.4%.~~

•~~Net income attributable to D.R. Horton decreased 26% to $1.9 billion compared to $2.6 billion.~~

•~~Diluted net income per common share attributable to D.R. Horton decreased 24% to $5.50 compared to $7.20.~~

•~~Net cash provided by operations was $1.5 billion compared to net cash used of $834.6 million.~~

3329

Table of Contents

RESULTS OF OPERATIONS - HOMEBUILDING

We conduct our homebuilding operations in the geographic regions, states and markets listed below. 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

State

Reporting Region/Market

Northwest Region

Southeast Region ~~(Continued)~~

North Region

Colorado

Colorado Springs

~~Florida~~Alabama

~~Ocala~~Baldwin County

Delaware

Northern Delaware

Denver

~~Orlando~~Birmingham

Southern Delaware

Fort Collins

~~Pensacola/Panama City~~Huntsville

Illinois

Chicago

Oregon

Bend

~~Port St. Lucie~~Mobile

Indiana

Fort Wayne

Eugene/Springfield

~~Tallahassee~~Montgomery

Indianapolis

Medford

Tuscaloosa

Northwest Indiana

Portland/Salem

Florida

~~Tampa/Sarasota~~Fort Myers/Naples

Iowa

Des Moines

Utah

Salt Lake City

~~Volusia County~~

~~St. George~~

~~West Palm Beach~~

~~Washington~~

~~Central Washington~~

~~Louisiana~~

~~Baton Rouge~~

~~Seattle/Tacoma/Everett/Olympia~~

~~Lake Charles/Lafayette~~

~~Spokane~~

~~Mississippi~~

~~Gulf Coast~~

~~Vancouver~~

~~East Region~~

~~Southwest Region~~

~~Georgia~~

~~Atlanta~~

~~Arizona~~

~~Phoenix~~

~~Augusta~~

~~Tucson~~

~~Central Georgia~~

~~California~~

~~Bakersfield~~

~~Savannah~~

~~Bay Area~~

~~Valdosta~~

~~Fresno/Tulare~~

~~North Carolina~~

~~Asheville~~

~~Los Angeles County~~

~~Charlotte~~

~~Modesto/Merced/Stockton~~

~~Greensboro/Winston-Salem~~

~~Redding/Chico/Yuba City~~

~~New Bern/Greenville~~

~~Riverside County~~

~~Raleigh/Durham~~

~~Sacramento~~

~~Wilmington~~

~~San Bernardino County~~

~~South Carolina~~

~~Charleston~~

~~Hawaii~~

~~Oahu~~

~~Columbia~~

~~Nevada~~

~~Las Vegas~~

~~Greenville/Spartanburg~~

~~Reno~~

~~Hilton Head~~

~~New Mexico~~

~~Albuquerque~~

~~Myrtle Beach~~

~~Tennessee~~

~~Chattanooga~~

~~South Central Region~~

~~Knoxville~~

~~Arkansas~~

~~Northwest Arkansas~~

~~Memphis~~

~~Oklahoma~~

~~Oklahoma City~~

~~Nashville~~

~~Tulsa~~

~~Northeast Tennessee~~

~~Texas~~

~~Abilene~~

~~Austin~~

~~North Region~~

~~Beaumont~~

~~Delaware~~

~~Central Delaware~~

~~Bryan/College Station~~

~~Northern Delaware~~

~~Corpus Christi~~

~~Illinois~~

~~Chicago~~

~~Dallas~~

~~Indiana~~

~~Fort Wayne~~

~~Fort Worth~~

~~Indianapolis~~

~~Houston~~

~~Northwest Indiana~~

~~Killeen/Temple/Waco~~

~~Iowa~~

~~Des Moines~~

~~Lubbock~~Gainesville

Iowa City/Cedar Rapids

~~Midland/Odessa~~St. George

Jacksonville

Kentucky

Louisville

Washington

~~New Braunfels/San Marcos~~Central Washington

Lakeland

Maryland

Baltimore

~~San Antonio~~Kennewick/Pasco/Richland

Melbourne/Vero Beach

Eastern Maryland

Seattle/Tacoma/Everett/Olympia

Miami/Fort Lauderdale

Suburban Washington, D.C.

Spokane

Ocala

Western Maryland

~~Southeast Region~~Vancouver

Orlando

Minnesota

Minneapolis/St. Paul

~~Alabama~~

~~Birmingham~~Panama City

Nebraska

Omaha

~~Huntsville~~Southwest Region

Pensacola

New Jersey

Northern New Jersey

Arizona

~~Mobile/Baldwin County~~Phoenix

Port St. Lucie

Southern New Jersey

~~Montgomery~~Tucson

Tallahassee

Ohio

Cincinnati

California

~~Tuscaloosa~~Bakersfield

Tampa/Sarasota

Columbus

~~Florida~~Bay Area

~~Fort Myers/Naples~~Volusia County

Pennsylvania

Central Pennsylvania

~~Gainesville~~Fresno/Tulare

Louisiana

Baton Rouge

Philadelphia

~~Jacksonville~~Los Angeles County

Lake Charles/Lafayette

Pittsburgh

Modesto/Merced/Stockton

Mississippi

Gulf Coast

Virginia

Northern Virginia

~~Lakeland~~Redding/Chico/Yuba City

Jackson

Richmond

~~Melbourne/Vero Beach~~Riverside County

Virginia Beach/Williamsburg

~~Miami/Fort Lauderdale~~Sacramento

East Region

Western Virginia

San Bernardino County

Georgia

Atlanta

West Virginia

Eastern West Virginia

Hawaii

Oahu

Augusta

Nevada

Las Vegas

Central Georgia

Reno

Savannah

New Mexico

Albuquerque

Valdosta

North Carolina

Asheville

South Central Region

Charlotte

Arkansas

Northwest Arkansas

Greensboro/Winston-Salem

Oklahoma

Oklahoma City

New Bern/Greenville

Tulsa

Raleigh/Durham/Fayetteville

Texas

Abilene

Wilmington

Austin

South Carolina

Charleston

Beaumont

Columbia

Bryan/College Station

Greenville/Spartanburg

Corpus Christi

Hilton Head

Dallas

Myrtle Beach

East Texas

Tennessee

Chattanooga

Fort Worth

Knoxville

Houston

Memphis

Killeen/Temple/Waco

Nashville

Lubbock

Northeast Tennessee

Midland/Odessa

New Braunfels/San Marcos

San Antonio

3530

Table of Contents

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 six~~ months ended ~~March~~December 31, 2023 and 2022.


		Net Sales Orders (1)																	Net Sales Orders (1)
		Three Months Ended March 31,																	Three Months Ended December 31,
		Net Homes Sold				Value (In millions)						Average Selling Price							Net Homes Sold				Value (In millions)						Average Selling Price
		2023	2022	% Change		2023		2022		% Change		2023		2022		% Change			2023	2022	% Change		2023		2022		% Change		2023		2022		% Change
Northwest	Northwest	1,379	1,342	3	%	$	724.1	$	768.1	(6)	%	$	525,100	$	572,400	(8)	%	Northwest	1,179	904	30	%	$	595.8	$	459.8	30	%	$	505,300	$	508,600	(1)	%
Southwest	Southwest	1,995	2,595	(23)	%	953.7		1,403.2		(32)	%	478,000		540,700		(12)	%	Southwest	2,163	1,254	72	%	1,034.9		580.5		78	%	478,500		462,900		3	%
South Central	South Central	6,021	7,328	(18)	%	1,941.5		2,511.9		(23)	%	322,500		342,800		(6)	%	South Central	4,832	3,806	27	%	1,554.7		1,174.1		32	%	321,800		308,500		4	%
Southeast	Southeast	6,679	6,849	(2)	%	2,397.5		2,640.9		(9)	%	359,000		385,600		(7)	%	Southeast	4,801	3,917	23	%	1,705.1		1,392.5		22	%	355,200		355,500		—	%
East	East	4,482	3,765	19	%	1,570.8		1,413.1		11	%	350,500		375,300		(7)	%	East	3,301	2,313	43	%	1,175.2		845.6		39	%	356,000		365,600		(3)	%
North	North	2,586	2,461	5	%	1,042.3		1,012.2		3	%	403,100		411,300		(2)	%	North	1,793	1,188	51	%	723.8		470.9		54	%	403,700		396,400		2	%
		23,142	24,340	(5)	%	$	8,629.9	$	9,749.4	(11)	%	$	372,900	$	400,600	(7)	%		18,069	13,382	35	%	$	6,789.5	$	4,923.4	38	%	$	375,800	$	367,900	2	%

		Six Months Ended March 31,
		Net Homes Sold				Value (In millions)						Average Selling Price
		2023	2022	% Change		2023		2022		% Change		2023		2022		% Change
Northwest		2,283	2,570	(11)	%	$	1,183.9	$	1,425.3	(17)	%	$	518,600	$	554,600	(6)	%
Southwest		3,249	4,896	(34)	%	1,534.2		2,587.0		(41)	%	472,200		528,400		(11)	%
South Central		9,827	13,190	(25)	%	3,115.6		4,458.0		(30)	%	317,000		338,000		(6)	%
Southeast		10,596	13,243	(20)	%	3,789.9		4,925.7		(23)	%	357,700		371,900		(4)	%
East		6,795	7,745	(12)	%	2,416.4		2,868.0		(16)	%	355,600		370,300		(4)	%
North		3,774	4,218	(11)	%	1,513.2		1,741.8		(13)	%	401,000		412,900		(3)	%
		36,524	45,862	(20)	%	$	13,553.2	$	18,005.8	(25)	%	$	371,100	$	392,600	(5)	%


		Sales Order Cancellations											Sales Order Cancellations
		Three Months Ended March 31,											Three Months Ended December 31,
		Cancelled Sales Orders		Value (In millions)				Cancellation Rate (2)					Cancelled Sales Orders		Value (In millions)				Cancellation Rate (2)
		2023	2022	2023		2022		2023		2022			2023	2022	2023		2022		2023		2022
Northwest	Northwest	244	139	$	132.1	$	73.3	15	%	9	%	Northwest	218	238	$	110.5	$	133.4	16	%	21	%
Southwest	Southwest	452	446	229.7		206.4		18	%	15	%	Southwest	411	501	200.2		249.3		16	%	29	%
South Central	South Central	1,471	1,450	500.0		476.3		20	%	17	%	South Central	1,131	1,707	382.9		602.6		19	%	31	%
Southeast	Southeast	1,532	1,397	558.3		481.6		19	%	17	%	Southeast	1,175	1,435	428.5		546.5		20	%	27	%
East	East	860	718	316.2		249.9		16	%	16	%	East	829	648	297.8		248.8		20	%	22	%
North	North	474	358	189.1		141.2		15	%	13	%	North	449	359	183.6		151.8		20	%	23	%
		5,033	4,508	$	1,925.4	$	1,628.7	18	%	16	%		4,213	4,888	$	1,603.5	$	1,932.4	19	%	27	%

		Six Months Ended March 31,
		Cancelled Sales Orders		Value (In millions)				Cancellation Rate (2)
		2023	2022	2023		2022		2023		2022
Northwest		482	287	$	265.5	$	150.5	17	%	10	%
Southwest		953	889	478.9		411.7		23	%	15	%
South Central		3,178	2,789	1,102.6		910.0		24	%	17	%
Southeast		2,967	2,480	1,104.8		842.6		22	%	16	%
East		1,508	1,379	565.1		475.2		18	%	15	%
North		833	604	341.0		238.8		18	%	13	%
		9,921	8,428	$	3,857.9	$	3,028.8	21	%	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.

~~Table of Contents~~

Net Sales Orders

The number of net sales orders ~~decreased 5% and 20%~~increased 35% in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods. The~~period, and the value of net sales orders ~~decreased 11%~~increased 38% to ~~$8.6~~$6.8 billion ~~(23,142~~(18,069 homes) ~~and 25% to $13.6 billion (36,524 homes) for the three and six months ended March 31, 2023, respectively,~~ compared to ~~$9.7~~$4.9 billion ~~(24,340~~(13,382 homes) ~~and $18.0 billion (45,862 homes)~~, with significant increases in ~~the prior year periods.~~all regions. The average selling price of net sales orders during the three ~~and six~~ months ended ~~March~~December 31, 2023 was ~~$372,900 and $371,100, respectively, down 7% and 5%~~$375,800, up 2% from the prior year ~~periods.~~period.

AsThe markets contributing most to the ~~spring selling season began~~increases in sales order volume were: the Salt Lake City and Denver markets in the Northwest; the Phoenix, California and Las Vegas markets in the Southwest; the Dallas market in the South Central; the Florida markets (particularly Tampa) in the Southeast; the Carolina (particularly Raleigh), Knoxville and Atlanta markets in the East; and the Washington, D.C., Ohio, Indiana and Minnesota markets in the North.

Despite continued inflationary pressures and elevated mortgage interest rates, demand for new homes remained solid during the ~~three months ended March 31, 2023,~~first quarter, and our net sales orders increased ~~73%~~35% from the ~~first~~prior year quarter. ~~Although inflationary pressures and mortgage interest rates remain elevated, demand improved during the quarter due~~We are continuing to ~~typical seasonal factors, coupled with an increased~~ use of incentives and pricing adjustments to adapt to ~~changing~~current market conditions. Although higher interest rates and economic uncertainty may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. We believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply.

~~The number~~31

Table of net sales orders decreased 5% in the three months ended March 31, 2023 compared to the prior year period. The markets contributing most to the decreases in sales order volume were the Phoenix and Southern California markets in the Southwest and the Dallas, San Antonio and Austin markets in the South Central. The markets contributing most to the increase in sales order volume in the East were the Carolina markets.Contents

The number of net sales orders decreased 20% in the six months ended March 31, 2023 compared to the prior year period. The markets contributing most to the decreases in sales order volume were: the Denver and Portland markets in the Northwest; the Phoenix and Southern California markets in the Southwest; the Dallas, Austin, Houston and San Antonio markets in the South Central; the Florida markets in the Southeast; the Atlanta market in the East; and the Indianapolis market in the North.

Our sales order cancellation rate (cancelled sales orders divided by gross sales orders for the period) was 18% and 21% in the three and six months ended March 31, 2023, respectively, compared to 16% in both of the prior year periods.


		Sales Order Backlog																	Sales Order Backlog
		As of March 31,																	As of December 31,
		Homes in Backlog				Value (In millions)						Average Selling Price							Homes in Backlog				Value (In millions)						Average Selling Price
		2023	2022	% Change		2023		2022		% Change		2023		2022		% Change			2023	2022	% Change		2023		2022		% Change		2023		2022		% Change
Northwest	Northwest	745	1,353	(45)	%	$	400.1	$	737.6	(46)	%	$	537,000	$	545,200	(2)	%	Northwest	592	646	(8)	%	$	300.1	$	366.8	(18)	%	$	506,900	$	567,800	(11)	%
Southwest	Southwest	1,429	4,069	(65)	%	731.0		2,036.4		(64)	%	511,500		500,500		2	%	Southwest	1,352	1,307	3	%	664.9		682.8		(3)	%	491,800		522,400		(6)	%
South Central	South Central	5,206	10,876	(52)	%	1,757.7		3,754.6		(53)	%	337,600		345,200		(2)	%	South Central	3,338	4,764	(30)	%	1,117.2		1,620.2		(31)	%	334,700		340,100		(2)	%
Southeast	Southeast	6,541	9,734	(33)	%	2,478.3		3,703.9		(33)	%	378,900		380,500		—	%	Southeast	4,123	5,613	(27)	%	1,588.5		2,185.4		(27)	%	385,300		389,300		(1)	%
East	East	3,514	5,365	(35)	%	1,281.5		2,045.9		(37)	%	364,700		381,300		(4)	%	East	3,101	2,384	30	%	1,159.7		917.0		26	%	374,000		384,600		(3)	%
North	North	1,802	2,462	(27)	%	751.4		1,034.9		(27)	%	417,000		420,300		(1)	%	North	1,459	1,045	40	%	612.4		447.6		37	%	419,700		428,300		(2)	%
		19,237	33,859	(43)	%	$	7,400.0	$	13,313.3	(44)	%	$	384,700	$	393,200	(2)	%		13,965	15,759	(11)	%	$	5,442.8	$	6,219.8	(12)	%	$	389,700	$	394,700	(1)	%

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.

~~Table of Contents~~


		Homes Closed and Home Sales Revenue																	Homes Closed and Home Sales Revenue
		Three Months Ended March 31,																	Three Months Ended December 31,
		Homes Closed				Value (In millions)						Average Selling Price							Homes Closed				Value (In millions)						Average Selling Price
		2023	2022	% Change		2023		2022		% Change		2023		2022		% Change			2023	2022	% Change		2023		2022		% Change		2023		2022		% Change
Northwest	Northwest	1,280	1,146	12	%	$	690.7	$	636.5	9	%	$	539,600	$	555,400	(3)	%	Northwest	1,134	982	15	%	$	573.7	$	520.1	10	%	$	505,900	$	529,600	(4)	%
Southwest	Southwest	1,873	2,321	(19)	%	905.5		1,135.0		(20)	%	483,400		489,000		(1)	%	Southwest	2,218	1,707	30	%	1,051.3		802.7		31	%	474,000		470,200		1	%
South Central	South Central	5,579	5,610	(1)	%	1,804.1		1,836.4		(2)	%	323,400		327,300		(1)	%	South Central	5,121	4,837	6	%	1,664.0		1,636.2		2	%	324,900		338,300		(4)	%
Southeast	Southeast	5,751	5,504	4	%	2,104.6		1,946.3		8	%	366,000		353,600		4	%	Southeast	5,494	5,287	4	%	1,990.3		1,994.4		—	%	362,300		377,200		(4)	%
East	East	3,352	3,469	(3)	%	1,206.3		1,216.8		(1)	%	359,900		350,800		3	%	East	3,581	3,015	19	%	1,267.9		1,143.4		11	%	354,100		379,200		(7)	%
North	North	1,829	1,778	3	%	738.5		728.2		1	%	403,800		409,600		(1)	%	North	1,792	1,512	19	%	729.2		612.4		19	%	406,900		405,000		—	%
		19,664	19,828	(1)	%	$	7,449.7	$	7,499.2	(1)	%	$	378,800	$	378,200	—	%		19,340	17,340	12	%	$	7,276.4	$	6,709.2	8	%	$	376,200	$	386,900	(3)	%

		Six Months Ended March 31,
		Homes Closed				Value (In millions)						Average Selling Price
		2023	2022	% Change		2023		2022		% Change		2023		2022		% Change
Northwest		2,262	2,171	4	%	$	1,210.8	$	1,185.4	2	%	$	535,300	$	546,000	(2)	%
Southwest		3,580	4,265	(16)	%	1,708.2		2,046.5		(17)	%	477,200		479,800		(1)	%
South Central		10,416	11,047	(6)	%	3,440.2		3,528.8		(3)	%	330,300		319,400		3	%
Southeast		11,038	10,828	2	%	4,099.1		3,756.5		9	%	371,400		346,900		7	%
East		6,367	6,597	(3)	%	2,349.7		2,291.5		3	%	369,000		347,400		6	%
North		3,341	3,316	1	%	1,350.9		1,346.9		—	%	404,300		406,200		—	%
		37,004	38,224	(3)	%	$	14,158.9	$	14,155.6	—	%	$	382,600	$	370,300	3	%

Home Sales Revenue

Revenues from home sales were ~~$7.4~~$7.3 billion ~~(19,664~~(19,340 homes closed) for the three months ended ~~March~~December 31, 2023 ~~and $7.5~~compared to $6.7 billion ~~(19,828~~(17,340 homes closed) in the prior year period. ~~Revenues from home sales were $14.2 billion for the six months ended March 31, 2023 and 2022 (37,004 homes closed and 38,224 homes closed, respectively).~~

The number of homes closed ~~was relatively flat between the periods, decreasing 1% and 3%~~increased 12% in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods.~~period, with increases in all regions. The ~~largest decrease~~average selling price of homes closed during the three months ended December 31, 2023 was $376,200, down 3% from the prior year period.

The markets contributing most to the increases in closings volume ~~was in our Southwest region and was primarily due to our California markets. The largest increase in closings volume was in our Northwest region and was primarily due to our~~were: the Salt Lake City market in the Northwest; the California and ~~Seattle markets.~~Las Vegas markets in the Southwest; the Fort Worth market in the South Central; the Alabama markets in the Southeast; the Carolina markets (particularly Myrtle Beach) in the East; and the Washington, D.C. and Ohio markets in the North.

3832

Table of Contents


Homebuilding Operating Margin Analysis	Homebuilding Operating Margin Analysis									Homebuilding Operating Margin Analysis
		Percentages of Related Revenues									Percentages of Related Revenues
		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
Gross profit – home sales	Gross profit – home sales	21.6	%	28.9	%	22.7	%	28.2	%	Gross profit – home sales	22.9	%	23.9	%
Gross profit – land/lot sales and other	Gross profit – land/lot sales and other	32.7	%	56.6	%	66.5	%	33.1	%	Gross profit – land/lot sales and other	35.0	%	85.9	%
Inventory and land option charges	Inventory and land option charges	(0.2)	%	(0.1)	%	(0.3)	%	(0.1)	%	Inventory and land option charges	(0.1)	%	(0.4)	%
Gross profit – total homebuilding	Gross profit – total homebuilding	21.4	%	28.8	%	22.6	%	28.1	%	Gross profit – total homebuilding	22.9	%	23.8	%
Selling, general and administrative expense	Selling, general and administrative expense	7.3	%	6.8	%	7.5	%	7.1	%	Selling, general and administrative expense	8.3	%	7.8	%
Other (income) expense	Other (income) expense	(0.2)	%	—	%	(0.2)	%	(0.1)	%	Other (income) expense	(0.4)	%	(0.2)	%
Homebuilding pre-tax income	Homebuilding pre-tax income	14.3	%	22.0	%	15.2	%	21.0	%	Homebuilding pre-tax income	15.0	%	16.2	%

Home Sales Gross Profit

Gross profit from home sales ~~decreased~~increased to ~~$1.6~~$1.7 billion in the three months ended ~~March~~December 31, 2023 from ~~$2.2~~$1.6 billion in the prior year period and decreased ~~730~~100 basis points to ~~21.6%~~22.9% as a percentage of home sales revenues. The percentage decrease resulted from a decrease of ~~740~~80 basis points primarily due to a decrease in the value of hedging instruments we use to offer below market interest rate financing to our homebuyers, 20 basis points due to ~~the average cost of our homes closed increasing by more than the average selling price of those homes, partially offset by decreased~~an increase in warranty and construction defect costs ofand 10 ~~basis points.~~

Gross profit from home sales decreased to $3.2 billion in the six months ended March 31, 2023 from $4.0 billion in the prior year period and decreased 550 basis points to 22.7% as a percentage of home sales revenues. The percentage decrease resulted from a decrease of 560 basis points due to an increase in the ~~average cost~~amount of ~~our homes closed increasing by more than the average selling price of those homes,~~purchase accounting adjustments related to prior year acquisitions, partially offset by 10 basis points due to a decrease in the amortization of capitalized interest.

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. To adjust to ~~changing~~changes in market conditions during fiscal 2023 and ~~higher mortgage interest rates,~~into fiscal 2024, we have increased our use of incentives and ~~we have~~ reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers. WeBased on current market conditions, we expect our incentive levels to ~~continue offering a higher level of incentives~~remain elevated throughout fiscal ~~2023.~~2024.

Land/Lot Sales and Other Revenues

Land/lot sales and other revenues from our homebuilding operations were ~~$19.9~~$20.3 million and ~~$54.7~~$34.8 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ and ~~$7.6 million and $30.5 million in the comparable periods of fiscal 2022.~~2022, respectively.

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 ~~March~~December 31, 2023, our homebuilding operations had ~~$20.4~~$3.5 million of land held for sale that we expect to sell in the next twelve months.

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 this review, there were ~~$0.9 million and $5.7 million of impairments~~no impairment charges recorded in our homebuilding segment during the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively. There were no impairment charges recorded in our homebuilding segment~~compared to $4.8 million in the prior year ~~periods.~~quarter.

~~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 impairment charges, which could be significant.

Table of Contents

During the three ~~and six~~ months ended ~~March~~December 31, 2023, earnest money and pre-acquisition cost write-offs related to our homebuilding segment’s land purchase contracts that we have terminated or expect to terminate were ~~$13.3~~$5.5 million ~~and $32.7 million, respectively,~~ compared to ~~$9.8 million and $13.7~~$19.4 million in the same ~~periods~~period of fiscal ~~2022.~~2023.

Selling, General and Administrative (SG&A) Expense

SG&A expense from homebuilding activities increased 8%14% to ~~$545.6~~$603.4 million ~~and 7% to $1.1 billion~~ in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ from ~~$507.3~~$527.1 million ~~and $1.0 billion~~ in the prior year ~~periods.~~period. SG&A expense as a percentage of homebuilding revenues was ~~7.3% and 7.5%~~8.3% in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~6.8% and 7.1%~~7.8% in the prior year ~~periods.~~period.

Employee compensation and related costs were ~~$452.9 million and $878.2~~$487.3 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$420.4 million and $830.1~~$425.3 million in the same ~~periods~~period of fiscal ~~2022. Employee compensation~~2023 and ~~related costs~~ represented ~~83% and 82%~~81% of SG&A costs in ~~the three and six months ended March 31, 2023, respectively, compared to 83% in~~ both ~~of the prior year~~ periods. These costs increased ~~8% and 6%~~15% in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ from the prior year ~~periods.~~period. Our homebuilding operations employed ~~9,369~~9,429 and ~~9,160~~8,941 people at ~~March~~December 31, 2023 and 2022, respectively.

We attempt to control our homebuilding 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 $19.0 million and $39.9~~decreased 45% to $11.4 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$25.6 million and $50.4~~$20.9 million in the prior year ~~periods.~~period, primarily due to a 23% decrease in our average homebuilding debt. Interest charged to cost of sales was 0.4% of homebuilding cost of sales (excluding inventory and land option charges) in both ~~the three and six months ended March 31, 2023 compared to 0.5% in both of the prior year~~ periods.

Other Income

Other income, net of other expenses, included in our homebuilding operations increased to ~~$14.5 million and $27.7~~$29.5 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ from ~~$1.6 million and $7.9~~$13.3 million in the prior year ~~periods,~~period, primarily due to an increase in interest income. 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. The activities that result in this ancillary income are not significant, either individually or in the aggregate.

~~Business Acquisition~~

In December 2022, we acquired the homebuilding operations of Riggins Custom Homes in Northwest Arkansas for approximately $107 million in cash. The assets acquired included approximately 170 homes in inventory, 3,000 lots and a sales order backlog of 100 homes.

4034

Table of Contents

Homebuilding Results by Reporting Region


		Three Months Ended March 31,													Three Months Ended December 31,
		2023						2022							2023						2022
		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	$	691.1	$	96.4	13.9	%	$	637.0	$	148.2	23.3	%	Northwest	$	577.9	$	69.5	12.0	%	$	520.4	$	58.7	11.3	%
Southwest	Southwest	920.9		81.7		8.9	%	1,135.1		226.6		20.0	%	Southwest	1,051.4		134.9		12.8	%	803.0		84.0		10.5	%
South Central	South Central	1,805.8		267.9		14.8	%	1,838.4		416.0		22.6	%	South Central	1,669.2		271.6		16.3	%	1,642.1		281.6		17.1	%
Southeast	Southeast	2,106.1		381.7		18.1	%	1,946.5		482.2		24.8	%	Southeast	1,999.6		329.4		16.5	%	1,996.3		411.3		20.6	%
East	East	1,206.9		183.5		15.2	%	1,219.5		265.9		21.8	%	East	1,268.3		204.6		16.1	%	1,143.9		189.4		16.6	%
North	North	738.8		56.7		7.7	%	730.3		113.9		15.6	%	North	730.3		86.1		11.8	%	638.3		69.4		10.9	%
		$	7,469.6	$	1,067.9	14.3	%	$	7,506.8	$	1,652.8	22.0	%		$	7,296.7	$	1,096.1	15.0	%	$	6,744.0	$	1,094.4	16.2	%

		Six Months Ended March 31,
		2023						2022
		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues
		(In millions)
Northwest		$	1,211.5	$	155.0	12.8	%	$	1,205.9	$	260.0	21.6	%
Southwest		1,723.9		165.7		9.6	%	2,046.7		385.9		18.9	%
South Central		3,447.9		549.5		15.9	%	3,532.7		770.3		21.8	%
Southeast		4,102.4		793.0		19.3	%	3,757.5		897.7		23.9	%
East		2,350.8		373.0		15.9	%	2,294.3		468.2		20.4	%
North		1,377.1		126.1		9.2	%	1,349.0		203.8		15.1	%
		$	14,213.6	$	2,162.3	15.2	%	$	14,186.1	$	2,985.9	21.0	%

____________________

(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.

Northwest Region — Homebuilding revenues increased 8%11% in the three months ~~and were essentially flat in the six months~~ ended ~~March~~December 31, 2023 compared to the prior year ~~periods. The increase for the three month~~ period ~~was primarily~~ due to increases in the number of homes closed, particularly in our ~~Seattle and~~ Salt Lake City ~~markets.~~market. The region generated pre-tax income of ~~$96.4 million and $155.0~~$69.5 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$148.2 million and $260.0~~$58.7 million in the prior year ~~periods.~~period. Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) ~~decreased~~increased by ~~910 and 860~~60 basis points in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods,~~period, primarily due to ~~an increase in~~ the average cost of homes closed ~~as well as a slight decrease in~~decreasing by more than the average selling ~~price.~~price of those homes. As a percentage of homebuilding revenues, SG&A expenses ~~were essentially flat~~increased by 10 basis points in the three months ~~and increased 40 basis points in the six months~~ ended ~~March~~December 31, 2023 compared to the prior year ~~periods, primarily due to a slight increase in SG&A expenses.~~period.

Southwest Region — Homebuilding revenues ~~decreased 19% and 16%~~increased 31% in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods,~~period, primarily due to ~~decreases~~increases in the number of homes closed, particularly in our California and Las Vegas markets. The region generated pre-tax income of ~~$81.7 million and $165.7~~$134.9 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$226.6 million and $385.9~~$84.0 million in the prior year ~~periods.~~period. Home sales gross profit percentage increased by 10 basis points in the three months ended December 31, 2023 compared to the prior year period, primarily due to a slight increase in the average selling price of homes closed. As a percentage of homebuilding revenues, SG&A expenses decreased by 150 basis points in the three months ended December 31, 2023 compared to the prior year period, primarily due to the increase in homebuilding revenues.

South Central Region — Homebuilding revenues increased 2% in the three months ended December 31, 2023 compared to the prior year period. The region generated pre-tax income of $271.6 million in the three months ended December 31, 2023 compared to $281.6 million in the prior year period. Home sales gross profit percentage decreased by ~~960 and 770~~70 basis points in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods,~~period, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses increased 50 basis points in the three months ended December 31, 2023 compared to the prior year period.

Southeast Region — Homebuilding revenues were flat in the three months ended December 31, 2023 compared to the prior year period. The region generated pre-tax income of $329.4 million in the three months ended December 31, 2023 compared to $411.3 million in the prior year period. Home sales gross profit percentage decreased by 360 basis points in the three months ended December 31, 2023 compared to the prior year period, primarily due to the average cost of homes closed increasing while the average selling price ~~decreased slightly.~~of those homes decreased. As a percentage of homebuilding revenues, SG&A expenses increased by ~~160 and 140~~90 basis points in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods, primarily due to the decrease in homebuilding revenues.~~period.

4135

Table of Contents

~~South Central~~East Region — Homebuilding revenues ~~decreased 2%~~increased 11% in ~~both~~ the three ~~and six~~ months ended ~~March~~December 31, 2023 compared to the prior year ~~periods,~~period, primarily due to ~~decreases~~increases in the number of homes closed, particularly in our ~~Houston market.~~Carolina markets. The region generated pre-tax income of ~~$267.9 million and $549.5~~$204.6 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$416.0 million and $770.3~~$189.4 million in the prior year ~~periods.~~period. Home sales gross profit percentage ~~decreased~~increased by ~~790 and 560~~40 basis points in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods,~~period, primarily due to the average cost of homes closed ~~increasing~~decreasing by more than the average selling price. As a percentage of homebuilding revenues, SG&A expenses were essentially flat in the three months and increased 30 basis points in the six months ended March 31, 2023 compared to the prior year periods, primarily due to increases in SG&A expenses.

~~Southeast Region~~ ~~— Homebuilding revenues increased 8% and 9% in the three and six months ended March 31, 2023, 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 $381.7 million and $793.0 million in the three and six months ended March 31, 2023, respectively, compared to $482.2 million and $897.7 million in the prior year periods. Home sales gross profit percentage decreased by 630 and 440 basis points in the three and six months ended March 31, 2023, respectively, compared to the prior year periods, primarily due to the average cost of homes closed increasing by more than the average selling price.those homes. As a percentage of homebuilding revenues, SG&A expenses increased by ~~60 and 20~~90 basis points in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods,~~period.

North Region — Homebuilding revenues increased 14% in the three months ended December 31, 2023 compared to the prior year period, primarily due to increases in ~~SG&A expenses.~~

~~East Region~~ ~~— Homebuilding revenues decreased 1%~~the number of homes closed, particularly in our Washington, D.C. and ~~increased 2% in the three and six months ended March 31, 2023, respectively, compared to the prior year periods.~~Ohio markets. The region generated pre-tax income of ~~$183.5 million and $373.0~~$86.1 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$265.9 million and $468.2~~$69.4 million in the prior year ~~periods.~~period. Home sales gross profit percentage ~~decreased~~increased by ~~620 and 420~~300 basis points in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods,~~period, primarily due to the average cost of homes closed ~~increasing by more than~~decreasing, while the average selling ~~price.~~price of those homes increased. As a percentage of homebuilding revenues, SG&A expenses increased by 50 ~~and 40~~ basis points in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods, primarily due to increases in SG&A expenses.~~

~~North Region~~ — Homebuilding revenues increased 1% and 2% in the three and six months ended March 31, 2023, respectively, compared to the prior year periods. The region generated pre-tax income of $56.7 million and $126.1 million in the three and six months ended March 31, 2023, respectively, compared to $113.9 million and $203.8 million in the prior year periods. Home sales gross profit percentage decreased by 690 and 610 basis points in the three and six months ended March 31, 2023, respectively, compared to the prior year periods, primarily due to the average cost of homes closed increasing while the average selling price decreased slightly. As a percentage of homebuilding revenues, SG&A expenses increased by 110 and 90 basis points in the three and six months ended March 31, 2023, respectively, compared to the prior year periods, primarily due to increases in SG&A expenses.period.

4236

Table of Contents

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 ~~March~~December 31, 2023 and September 30, ~~2022~~2023 are summarized as follows:


		March 31, 2023											December 31, 2023
		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	$	769.4	$	1,005.4	$	—	$	2.2	$	1,777.0	Northwest	$	902.5	$	1,087.0	$	—	$	0.5	$	1,990.0
Southwest	Southwest	1,342.6		1,661.4		6.9		9.1		3,020.0		Southwest	1,352.2		1,951.5		6.8		0.9		3,311.4
South Central	South Central	2,088.9		1,711.1		0.3		1.1		3,801.4		South Central	2,005.4		1,943.9		0.3		1.0		3,950.6
Southeast	Southeast	2,533.5		1,427.6		13.2		4.8		3,979.1		Southeast	2,479.2		1,694.3		13.0		—		4,186.5
East	East	1,431.9		1,321.7		—		0.5		2,754.1		East	1,518.0		1,848.4		—		1.0		3,367.4
North	North	1,142.8		862.0		—		2.4		2,007.2		North	1,213.3		1,088.9		—		0.1		2,302.3
Corporate and unallocated (1)	Corporate and unallocated (1)	127.9		103.8		0.3		0.3		232.3		Corporate and unallocated (1)	131.9		126.5		0.3		—		258.7
		$	9,437.0	$	8,093.0	$	20.7	$	20.4	$	17,571.1		$	9,602.5	$	9,740.5	$	20.4	$	3.5	$	19,366.9


		September 30, 2022											September 30, 2023
		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	$	854.9	$	945.1	$	—	$	2.2	$	1,802.2	Northwest	$	819.5	$	1,087.5	$	—	$	0.5	$	1,907.5
Southwest	Southwest	1,328.7		1,447.2		7.2		18.6		2,801.7		Southwest	1,280.0		1,845.0		6.7		1.3		3,133.0
South Central	South Central	2,304.9		1,625.4		0.3		1.1		3,931.7		South Central	2,040.2		1,769.6		0.3		0.4		3,810.5
Southeast	Southeast	2,692.7		1,385.2		13.2		—		4,091.1		Southeast	2,390.5		1,549.8		13.2		5.0		3,958.5
East	East	1,389.3		1,153.4		—		—		2,542.7		East	1,393.5		1,630.4		—		0.8		3,024.7
North	North	1,251.9		676.7		—		7.1		1,935.7		North	1,083.7		993.7		—		0.6		2,078.0
Corporate and unallocated (1)	Corporate and unallocated (1)	129.1		89.5		0.3		0.4		219.3		Corporate and unallocated (1)	126.9		116.3		0.3		0.1		243.6
		$	9,951.5	$	7,322.5	$	21.0	$	29.4	$	17,324.4		$	9,134.3	$	8,992.3	$	20.5	$	8.7	$	18,155.8

__________

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

4337

Table of Contents

Our land and lot position and homes in inventory at ~~March~~December 31, 2023 and September 30, ~~2022~~2023 are summarized as follows:


		March 31, 2023								December 31, 2023
		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	12,300		25,300		37,600		2,700	Northwest	13,400		21,900		35,300		3,100
Southwest	Southwest	22,400		32,400		54,800		4,800	Southwest	22,800		29,000		51,800		4,700
South Central	South Central	39,100		59,400		98,500		11,300	South Central	37,100		95,600		132,700		10,500
Southeast	Southeast	23,500		128,600		152,100		12,800	Southeast	26,700		135,900		162,600		11,700
East	East	25,300		107,300		132,600		7,500	East	29,700		123,600		153,300		7,600
North	North	13,700		57,700		71,400		4,500	North	15,300		56,200		71,500		5,000
		136,300		410,700		547,000		43,600		145,000		462,200		607,200		42,600
		25	%	75	%	100	%			24	%	76	%	100	%


		September 30, 2022								September 30, 2023
		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	11,100		32,200		43,300		2,900	Northwest	14,100		20,300		34,400		2,800
Southwest	Southwest	22,100		36,500		58,600		4,900	Southwest	22,600		30,500		53,100		4,700
South Central	South Central	37,800		66,500		104,300		12,400	South Central	36,700		69,500		106,200		10,800
Southeast	Southeast	24,700		138,600		163,300		14,200	Southeast	24,700		132,900		157,600		12,100
East	East	22,700		105,700		128,400		6,800	East	27,700		118,400		146,100		7,100
North	North	12,700		62,600		75,300		5,200	North	15,300		55,700		71,000		4,500
		131,100		442,100		573,200		46,400		141,100		427,300		568,400		42,000
		23	%	77	%	100	%			25	%	75	%	100	%

___________________

(1)Land/lots owned included approximately ~~43,700~~55,600 and ~~37,600~~50,300 owned lots that are fully developed and ready for home construction at ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, respectively. ~~Land/lots owned also included land held for development representing 400 lots at both March 31, 2023 and September 30, 2022.~~

(2)The total remaining purchase price of lots controlled through land and lot purchase contracts at ~~March~~December 31, 2023 and September 30, ~~2022~~2023 was ~~$19.2~~$22.5 billion and ~~$19.7~~$21.1 billion, respectively, secured by earnest money deposits of ~~$1.6~~$1.9 billion ~~at both dates.~~and $1.8 billion, respectively. The total remaining purchase price of lots controlled through land and lot purchase contracts at ~~March~~December 31, 2023 and September 30, ~~2022~~2023 included ~~$1.2~~$1.5 billion and ~~$1.4~~$1.3 billion, respectively, related to lot purchase contracts with Forestar, secured by ~~$124.3~~$161.7 million and ~~$131.7~~$139.1 million, respectively, of earnest money.

(3)Lots controlled at ~~March~~December 31, 2023 included approximately ~~31,500~~33,700 lots owned or controlled by Forestar, ~~14,200~~16,200 of which our homebuilding divisions had under contract to purchase and ~~17,300~~17,500 of which our homebuilding divisions had a right of first offer to purchase. Of these, approximately ~~13,500~~12,800 lots were in our Southeast region, ~~6,100~~5,700 lots were in our East region, ~~4,700~~5,100 lots were in our South Central region, ~~3,300~~4,400 lots were in our North region, 3,800 lots were in our Southwest region ~~3,300 lots were in our North region~~ and ~~600~~1,900 lots were in our Northwest region. Lots controlled at September 30, ~~2022~~2023 included approximately ~~36,700~~31,400 lots owned or controlled by Forestar, ~~17,800~~14,400 of which our homebuilding divisions had under contract to purchase and ~~18,900~~17,000 of which our homebuilding divisions had a right of first offer to purchase.

(4)Approximately ~~24,800~~28,800 and ~~27,200~~27,000 of our homes in inventory were unsold at ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, respectively. At ~~March~~December 31, 2023, approximately ~~6,400~~9,000 of our unsold homes were completed, of which approximately ~~510~~730 homes had been completed for more than six months. At September 30, ~~2022,~~2023, approximately ~~4,400~~7,000 of our unsold homes were completed, of which approximately 90620 homes had been completed for more than six months. Homes in inventory exclude approximately ~~1,900~~2,200 and ~~1,800~~2,100 model homes at ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, respectively.

4438

Table of Contents

RESULTS OF OPERATIONS - RENTAL

Our rental segment consists of single-family and multi-family rental operations. The single-family rental operations primarily construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes. The multi-family rental operations develop, construct, lease and sell residential rental properties, with a primary focus on constructing garden style apartment communities in high growth suburban markets. Single-family and multi-family rental property sales are recognized as revenues, and rental income is recognized as other income. The following tables provide further information regarding our rental operations as of and for the three months ended December 31, 2023 and 2022.


	Rental Homes/Units Closed
	Three Months Ended December 31,
	2023	2022
Single-family rental homes	379	694
Multi-family rental units	300	300
	679	994


	Results of Operations
	(In millions)
Revenues
Single-family rental	$	116.1	$	228.0
Multi-family rental and other	79.2		99.5
Total revenues	195.3		327.5
Cost of sales
Single-family rental	87.2		136.8
Multi-family rental and other	54.5		47.0
Inventory and land option charges	—		0.9
Total cost of sales	141.7		184.7
Selling, general and administrative expense	47.4		47.5
Other (income) expense	(25.1)		(15.0)
Income before income taxes	$	31.3	$	110.3

Revenues from our rental operations decreased to $195.3 million during the three months ended December 31, 2023 from $327.5 million in the prior year period, and pre-tax income decreased to $31.3 million from $110.3 million. The decreases were primarily due to fewer rental home and unit closings during the three months ended December 31, 2023 compared to the prior year period.

At December 31, 2023, our rental property inventory of $3.0 billion included $1.4 billion of inventory related to our single-family rental operations and $1.6 billion of inventory related to our multi-family rental operations. At September 30, 2023, our rental property inventory of $2.7 billion included $1.3 billion of inventory related to our single-family rental operations and $1.4 billion of inventory related to our multi-family rental operations. Single-family rental homes and lots and multi-family rental units at December 31, 2023 and September 30, 2023 consisted of the following:


	Rental Inventory
	December 31, 2023	September 30, 2023
Single-family rental homes (1)	5,820	5,630
Single-family rental lots (2)	2,980	3,380
Multi-family rental units (3)	10,200	9,150

________________________

(1)Single-family rental homes at December 31, 2023 consist of 900 homes under construction and 4,920 completed homes. Single-family rental homes at September 30, 2023 consist of 1,260 homes under construction and 4,370 completed homes.

(2)Single-family rental lots at December 31, 2023 consist of 1,935 undeveloped lots and 1,045 finished lots. Single-family rental lots at September 30, 2023 consist of 2,210 undeveloped lots and 1,170 finished lots.

(3)Multi-family rental units at December 31, 2023 consist of 8,070 units under construction and 2,130 units that were substantially complete and in the lease-up phase. Multi-family rental units at September 30, 2023 consist of 7,200 units under construction and 1,950 units that were substantially complete and in the lease-up phase.

Table of Contents

RESULTS OF OPERATIONS – FORESTAR

At ~~March~~December 31, 2023, we owned 63% of the outstanding shares of Forestar. Forestar is a publicly traded residential lot development company with operations in 5257 markets across 2023 states as of ~~March~~December 31, 2023. ~~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 six~~ months ended ~~March~~December 31, 2023 and 2022 were as follows:


		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
		(In millions)									(In millions)
Total revenues	Total revenues	$	301.5	$	421.6	$	518.2	$	829.2	Total revenues	$	305.9	$	216.7
Cost of land/lot sales and other	Cost of land/lot sales and other	225.3		328.7		392.1		662.3		Cost of land/lot sales and other	232.8		166.8
Inventory and land option charges	Inventory and land option charges	20.3		5.4		22.7		6.0		Inventory and land option charges	0.2		2.4
Total cost of sales	Total cost of sales	$	245.6	$	334.1	$	414.8	$	668.3	Total cost of sales	233.0		169.2
Selling, general and administrative expense	Selling, general and administrative expense	22.0		24.3		44.9		45.8		Selling, general and administrative expense	28.0		22.9
Other (income) expense	Other (income) expense	(2.0)		—		(5.3)		(1.6)		Other (income) expense	(6.3)		(3.3)
Income before income taxes	Income before income taxes	$	35.9	$	63.2	$	63.8	$	116.7	Income before income taxes	$	51.2	$	27.9

Forestar’s revenues are primarily derived from sales of single-family residential lots to local, regional and national homebuilders and land bankers for homebuilders. The following tables provide further information regarding Forestar’s revenues and lot position as of and for the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022:


		Three Months Ended March 31,							Three Months Ended December 31,
		Lots Closed		Value (In millions)					Lots Sold		Value (In millions)
		2023	2022	2023		2022			2023	2022	2023		2022
Residential single-family lots sold	Residential single-family lots sold							Residential single-family lots sold
Lots sold to D.R. Horton	Lots sold to D.R. Horton	2,666	4,771	$	220.6	$	389.7	Lots sold to D.R. Horton	2,834	2,094	$	273.5	$	189.8
Total lots sold	Total lots sold	2,979	5,788	$	252.9	$	409.0	Total lots sold	3,150	2,263	$	304.2	$	206.7
Tract acres sold to D.R. Horton		379	—	$	32.5	$	—

		Six Months Ended March 31,
		Lots Closed		Value (In millions)
		2023	2022	2023		2022
Residential single-family lots sold
Lots sold to D.R. Horton		4,760	8,785	$	410.4	$	719.8
Total lots sold		5,242	10,304	$	459.5	$	813.1
Tract acres sold to D.R. Horton		379	—	$	32.5	$	—

March 31,
2023 September 30,
2022
Residential single-family lots in inventory and under contract
Lots owned 57,800 61,800
Lots controlled through land purchase contracts 18,600 28,300
Total lots owned and controlled 76,400 90,100
Owned lots under contract to sell to D.R. Horton 14,200 17,800
Owned lots under contract to customers other than D.R. Horton 1,000 1,400
Total owned lots under contract 15,200 19,200
Owned lots subject to right of first offer with D.R. Horton 17,300 18,900
Owned lots fully developed 9,100 5,500

~~Table of Contents~~


	December 31, 2023	September 30, 2023
Residential single-family lots in inventory and under contract
Lots owned	55,400	52,400
Lots controlled through land purchase contracts	27,000	26,800
Total lots owned and controlled	82,400	79,200

Owned lots under contract to sell to D.R. Horton	16,200	14,400
Owned lots under contract to customers other than D.R. Horton	500	600
Total owned lots under contract	16,700	15,000

Owned lots subject to right of first offer with D.R. Horton	17,500	17,000
Owned lots fully developed	7,300	6,400

At ~~both March~~December 31, 2023 and September 30, ~~2022,~~2023, Forestar’s inventory, which includes land and lots developed, under development and held for development, totaled $2.0 ~~billion.~~

~~Inventory~~billion and ~~land option charges during the three and six months ended March 31, 2023 included inventory impairment charges of $19.4 million compared to $3.8 million in both of the prior year periods.~~$1.8 billion, respectively.

SG&A expense for the three ~~and six~~ months ended ~~March~~December 31, 2023 and 2022 included charges of ~~$0.9~~$1.3 million and ~~$1.9~~$0.9 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 $1.0 million and $2.0 million, respectively, in the same periods of fiscal 2022.~~

4640

Table of Contents

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 six~~ months ended ~~March~~December 31, 2023 and 2022.


		Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended December 31,
		2023		2022		% Change		2023		2022		% Change			2023		2022		% 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	14,865		13,551		10	%	28,161		25,640		10	%	Number of first-lien loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	15,117		13,296		14	%
Number of homes closed by D.R. Horton	Number of homes closed by D.R. Horton	19,664		19,828		(1)	%	37,004		38,224		(3)	%	Number of homes closed by D.R. Horton	19,340		17,340		12	%
Percentage of D.R. Horton homes financed by DHI Mortgage	Percentage of D.R. Horton homes financed by DHI Mortgage	76	%	68	%			76	%	67	%			Percentage of D.R. Horton homes financed by DHI Mortgage	78	%	77	%
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	14,879		13,571		10	%	28,179		25,682		10	%	Number of total loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	15,131		13,300		14	%
Total number of loans originated or brokered by DHI Mortgage	Total number of loans originated or brokered by DHI Mortgage	14,957		13,777		9	%	28,356		26,191		8	%	Total number of loans originated or brokered by DHI Mortgage	15,200		13,399		13	%
Captive business percentage	Captive business percentage	99	%	99	%			99	%	98	%			Captive business percentage	99.5	%	99.3	%
Loans sold by DHI Mortgage to third parties	Loans sold by DHI Mortgage to third parties	13,984		12,527		12	%	29,151		25,598		14	%	Loans sold by DHI Mortgage to third parties	16,927		15,167		12	%


		Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended December 31,
		2023		2022		% Change		2023		2022		% Change			2023		2022		% Change
		(In millions)													(In millions)
Loan origination and other fees	Loan origination and other fees	$	16.3	$	11.4	43	%	$	31.6	$	20.9	51	%	Loan origination and other fees	$	18.2	$	15.3	19	%
Gains on sale of mortgage loans and mortgage servicing rights	Gains on sale of mortgage loans and mortgage servicing rights	154.5		168.0		(8)	%	233.8		302.0		(23)	%	Gains on sale of mortgage loans and mortgage servicing rights	128.7		79.2		63	%
Servicing income	Servicing income	1.7		0.5		240	%	2.9		1.1		164	%	Servicing income	1.2		1.2		—	%
Total mortgage operations revenues	Total mortgage operations revenues	172.5		179.9		(4)	%	268.3		324.0		(17)	%	Total mortgage operations revenues	148.1		95.7		55	%
Title policy premiums	Title policy premiums	43.9		42.2		4	%	85.1		82.4		3	%	Title policy premiums	44.5		41.3		8	%
Total revenues	Total revenues	216.4		222.1		(3)	%	353.4		406.4		(13)	%	Total revenues	192.6		137.0		41	%
General and administrative expense	General and administrative expense	146.9		138.0		6	%	281.0		263.2		7	%	General and administrative expense	151.5		134.1		13	%
Other (income) expense	Other (income) expense	(16.1)		(8.7)		85	%	(31.4)		(16.7)		88	%	Other (income) expense	(24.9)		(15.3)		63	%
Financial services pre-tax income	Financial services pre-tax income	$	85.6	$	92.8	(8)	%	$	103.8	$	159.9	(35)	%	Financial services pre-tax income	$	66.0	$	18.2	263	%

Financial Services Operating Margin Analysis


		Percentages of Financial Services Revenues									Percentages of Financial Services Revenues
		Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended December 31,
		2023		2022		2023		2022			2023		2022
General and administrative expense	General and administrative expense	67.9	%	62.1	%	79.5	%	64.8	%	General and administrative expense	78.7	%	97.9	%
Other (income) expense	Other (income) expense	(7.4)	%	(3.9)	%	(8.9)	%	(4.1)	%	Other (income) expense	(12.9)	%	(11.2)	%
Financial services pre-tax income	Financial services pre-tax income	39.6	%	41.8	%	29.4	%	39.3	%	Financial services pre-tax income	34.3	%	13.3	%

4741

Table of Contents

Mortgage Loan Activity

~~The volume of~~DHI Mortgage’s primary focus is to originate loans ~~originated by our mortgage operations is directly related to the number of homes closed by~~for our homebuilding ~~operations.~~operations, and those loan originations account for almost all of its total loan volume. In the three ~~and six~~ months ended ~~March~~December 31, 2023, ~~while the number of homes closed by our homebuilding operations decreased 1% and 3%, respectively, from the prior year periods,~~ the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers increased ~~10% in both periods~~14%, primarily due to ana 12% increase in the number of homes closed by our homebuilding operations. The percentage of homes closed for which DHI Mortgage handled our homebuyers’ ~~financing.~~

~~Homes closed by our homebuilding operations constituted 99% of DHI Mortgage loan originations~~financing was 78% in ~~both~~ the three ~~and six~~ months ended ~~March~~December 31, 2023, ~~compared to 99% and 98%, respectively,~~up from 77% in the prior year ~~periods. These percentages reflect DHI Mortgage’s consistent focus on the captive business provided by our homebuilding operations.~~period.

The number of loans sold increased 12% ~~and 14%~~ in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to the prior year ~~periods.~~period. Virtually all of the mortgage loans held for sale on ~~March~~December 31, 2023 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 ~~six~~three months ended ~~March~~December 31, 2023, approximately ~~53%~~71% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and ~~43%~~28% were sold to one other major financial 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~~Total loan origination volume increased 13% in the three months ended December 31, 2023, and revenues from our mortgage operations ~~decreased 4%~~increased 55% to ~~$172.5~~$148.1 million ~~and 17% to $268.3 million in the three and six months ended March 31, 2023, respectively,~~ from ~~$179.9 million and $324.0~~$95.7 million in the prior year ~~periods.~~period. The ~~decreases were~~increase in revenues was primarily due to ~~lower~~higher gains on sales of mortgages resulting from ~~a more competitive environment~~improved loan sale execution in the ~~mortgage industry due to rising interest rates.~~secondary market. Revenues from our title operations increased 4%8% to ~~$43.9 million and 3% to $85.1~~$44.5 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ from ~~$42.2 million and $82.4~~$41.3 million in the prior year ~~periods.~~period.

General and administrative (G&A) expense related to our financial services operations increased 6%13% to ~~$146.9 million and 7% to $281.0~~$151.5 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ from ~~$138.0 million and $263.2~~$134.1 million in the prior year ~~periods.~~period. The increase was primarily due to the increase in loan origination volume and related title closing services. As a percentage of financial services revenues, G&A expense was ~~67.9% and 79.5%~~78.7% in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~62.1% and 64.8%~~97.9% in the prior year ~~periods.~~period. 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 ~~2,849~~2,978 and ~~2,990~~2,897 people at ~~March~~December 31, 2023 and 2022, respectively.

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

~~Primarily as a result of the reduction in revenue and operating margin of our mortgage operations, pre-tax~~ Other income ~~from our financial services operations decreased 35%~~increased 63% to ~~$103.8~~$24.9 million in the ~~six~~three months ended ~~March~~December 31, 2023 from ~~$159.9~~$15.3 million in the prior year ~~period.~~period, primarily due to an increase in interest rates on our loan origination volume.

4842

Table of Contents

~~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 within a community and then market each 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, 2023 and 2022 were as follows:

Three Months Ended
March 31, Six Months Ended
March 31,
2023 2022 2023 2022
(In millions)
Revenues
Single-family rental $ 224.1 $ 172.9 $ 452.1 $ 253.2
Multi-family rental and other — 50.0 99.5 126.2
Total revenues 224.1 222.9 551.6 379.4
Cost of sales
Single-family rental 157.7 77.5 294.5 113.8
Multi-family rental and other 0.3 25.0 48.3 61.5
Total cost of sales 158.0 102.5 342.8 175.3
Selling, general and administrative expense 53.5 22.8 101.0 41.4
Other (income) expense (22.0) (4.9) (37.1) (9.8)
Income before income taxes $ 34.6 $ 102.5 $ 144.9 $ 172.5

At March 31, 2023, our rental property inventory of $3.3 billion included $2.1 billion of inventory related to our single-family rental operations and $1.2 billion of inventory related to our multi-family rental operations. At September 30, 2022, our rental property inventory of $2.6 billion included $1.7 billion of inventory related to our single-family rental operations and $897.2 million of inventory related to our multi-family rental operations.

~~The following tables provide further information regarding our rental operations as of and for the three and six months ended March 31, 2023 and 2022:~~

Rental Homes/Units Sold and Closed
Three Months Ended March 31,
Homes/Units Closed Value (In millions)
2023 2022 2023 2022
Single-family rental homes 721 368 $ 224.1 $ 172.9
Multi-family rental units — 126 — 50.0
721 494 $ 224.1 $ 222.9
Six Months Ended March 31,
Homes/Units Closed Value (In millions)
2023 2022 2023 2022
Single-family rental homes 1,415 594 $ 452.1 $ 253.2
Multi-family rental units 300 477 99.5 126.2
1,715 1,071 $ 551.6 $ 379.4
Rental Inventory
March 31,
2023 September 30,
2022
Single-family rental homes (1) 8,630 7,400
Single-family rental lots (2) 4,930 6,680
Multi-family rental units (3) 7,210 6,110

~~________________________~~

~~See footnotes on following page.~~

~~Table of Contents~~

~~(1)Single-family rental homes include 5,980 and 3,530 completed homes at March 31, 2023 and September 30, 2022, respectively.~~

~~(2)Single-family rental lots include 930 and 1,770 finished lots at March 31, 2023 and September 30, 2022, respectively.~~

~~(3)~~Multi-family rental units at March 31, 2023 consist of 6,730 units under active construction and 480 units that were substantially complete and in the lease-up phase. Multi-family rental units at September 30, 2022 consist of 5,810 units under active construction and 300 units that were substantially complete and in the lease-up phase.

RESULTS OF OPERATIONS - OTHER BUSINESSES

In addition to our homebuilding, rental, Forestar and financial services ~~and rental~~ operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own water rights and other water-related assets and own non-residential real estate including ranch land and ~~improvements and own and operate energy-related assets.~~improvements. The pre-tax income of all of our subsidiaries engaged in other business activities was ~~$12.5 million and $21.9~~$9.9 million in the three ~~and six~~ months ended ~~March~~December 31, 2023 ~~respectively,~~ compared to ~~$13.6 million and $24.3~~$9.4 million in the prior year ~~periods.~~period.

RESULTS OF OPERATIONS - CONSOLIDATED

Income before Income Taxes

Pre-tax income for the three ~~and six~~ months ended ~~March~~December 31, 2023 was $1.2 billion ~~and $2.5 billion, respectively,~~ compared to ~~$1.9 billion and $3.4~~$1.3 billion in the prior year ~~periods.~~period. The decrease was primarily due to a decrease in the pre-tax income of our ~~homebuilding~~rental operations, ~~as a result of a decrease in~~which had fewer home ~~sales gross margin.~~and unit closings compared to the prior year period.

Income Taxes

Our income tax expense for the three ~~and six~~ months ended ~~March~~December 31, 2023 was ~~$295.7~~$291.8 million ~~and $594.6 million, respectively,~~ compared to ~~$441.0 million and $792.5~~$298.9 million in the prior year ~~periods.~~period. Our effective tax rate was ~~23.7%~~23.4% for ~~both~~ the three ~~and six~~ months ended ~~March~~December 31, 2023 compared to ~~23.4%~~23.6% in ~~both of~~ the prior year ~~periods.~~period. The effective tax rates for ~~all~~both periods include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient homes tax credits.

Our deferred tax assets, net of deferred tax liabilities, were ~~$130.1~~$190.7 million at ~~March~~December 31, 2023 compared to ~~$159.0~~$202.0 million at September 30, ~~2022.~~2023. We have a valuation allowance of ~~$17.8 million and $17.9~~$14.8 million at ~~March~~December 31, 2023 and September 30, ~~2022, respectively,~~2023 related to deferred tax assets for state net operating loss (NOL)~~, state capital loss~~ and tax credit carryforwards that are expected 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 ~~state capital loss~~ and tax credit 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.

5043

Table of Contents

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.

We have continued to increase our investments in our homebuilding ~~inventories~~ and ~~single-family and multi-family~~ rental ~~properties~~inventories to expand our operations. We are also returning capital to our shareholders through dividend payments and repurchases of our common stock. We are maintaining significant homebuilding cash balances and liquidity to support the increased scale and level of activity in our business and to provide flexibility to adjust to changing conditions and opportunities.

At ~~March~~December 31, 2023, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of ~~$6.0 billion, of which $2.2~~$5.3 billion. $2.0 billion is payable within 12 months, ~~and includes $1.6~~including $1.3 billion which is outstanding under ~~the~~our mortgage repurchase ~~facility and $400 million principal amount of 5.75% homebuilding senior notes maturing in August 2023.~~facilities. At ~~March~~December 31, 2023, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was ~~22.4%~~18.6% compared to ~~23.8%~~18.3% at September 30, ~~2022~~2023 and ~~24.9%~~22.0% at ~~March~~December 31, 2022. Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was ~~12.3%~~7.8% at ~~March~~December 31, 2023 compared to ~~15.4%~~5.1% at September 30, ~~2022~~2023 and ~~18.9%~~13.3% at ~~March 31, 2022.~~

At March 31, 2023, our ratio of homebuilding debt to total capital (homebuilding notes payable divided by stockholders’ equity plus homebuilding notes payable) was 11.5% compared to 13.2% at September 30, 2022 and 16.4% at March 31, 2022. 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 1.5% at March 31, 2023 compared to 4.4% at September 30, 2022 and 11.2% at MarchDecember 31, 2022. Over the long term, we intend to maintain our ratio of ~~homebuilding~~ debt to total capital below ~~30%~~25%, and we expect it to remain below 20% throughout fiscal 2023. 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, DRH Rental and our financial services business because they are separately capitalized and not guaranteed by our parent company or any of our homebuilding entities.2024.

At ~~March~~December 31, 2023, we had outstanding letters of credit of ~~$245.2~~$253.9 million and surety bonds of ~~$2.9~~$3.2 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 and liquidity 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 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 October 2021, registering $750 million of equity securities, of which $300 million was reserved for sales under its at-the-market equity offering (ATM) program that became effective in November 2021. At ~~March~~December 31, 2023, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its ATM 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~~facilities 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 for the next 12 months and for the foreseeable future thereafter.

Capital Resources - Homebuilding

Cash and Cash Equivalents — At ~~March~~December 31, 2023, cash and cash equivalents of our homebuilding segment totaled ~~$2.4~~$2.5 billion.

~~Table of Contents~~

Bank Credit Facility — We have a $2.19 billion senior unsecured homebuilding revolving credit facility 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 commitments. Letters of credit issued under the facility reduce the available borrowing capacity. The maturity date of the facility is October 28, 2027. At ~~March~~December 31, 2023, there were no borrowings outstanding and ~~$202.6~~$229.6 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$1.99~~$1.96 billion.

Table of Contents

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 ~~March~~December 31, 2023, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility.

Public Unsecured Debt — ~~We have $2.5~~At December 31, 2023, we had $2.1 billion principal amount of homebuilding senior notes outstanding ~~as of March 31, 2023~~ that mature from ~~August 2023~~October 2024 through October 2027. ~~In February 2023, we repaid $300 million principal amount of our 4.75% senior notes at maturity.~~

The indentures governing our senior notes impose restrictions on the creation of secured debt and liens. At ~~March~~December 31, 2023, we were in compliance with all of the limitations and restrictions associated with our public debt obligations.

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

Debt and Stock Repurchase Authorizations — In July 2019, our Board of Directors authorized the repurchase of up to $500 million of debt securities. ~~In April 2022,~~Effective October 31, 2023, our Board of Directors authorized the repurchase of up to ~~$1.0~~$1.5 billion of our common ~~stock.~~stock, replacing the previous authorization that was effective as of April 18, 2023. During the ~~six~~three months ended ~~March~~December 31, 2023, we repurchased ~~4.5~~3.3 million shares at a total cost, including commissions and excise taxes, of ~~$421.3 million.~~$398.3 million, of which $201.6 million was repurchased under the previous authorization. At ~~March~~December 31, 2023, the full amount of the debt repurchase authorization was remaining, and ~~$17.0 million~~$1.3 billion of the stock repurchase authorization was remaining. ~~In April 2023, our Board of Directors authorized the repurchase of up to $1.0 billion of our common stock, replacing the previous common stock repurchase authorization.~~ The debt and stock repurchase authorizations have no expiration date.

Capital Resources - Rental

During the past few years, we have made significant investments in our rental operations. The inventory in our rental segment totaled $3.0 billion at December 31, 2023 compared to $2.7 billion at September 30, 2023 and $2.9 billion at December 31, 2022.

Cash and Cash Equivalents — At December 31, 2023, cash and cash equivalents of our rental segment totaled $117.7 million.

Bank Credit Facility — Our rental subsidiary, DRH Rental, has a $1.05 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $2.0 billion, subject to certain conditions and availability of additional bank commitments. Availability under the rental 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. 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. The maturity date of the facility is October 10, 2027. Borrowings and repayments under the facility totaled $720 million and $170 million, respectively, during the three months ended December 31, 2023. At December 31, 2023, there were $950 million of borrowings outstanding at a 7.2% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $100 million.

Table of Contents

The rental revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. The rental 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.

Capital Resources - Forestar

The achievement of Forestar’s long-term growth objectives will depend on its ability to obtain financing and generate sufficient cash flows from operations. 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 ~~March~~December 31, 2023, Forestar’s ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was ~~36.2%~~33.4% compared to ~~37.1%~~33.7% at September 30, ~~2022~~2023 and ~~38.9%~~36.7% at ~~March~~December 31, 2022. 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 ~~25.2%~~14.9% compared to ~~26.9%~~5.5% at September 30, ~~2022~~2023 and ~~29.9%~~28.7% at ~~March~~December 31, 2022.

Cash and Cash Equivalents — At ~~March~~December 31, 2023, Forestar had cash and cash equivalents of ~~$286.7~~$458.9 million.

Bank Credit Facility — Forestar has a $410 million senior unsecured revolving credit facility 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 commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of 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 is October 28, 2026. At ~~March~~December 31, 2023, there were no borrowings outstanding and ~~$42.6~~$24.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$367.4~~$385.7 million.

~~Table of Contents~~

Unsecured Debt — As of ~~March~~December 31, 2023, 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 that mature in May 2026 and $300 million principal amount of 5.0% senior notes that mature in March 2028.

At December 31, 2023, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. They are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, rental or financial services ~~or rental~~ operations. ~~At March 31, 2023, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.~~

Debt Repurchase Authorization — In April 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 ~~March~~December 31, 2023, and the authorization has no expiration date.

Issuance of Common Stock — During the ~~six~~three months ended ~~March~~December 31, 2023, there were no shares of common stock issued under Forestar’s ATM program. At ~~March~~December 31, 2023, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its ATM program.

Table of Contents

Capital Resources - Financial Services

Cash and Cash Equivalents — At ~~March~~December 31, 2023, cash and cash equivalents of our financial services segment totaled ~~$285.5~~$226.9 million.

Mortgage Repurchase ~~Facility~~Facilities — Our mortgage subsidiary, DHI Mortgage, has atwo mortgage repurchase ~~facility~~facilities, one of which is committed and the other of which is uncommitted, that ~~provides~~provide 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 2023, the~~facilities.

The facilities contain financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity. At December 31, 2023, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase ~~facility is~~facilities.

These mortgage repurchase facilities are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, rental or 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 March 31, 2023, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.

In the past, DHI Mortgage has been able to renew or extend its committed mortgage ~~credit~~repurchase facility at a sufficient capacity and on satisfactory terms prior to its maturity and obtain temporary additional commitments through amendments to the ~~credit agreement~~facility 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 committed mortgage repurchase facility or to obtain other additional financing in sufficient capacities.

~~Table of Contents~~

~~Uncommitted Mortgage Repurchase Facility~~ — In April 2023, DHI Mortgage entered into a master repurchase agreement pursuant to which DHI Mortgage may from time to time sell to the counterparty, and later repurchase, eligible loans. The new mortgage repurchase facility provides DHI Mortgage with uncommitted borrowing capacity of up to $300 million and includes customary affirmative and negative covenants, events of default and financial covenants similar to those in the committed mortgage repurchase facility. The obligations of DHI Mortgage under this facility are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or rental operations.

~~Capital Resources - Rental~~

During the first half of fiscal 2023, we continued to increase the investment in our rental operations. The inventory in our rental segment totaled $3.3 billion at March 31, 2023 compared to $2.6 billion at September 30, 2022 and $1.5 billion at March 31, 2022.

~~Cash and Cash Equivalents~~ ~~— At March 31, 2023, cash and cash equivalents of our rental segment totaled $89.8 million.~~

~~Bank Credit Facility~~ — Our rental subsidiary, DRH Rental, has a $1.025 billion 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. 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. 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. The maturity date of the facility is March 4, 2026. Borrowings and repayments under the facility totaled $575 million and $350 million, respectively, during the six months ended March 31, 2023. At March 31, 2023, the capacity of the facility was fully utilized, with $1.025 billion of borrowings outstanding at a 7.2% annual interest rate.

DRH Rental’s revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. The rental 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 ~~six~~three months ended ~~March~~December 31, 2023, net cash ~~provided by~~used in operating activities was ~~$1.5 billion~~$153.4 million compared to ~~$834.6~~$829.1 million of cash ~~used in~~provided by operating activities in the prior year period. Cash ~~provided by~~used in operating activities in the current year period primarily consisted of ~~$1.5 billion, $232.2~~$516.2 million and ~~$21.3~~$156.7 million of cash ~~provided by~~used in our ~~homebuilding, financial services~~rental and Forestar segments, respectively, partially offset by ~~$263.3~~$464.7 million and $31.2 million of cash ~~used in~~provided by our ~~rental segment.~~financial services and homebuilding segments, respectively.

Cash ~~provided by a decrease in construction in progress and finished home inventory was $537.3 million in the current year period compared to cash~~ used to increase construction in progress and finished home inventory ~~of $2.1 billion~~was $466.4 million in the ~~prior~~current year period, reflecting ~~a decrease~~an increase in our completed homes in inventory in the current period. Cash used to increase residential land and lots was ~~$668.7~~$937.8 million in the current year period compared to ~~$528.4~~$637.5 million in the prior year period.

In the six months ended March 31, 2023, cash used to increase our rental inventories was $689.2 million compared to $655.9 million in the prior year period, which reflects our ongoing efforts to expand our rental platform.

~~Table of Contents~~

Investing Cash Flow Activities

In the ~~six~~three months ended ~~March~~December 31, 2023, net cash used in investing activities was ~~$180.6~~$39.3 million compared to ~~$68.7~~$142.9 million in the prior year period. In the current year period, uses of cash included purchases of property and equipment totaling $47.6 million. In the prior year period, uses of cash included the acquisition of the homebuilding operations of Riggins Custom Homes for ~~$103.5~~$107.0 million, of which $97.1 million was paid in the period, and purchases of property and equipment totaling ~~$79.2 million. In the prior year period, uses of cash included purchases of property and equipment totaling $72.5~~$47.5 million.

Table of Contents

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 operations may be funded with the issuance of senior unsecured debt securities or equity securities through the capital markets.

During the ~~six~~three months ended ~~March~~December 31, 2023, net cash used in financing activities was ~~$791.3~~$362.8 million, consisting primarily of ~~repayment of $300 million principal amount of our 4.75% homebuilding senior notes,~~ net payments ~~of $63.4 million~~ on our mortgage repurchase ~~facility,~~facilities of $389.9 million, cash used to repurchase shares of our common stock of ~~$419.8~~$376.9 million and payment of cash dividends totaling ~~$171.7~~$99.9 million. These uses of cash were partially offset by net borrowings on ~~DRH Rental’s~~our rental revolving credit facility of ~~$225~~$550 million.

During the ~~six~~three months ended ~~March~~December 31, 2022, net cash used in financing activities was ~~$644.8~~$646.6 million, consisting primarily of net payments on our mortgage repurchase facility of $404.4 million, cash used to repurchase shares of our common stock of ~~$569.8~~$118.1 million and payment of cash dividends totaling ~~$159.2 million, partially offset by net borrowings of $84.3 million on our mortgage repurchase facility.~~$86.1 million.

During ~~each of~~ the ~~first two quarters of fiscal~~three months ended December 31, 2023, our Board of Directors approved a quarterly cash dividend of ~~$0.25~~$0.30 per common share, ~~the most recent of~~ which was paid on ~~February 14,~~November 28, 2023 to stockholders of record on ~~February 7,~~November 21, 2023. In ~~April 2023,~~January 2024, our Board of Directors approved a quarterly cash dividend of ~~$0.25~~$0.30 per common share, payable on ~~May 10, 2023~~February 13, 2024 to stockholders of record on ~~May 3, 2023.~~February 6, 2024. Cash dividends of ~~$0.225~~$0.25 per common share were approved and paid in each quarter of fiscal ~~2022.~~2023. 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.

5548

Table of Contents

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

As of ~~March~~December 31, 2023, D.R. Horton, Inc. had ~~$2.5~~$2.1 billion principal amount of homebuilding senior notes outstanding due through October 2027 and no 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 single-family and multi-family rental operations, Forestar lot development operations, financial services ~~operations, multi-family 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 enforceability of the obligations of the Guarantor Subsidiaries under 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 court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of 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.

5649

Table of Contents

The following tables present summarized financial information for D.R. Horton, Inc. and the Guarantor Subsidiaries on 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	D.R. Horton, Inc. and Guarantor Subsidiaries					D.R. Horton, Inc. and Guarantor Subsidiaries

Summarized Balance Sheet Data	Summarized Balance Sheet Data	March 31, 2023		September 30, 2022		Summarized Balance Sheet Data	December 31, 2023		September 30, 2023
		(In millions)					(In millions)
Assets	Assets					Assets
Cash	Cash	$	2,295.5	$	1,974.6	Cash	$	2,432.7	$	2,848.3
Inventories	Inventories	18,197.0		18,096.5		Inventories	19,463.2		18,331.6
Amount due from Non-Guarantor Subsidiaries	Amount due from Non-Guarantor Subsidiaries	1,208.2		1,034.9		Amount due from Non-Guarantor Subsidiaries	1,497.9		1,314.3
Total assets	Total assets	24,789.8		24,001.0		Total assets	26,828.3		26,081.4
Liabilities & Stockholders’ Equity	Liabilities & Stockholders’ Equity					Liabilities & Stockholders’ Equity
Notes payable	Notes payable	$	2,584.7	$	2,878.3	Notes payable	$	2,224.6	$	2,211.1
Total liabilities	Total liabilities	6,067.8		6,345.8		Total liabilities	5,952.2		5,785.4
Stockholders’ equity	Stockholders’ equity	18,722.0		17,655.2		Stockholders’ equity	20,876.1		20,296.0

Summarized Statement of Operations Data	Summarized Statement of Operations Data	Six Months Ended March 31, 2023		Year Ended September 30, 2022		Summarized Statement of Operations Data	Three Months Ended December 31, 2023		Year Ended September 30, 2023
		(In millions)					(In millions)
Revenues	Revenues	$	14,188.0	$	31,890.0	Revenues	$	7,258.7	$	31,661.8
Cost of sales	Cost of sales	10,985.2		22,794.1		Cost of sales	5,595.7		24,264.9
Selling, general and administrative expense	Selling, general and administrative expense	1,050.0		2,128.5		Selling, general and administrative expense	592.9		2,192.0
Income before income taxes	Income before income taxes	2,162.2		6,946.0		Income before income taxes	1,090.0		5,245.5
Net income	Net income	1,651.3		5,372.7		Net income	836.1		3,984.2

5750

Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

As disclosed in our annual report on Form 10-K for the fiscal year ended September 30, ~~2022,~~2023, our most critical accounting policies relate to revenue recognition, inventories and cost of sales, warranty and legal claims and insurance. Since September 30, ~~2022,~~2023, 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, ~~2022,~~2023, our reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims. At ~~March~~December 31, 2023 and September 30, 2023, we had reserves for approximately 565 and 600 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the three months ended December 31, 2023, we were notified of approximately 85 new construction defect claims and resolved 120 construction defect claims for a total cost of $34.9 million. At December 31, 2022 and September 30, 2022, we had reserves for approximately ~~600~~570 and 560 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the ~~six~~three months ended ~~March~~December 31, ~~2023,~~2022, we ~~established reserves for~~were notified of approximately ~~150~~60 new construction defect claims and resolved ~~110~~50 construction defect claims for a total cost of $16.6 million. At 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$4.6 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 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 for our homebuilding, rental, 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.

5851

Table of Contents

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

•~~constriction of~~adverse developments affecting the ~~credit~~capital markets and ~~public capital markets,~~financial institutions, which could limit our ability to access capital and increase our ~~costs~~cost of ~~capital;~~capital and impact our liquidity and capital resources;

•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 rental inventory;

•our ability to effect our growth strategies, acquisitions, investments or ~~investments~~other strategic initiatives 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;~~labor and obtaining regulatory approvals;

•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;

•reductions in the availability of performance bonds;

•increases in the costs of owning a home;

•the effects of information technology failures, data security breaches, and the failure to satisfy privacy and data protection laws and regulations;

•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 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; and

•actions by activist ~~stockholders; and~~

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

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, ~~2022,~~2023, including the section entitled “Risk Factors,” which is filed with the SEC.

5952

Table of Contents

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 six~~ months ended ~~March~~December 31, 2023 and 2022 was not significant, is recognized in current earnings. At ~~March~~December 31, 2023, hedging instruments used to mitigate interest rate risk related to uncommitted mortgage loans held for sale and uncommitted IRLCs totaled a notional amount of ~~$3.8~~$4.0 billion. Uncommitted IRLCs totaled a notional amount of approximately ~~$3.0~~$2.3 billion and uncommitted mortgage loans held for sale totaled a notional amount of approximately ~~$996.4 million~~$1.8 billion at ~~March~~December 31, 2023.

We also use hedging instruments as part of a program to offer below market interest rate financing to our homebuyers. At ~~March~~December 31, 2023 and September 30, ~~2022,~~2023, we had MBS totaling $765.6 million and $1.1 billion, ~~and $532.4 million,~~ respectively, that did not yet have IRLCs or closed loans created or assigned and recorded a liability of ~~$2.4~~$16.5 million and an asset of ~~$4.8~~$15.7 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 ~~March~~December 31, 2023. Because the mortgage repurchase ~~facility is~~facilities are effectively secured by certain mortgage loans held for sale that are typically sold within 60 days, ~~its~~the outstanding ~~balance is~~balances related to those facilities are included in the most current period presented. The interest rate for our variable rate debt represents the weighted average interest rate in effect at ~~March~~December 31, 2023.


		Six Months Ending September 30, 2023		Fiscal Year Ending September 30,													Fair Value at March 31, 2023				Nine Months Ending September 30, 2024		Fiscal Year Ending September 30,														Fair Value at December 31, 2023
			2024		2025		2026		2027		2028		Thereafter		Total				2025				2026		2027		2028		2029		Thereafter		Total
			($ in millions)																			($ in millions)
Debt:	Debt:																	Debt:
Fixed rate	Fixed rate	$590.5		$12.9		$500.4		$900.4		$600.4		$800.0		$—		$3,404.6		$3,149.4		Fixed rate		$214.6		$522.6		$929.8		$607.2		$800.0		$—		$—		$3,074.2		$2,908.0
Average interest rate	Average interest rate	5.5%		4.0%		2.7%		3.4%		1.5%		3.0%		—%		3.2%		Average interest rate			4.6%		2.6%		3.4%		1.5%		3.0%		—%		—%		2.9%
Variable rate	Variable rate	$1,554.9		$—		$—		$1,025.0		$—		$—		$—		$2,579.9	$2,579.9	Variable rate			$1,279.7		$—		$—		$—		$950.0		$—		$—		$2,229.7		$2,229.7
Average interest rate	Average interest rate	6.4%		—%		—%		7.2%		—%		—%		—%		6.7%		Average interest rate			6.9%		—%		—%		—%		7.2%		—%		—%		7.0%

6053

Table of Contents

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 ~~March~~December 31, 2023 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 ~~March~~December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6154

Table of Contents

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.

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.

In fiscal 2014, we received Notices of Violation from the United States Environmental Protection Agency (EPA), the Alabama Department of Environmental Management and the State of South Carolina Department of Health and Environmental Control related to stormwater compliance at certain of our sites in the southeastern United States within EPA Region 4. Since 2014, we have enhanced our practices and procedures related to stormwater compliance, and we are currently in discussions to resolve these matters. The resolution of these matters is expected to result in a monetary payment, an agreement to complete a supplemental environmental project that is intended to provide a tangible environmental benefit and entry of a consent decree in EPA Region 4 providing for ongoing reporting obligations and stipulated penalties for any future noncompliance with the consent decree. Collectively, these amounts may exceed $1 million. However, we do not believe it is reasonably possible that this matter would result in a loss that would have a material effect on our consolidated financial position, results of operations or cash flows.

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 $1.5 billion common stock repurchase authorization, which was approved by our Board of Directors effective October 31, 2023, and which replaced our prior $1.0 billion common stock repurchase authorization. The following table sets forth information concerning our common stock repurchases during the three months ended March 31, 2023. All share repurchases during the quarter were made in accordance with the safe harbor provisions of Rule 10b-18 under the Exchange Act.

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, 2023 - January 31, 2023 869,609 $ 96.53 869,609 $ 236.2
February 1, 2023 - February 28, 2023 2,000,853 96.70 2,000,853 42.7
March 1, 2023 - March 31, 2023 285,836 90.02 285,836 17.0
Total 3,156,298 $ 96.05 3,156,298 $ 17.0

~~_________________~~

~~(1) Effective April 2022, our Board of Directors authorized the repurchase of $1.0 billion of our common stock.~~authorization has no expiration date. During the three months ended ~~March~~December 31, 2023, we repurchased ~~3.2~~3.3 million shares of our common stock at a total cost, including commissions and excise taxes, of ~~$303.2 million, leaving $17.0 million~~$398.3 million. At December 31, 2023, there was $1.3 billion remaining on the repurchase ~~authorization at March 31, 2023. In April 2023, our Board of Directors authorized the repurchase of up to $1.0 billion of~~authorization. The following table sets forth additional information concerning our common stock ~~replacing~~repurchases during the ~~previous authorization.~~ quarter.


Period	Total Number of Shares Purchased	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 (In millions)
October 2023	1,912,460	$	105.40	1,912,460	$	32.4
November 2023	593,600	125.09		593,600	1,425.8
December 2023	819,090	149.62		819,090	1,303.3
Total	3,325,150	$	119.81	3,325,150	$	1,303.3

The ~~authorization has no expiration date.~~share repurchases may be effected through Rule 10b5-1 plans or open market purchases, each in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (Exchange Act). Shares repurchased in October and December 2023 included 1,912,460 and 632,228 shares, respectively, purchased pursuant to a trading plan under Rule 10b5-1 of the Exchange Act.

6255

Table of Contents

ITEM 5. OTHER INFORMATION

During the three months ended December 31, 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

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).
	10.1		~~First~~ Amendment No. 1 to ~~Fourth Amended and Restated Master Repurchase~~Credit Agreement, dated ~~February 17,~~October 10, 2023, among ~~DHI Mortgage Company,~~DRH Rental, Inc., Mizuho Bank, Ltd., ~~U.S. Bank National Association,~~ as Administrative Agent ~~Sole Book Runner, Lead Arranger,~~ and ~~a Buyer and all other Buyers~~the Lenders party thereto (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~February 21,~~October 12, 2023).
	10.2	†	~~Master Repurchase Agreement, dated April 4, 2023, between DHI Mortgage Company, Ltd.~~Summary of Compensation Notification - Chairman of the Board and ~~Royal Bank of Canada~~Strategic Advisor (fiscal 2024) (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~April 10,~~November 3, 2023).
	10.3	†	D.R. Horton, Inc. 2024 Stock Incentive Plan, effective as of January 17, 2024 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 18, 2024).
	22.1	*	List of Guarantor ~~Subsidiaries~~.Subsidiaries.
	31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 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 or arrangement.

6356

Table of Contents

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:	~~April~~January 24, ~~2023~~2024	By:	/s/ Bill W. Wheat
			Bill W. Wheat
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)
Date:	~~April~~January 24, ~~2023~~2024	By:	/s/ Aron M. Odom
			Aron M. Odom
			Senior Vice President and Controller
			(Principal Accounting Officer)

6457


	Three Months Ended March 31, 2022
	Homebuilding		Forestar		Financial Services		Rental		Eliminations and Other (1)		Consolidated
	(In millions)
Revenues
Home sales	$	7,499.2	$	—	$	—	$	—	$	—	$	7,499.2
Land/lot sales and other	7.6		421.6		—		—		(374.4)		54.8
Rental property sales	—		—		—		222.9		—		222.9
Financial services	—		—		222.1		—		—		222.1
	7,506.8		421.6		222.1		222.9		(374.4)		7,999.0
Cost of sales
Home sales (2)	5,335.2		—		—		—		(43.7)		5,291.5
Land/lot sales and other	3.3		328.7		—		—		(307.0)		25.0
Rental property sales	—		—		—		102.5		(4.3)		98.2
Inventory and land option charges	9.8		5.4		—		—		—		15.2
	5,348.3		334.1		—		102.5		(355.0)		5,429.9
Selling, general and administrative expense	507.3		24.3		138.0		22.8		2.7		695.1
Other (income) expense	(1.6)		—		(8.7)		(4.9)		5.9		(9.3)
Income before income taxes	$	1,652.8	$	63.2	$	92.8	$	102.5	$	(28.0)	$	1,883.3


	Six Months Ended March 31, 2022
	Homebuilding		Forestar		Financial Services		Rental		Eliminations and Other (1)		Consolidated
	(In millions)
Revenues
Home sales	$	14,155.6	$	—	$	—	$	—	$	—	$	14,155.6
Land/lot sales and other	30.5		829.2		—		—		(748.7)		111.0
Rental property sales	—		—		—		379.4		—		379.4
Financial services	—		—		406.4		—		—		406.4
	14,186.1		829.2		406.4		379.4		(748.7)		15,052.4
Cost of sales
Home sales (2)	10,169.1		—		—		—		(81.3)		10,087.8
Land/lot sales and other	20.4		662.3		—		—		(624.8)		57.9
Rental property sales	—		—		—		175.0		(5.1)		169.9
Inventory and land option charges	13.7		6.0		—		0.3		—		20.0
	10,203.2		668.3		—		175.3		(711.2)		10,335.6
Selling, general and administrative expense	1,004.9		45.8		263.2		41.4		5.7		1,361.0
Other (income) expense	(7.9)		(1.6)		(16.7)		(9.8)		11.2		(24.8)
Income before income taxes	$	2,985.9	$	116.7	$	159.9	$	172.5	$	(54.4)	$	3,380.6

Summary Cash Flow Information
Depreciation and amortization	$	30.9	$	1.3	$	0.9	$	0.2	$	6.0	$	39.3
Cash (used in) provided by operating activities	$	(416.2)	$	76.6	$	(63.0)	$	(409.1)	$	(22.9)	$	(834.6)


	Rental Homes/Units Sold and Closed
	Three Months Ended March 31,
	Homes/Units Closed		Value (In millions)
	2023	2022	2023		2022
Single-family rental homes	721	368	$	224.1	$	172.9
Multi-family rental units	—	126	—		50.0
	721	494	$	224.1	$	222.9

	Six Months Ended March 31,
	Homes/Units Closed		Value (In millions)
	2023	2022	2023		2022
Single-family rental homes	1,415	594	$	452.1	$	253.2
Multi-family rental units	300	477	99.5		126.2
	1,715	1,071	$	551.6	$	379.4

			Rental Inventory
			March 31, 2023		September 30, 2022
Single-family rental homes (1)			8,630		7,400
Single-family rental lots (2)			4,930		6,680
Multi-family rental units (3)			7,210		6,110


	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, 2023 - January 31, 2023	869,609	$	96.53	869,609	$	236.2
February 1, 2023 - February 28, 2023	2,000,853	96.70		2,000,853	42.7
March 1, 2023 - March 31, 2023	285,836	90.02		285,836	17.0
Total	3,156,298	$	96.05	3,156,298	$	17.0