-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D+RPptYSkdh6G373utm8juzIlGgbv5A4TwAZOeFiSS2fAC9hL108VU7lJfckCPCv ZFS4VayQTT7jq9XzZl2mvA== 0000882184-97-000023.txt : 19970806 0000882184-97-000023.hdr.sgml : 19970806 ACCESSION NUMBER: 0000882184-97-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970805 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HORTON D R INC /DE/ CENTRAL INDEX KEY: 0000882184 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 752386963 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14122 FILM NUMBER: 97651577 BUSINESS ADDRESS: STREET 1: 1901 ASCENSION BLVD STREET 2: STE 100 CITY: ARLINGTON STATE: TX ZIP: 76006 BUSINESS PHONE: 8178568200 10-Q 1 FORM 10-Q QUARTERLY REPORT FOR D.R. HORTON, INC. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1997 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ________________ To __________________ Commission file number 1-14112 D.R. HORTON, INC. ----------------- (Exact name of registrant as specified in its charter) DELAWARE 75-2386963 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1901 Ascension Blvd., Suite 100, Arlington, Texas 76006 ------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (817) 856-8200 -------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $.01 par value -- 37,236,841 shares as of July 25, 1997 INDEX D.R. HORTON, INC. PART I. FINANCIAL INFORMATION. Page ITEM 1.Financial Statements. Consolidated Balance Sheets--June 30, 1997 and September 30, 1996. 3 Consolidated Statements of Income--Three Months Ended June 30, 1997 and 1996; and Nine Months Ended June 30, 1997 and 1996. 4 Consolidated Statement of Stockholders' Equity--Nine Months Ended June 30, 1997. 5 Consolidated Statements of Cash Flows--Nine Months Ended June 30, 1997 and 1996. 6 Notes to Consolidated Financial Statements. 7-9 Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition. 10-13 PART II. OTHER INFORMATION. Item 2. Changes in Securities. 14 Item 6. Exhibits and Reports on Form 8-K. 14 SIGNATURES. 15 D.R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, September 30, 1997 1996 ---- ---- (In thousands) (Unaudited) ASSETS Cash $56,358 $32,467 Inventories: Finished homes and construction in progress 358,905 216,264 Residential lots - developed and under development 217,553 127,707 Land held for development 1,512 1,312 ----- ----- 577,970 345,283 Property and equipment (net) 12,783 5,631 Earnest money deposits and other assets 24,877 15,247 Excess of cost over net assets acquired (net) 28,079 4,285 ------ ----- $700,067 $402,913 ======== ======== LIABILITIES Accounts payable $56,112 $34,391 Accrued expenses and customer deposits 33,778 21,011 Notes payable 212,818 169,873 8 3/8% senior notes payable, due June 15, 2004, net of unamortized premium 147,402 - ------- -------- 450,110 225,275 STOCKHOLDERS' EQUITY Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued - - Common stock, $.01 par value, 100,000,000 shares authorized, 37,232,841 at June 30, 1997 and 32,362,036 at September 30, 1996, issued and outstanding 372 324 Additional capital 210,128 159,714 Retained earnings 39,457 17,600 ------ ------ 249,957 177,638 ------- ------- $700,067 $402,913 ======== ======== See accompanying notes to consolidated financial statements. -3- D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Nine Months Ended June 30, Ended June 30, -------------- -------------- 1997 1996 1997 1996 ---- ---- ---- ---- (In thousands, except net income per share) (Unaudited) Revenues $250,096 $143,283 $554,073 $378,393 Cost of sales 205,901 117,386 453,729 310,788 ------- ------- ------- ------- 44,195 25,897 100,344 67,605 Selling, general and admini- strative expense 27,097 14,101 61,008 38,674 ------ ------ ------ ------ Operating income 17,098 11,796 39,336 28,931 Other: Interest expense (1,731) (216) (3,331) (1,157) Other income 754 449 1,876 1,046 ------ ------ ------ ------ (977) 233 (1,455) (111) ------ ------ ------ ------ INCOME BEFORE INCOME TAXES 16,121 12,029 37,881 28,820 Provision for income taxes 6,368 4,595 14,631 10,849 ----- ----- ------ ------ NET INCOME $9,753 $7,434 $23,250 $17,971 ====== ====== ======= ======= Net income per share $0.26 $0.23 $0.66 $0.58 ===== ===== ===== ===== Weighted average number of shares of common stock and common stock equivalents outstanding 37,815 32,972 35,028 30,903 ====== ====== ====== ====== See accompanying notes to consolidated financial statements. -4- D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Total Common Additional Retained Stockholders' Stock Capital Earnings Equity --------------------------------------- (In thousands) (Unaudited) Balances at October 1, 1996 $324 $159,714 $17,600 $177,638 Net income - - 23,250 23,250 Sale of 3,838,800 shares of common stock and issuance of 844,444 shares as partial consideration for acquisition 47 49,083 - 49,130 Stock issuance under employee benefit plans - 310 - 310 Exercise of stock options 1 1,021 - 1,022 Cash dividends paid - - (1,393) (1,393) ---- -------- ------- -------- Balances at June 30, 1997 $372 $210,128 $39,457 $249,957 ==== ======== ======= ======== See accompanying notes to consolidated financial statements. -5- D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended June 30, -------------- 1997 1996 ---- ---- (In thousands) (Unaudited) OPERATING ACTIVITIES Net income $23,250 $17,971 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,831 2,156 Expense associated with issuance of stock under employee benefit plans 224 159 Changes in operating assets and liabilities: Increase in inventories (142,793) (56,503) Increase in earnest money deposits and other assets (6,187) (1,807) Increase in accounts payable, accrued expenses and customer deposits 21,154 8,444 ------ ----- NET CASH USED IN OPERATING ACTIVITIES (101,521) (29,580) -------- ------- INVESTING ACTIVITIES Purchase of property and equipment (5,035) (2,382) Net cash paid for acquisitions (45,198) (560) ------- ---- NET CASH USED IN INVESTING ACTIVITIES (50,233) (2,942) ------- ------ FINANCING ACTIVITIES Proceeds from notes payable 207,237 225,093 Repayment of notes payable (218,576) (223,703) Issuance of senior notes payable 147,371 - Issuance of common stock 39,979 43,259 Proceeds from issuance of stock under employee benefit plans 1,027 743 Cash dividends paid (1,393) - ------ ------ NET CASH PROVIDED BY FINANCING ACTIVITIES 175,645 45,392 ------- ------ INCREASE (DECREASE) IN CASH 23,891 12,870 Cash at beginning of period 32,467 16,737 ------ ------ Cash at end of period $56,358 $29,607 ======= ======= Supplemental cash flow information: Interest paid $15,561 $10,553 ======= ======= Income taxes paid $16,624 $11,218 ======= ======= See accompanying notes to consolidated financial statements. -6- D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 1997 NOTE A - BASIS OF PRESENTATION The accompanying unaudited, consolidated financial statements include the accounts of the D.R. Horton, Inc. (the "Company") and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended June 30, 1997, are not necessarily indicative of the results that may be expected for the year ending September 30, 1997. NOTE B - NET INCOME PER SHARE Net income per share for the three and nine month periods ended June 30, 1997 and 1996, is based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. NOTE C - PROVISIONS FOR INCOME TAXES Deferred tax liabilities and assets, arising from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, consist primarily of differences in depreciation, warranty costs and inventory cost capitalization methods and were, as of June 30, 1997, not significant. The provisions for income tax expense for the three and nine month periods ended June 30, 1997 and 1996, are based on the effective tax rates estimated to be in effect for the respective years. The deferred income tax provisions were not significant in either period. The difference between income tax expense and tax computed by applying the statutory Federal income tax rate to income before income taxes is due primarily to the effect of applicable state income taxes. NOTE D - INTEREST Three months ended Nine months ended June 30, June 30, ------------------ ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- (In thousands) Capitalized interest, beginning of period $14,126 $9,855 $11,042 $7,118 Interest incurred 7,021 3,343 16,032 10,897 Interest expensed: Directly (1,731) (216) (3,331) (1,157) Amortized to cost of sales (3,558) (2,153) (7,885) (6,029) ------ ------ ------ ------ Capitalized interest, end of period $15,858 $10,829 $15,858 $10,829 ======= ======= ======= ======= -7- D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) June 30, 1997 NOTE E - CAPITALIZATION During 1997, the Company completed the sale of 3,838,800 additional shares of common stock. The net proceeds of approximately $40.0 million, were used to retire debt and for general corporate purposes. On July 24, 1997, the Company's Board of Directors declared a quarterly cash dividend of $.02 per common share. NOTE F - ACQUISITIONS In October, 1996, the Company completed the acquisition of the principal assets (approximately $7.7 million, primarily inventories) of Trimark Communities, L.L.C., of Denver, Colorado, for $6.8 million in cash and the assumption of approximately $1.0 million in trade accounts and notes payable associated with the acquired assets. In December, 1996, the Company purchased the principal assets (approximately $19.5 million, primarily inventories) of SGS Communities, Inc., of New Jersey, for $10.6 million in cash and the assumption of $10.1 million in trade accounts and notes payable associated with the acquired assets. In February, 1997, the Company completed the acquisition of all of the outstanding capital stock of the entities comprising the Torrey Group (Torrey) of Atlanta, Georgia, and certain assets of affiliated partnerships, for $37.5 million in cash, 844,444 newly issued shares of the Company's common stock, valued at $9.2 million, and a contingent payment estimated at $1 million. The estimated market value of the assets acquired, less liabilities assumed, amounts to $24.3 million. At July 25, 1997, the determination of the final valuation of the Torrey acquisition had not been completed. Any subsequent adjustments to the beginning balance sheet valuation amounts estimated herein will be recorded in future periods as adjustments to the excess of cost over net assets acquired and amortized over 20 years. The following unaudited pro forma combined financial data give effect to the Torrey acquisition as if it had occurred on the first day of the period. The pro forma information has been prepared utilizing the historical consolidated financial statements of the Company and Torrey. It does not include any adjustments for anticipated cost savings expected to be achieved as a result of the acquisition. The pro forma information should be read in conjunction with the historical financial statements and notes thereto. The pro forma financial information is provided for comparative purposes only and is not necessarily indicative of the results which would have been obtained if the Torrey acquisition had been effected throughout the period. The pro forma financial information is based upon the purchase method of accounting. Nine months ended June 30, 1997 ------------- (In thousands, except for net income per share) Total revenues $633,917 Net income 23,419 Net income per share $0.66 -8- D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) June 30, 1997 NOTE G - SUMMARIZED FINANCIAL INFORMATION The $150,000,000 8 3/8% senior notes payable, due June, 2004, are fully and unconditionally guaranteed, on a joint and several basis, by all of the Company's direct and indirect subsidiaries other than certain inconsequential subsidiaries. Summarized financial information of the Company and its subsidiaries is presented below. Separate financial statements and other disclosures concerning the guarantor subsidiaries are not presented because management has determined that they are not material to investors. As of and for the periods ended: (In thousands) June 30, 1997 - (Unaudited) D.R. Horton Guarantor Nonguarantor Intercompany Inc. Subsidiaries Subsidiaries Eliminations Total ---- ------------ ------------ ------------ ----- Total assets....... $612,306 $435,890 $2,013 ($350,142) $700,067 Total liabilities.. 396,355 402,188 624 (349,057) 450,110 Revenues........... 194,219 359,854 1,070 (1,070) 554,073 Gross profit....... 38,534 61,810 864 (864) 100,344 Net income......... 20,215 37,814 439 (35,218) 23,250 June 30, 1996 - (Unaudited) D.R. Horton Guarantor Nonguarantor Intercompany Inc. Subsidiaries Subsidiaries Eliminations Total ---- ------------ ------------ ------------ ----- Total assets....... $348,255 $169,690 $841 ($128,108) $390,678 Total liabilities.. 196,450 152,791 197 (127,034) 222,404 Revenues........... 187,503 190,890 860 (860) 378,393 Gross profit....... 32,326 35,279 628 (628) 67,605 Net income......... 22,263 38,785 354 (43,431) 17,971 September 30, 1996 D.R. Horton Guarantor Nonguarantor Intercompany Inc. Subsidiaries Subsidiaries Eliminations Total ---- ------------ ------------ ------------ ----- Total assets....... $353,563 $181,586 $1,117 ($133,353) $402,913 Total liabilities.. 197,255 160,019 279 (132,278) 225,275 Revenues........... 269,853 277,483 1,210 (1,210) 547,336 Gross profit....... 47,346 50,936 901 (901) 98,282 Net income......... 30,771 54,368 553 (58,313) 27,379 -9- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following tables set forth certain operating and financial data for the Company: Percentages of Revenue ---------------------- Three Nine Months Ended Months Ended June 30, June 30, -------- -------- 1997 1996 1997 1996 ---- ---- ---- ---- Costs and expenses: Cost of sales 82.3 % 81.9 % 81.9 % 82.1% Selling, general and administrative expense 10.8 9.8 11.0 10.2 Interest expense 0.8 0.2 0.6 0.3 --- --- --- --- Total costs and expenses 93.9 91.9 93.5 92.6 Other (income) (0.3) (0.3) (0.3) (0.2) ---- ---- ---- ---- Income before income taxes 6.4 8.4 6.8 7.6 Income taxes 2.5 3.2 2.6 2.9 --- --- --- --- Net income 3.9 % 5.2 % 4.2 % 4.7 % === === === ===
New sales contracts, net Homes in of cancellations Home closings sales backlog ---------------- ------------- ------------- Three Nine Three Nine Months Ended Months Ended Months Ended Months Ended As of June 30, June 30, June 30, June 30, June 30, -------- -------- -------- -------- -------- 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Mid-Atlantic (New Jersey, North and South Carolina, Maryland, Virginia) 272 127 572 405 280 136 547 407 353 196 Midwest (Illinois, Kansas, Minnesota, Missouri, Ohio) 143 157 372 430 125 131 336 266 220 278 Southeast (Alabama, Florida, Georgia, Tennessee) 450 129 848 385 392 136 763 382 465 193 Southwest (Arizona, New Mexico, Texas) 408 389 1,012 1,019 370 300 973 901 528 535 West (California, Colorado, Nevada, Utah) 344 194 845 484 314 157 687 333 411 232 --- --- --- --- --- --- --- --- --- --- Totals 1,617 996 3,649 2,723 1,481 860 3,306 2,289 1,977 1,434 ===== === ===== ===== ===== === ===== ===== ===== =====
-10- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996 Revenues for the three months ended June 30, 1997, increased by 74.5%, to $250.1 million, from $143.3 million in the comparable period of 1996. The number of homes closed by the Company increased by 72.2%, to 1,481 homes in the three months ended June 30, 1997, from 860 in the same period of 1996. Percentage increases in the number of homes closed ranging from 23.3% to 188.2% were achieved in four of the Company's five market regions, with a 4.6% decline in the Midwest region. The increases in both revenues and homes closed were due in part to Torrey, which was acquired in February, 1997. In the three months ended June 30, 1997, the Torrey Group closed 358 homes, with revenues totalling $53.6 million. Torrey comprised 24.2% of the homes closed in the period, and 21.4% of the revenues generated. Excluding Torrey, revenues increased by 37.2%, to $196.5 million in the three months ended June 30, 1997. The average selling price of homes closed in the three months ended June 30, 1997, was $168,700, an increase of 1.5% over the $166,200 average selling price in the comparable period of 1996. The increase in average selling price was attributable to differences in the geographic mix of markets in which homes were closed. New net sales contracts increased 62.3%, to 1,617 homes for the three months ended June 30, 1997, from 996 homes for the three months ended June 30, 1996. Torrey had 404 home sales contracts during the current period. Excluding Torrey, sales contracts were 1,213 homes in the current three-month period, a 21.8% increase over 1996. The Company was operating in 331 subdivisions at June 30, 1997, compared to 180 subdivisions at June 30, 1996. At June 30, 1997, the Company's backlog of sales contracts was 1,977 homes, a 37.9% increase over comparable figures at June 30, 1996. At June 30, 1997, Torrey had 394 homes in sales backlog. Excluding Torrey, the sales backlog at June 30, 1997, was 1,583 homes, a 10.4% increase over 1996. Cost of sales increased by 75.4%, to $205.9 million in the three months ended June 30, 1997, from $117.4 million in the comparable period of 1996. The increase was primarily attributable to the increase in revenues. As a percentage of revenues, cost of sales for the quarter increased to 82.3% in 1997 from 81.9% in 1996. Selling, general and administrative (SG&A) expense increased by 92.2%, to $27.1 million in the three months ended June 30, 1997, from $14.1 million in the comparable period of 1996. As a percentage of revenues, SG&A expense for the quarter increased 1.0%, to 10.8% in 1997 from 9.8% in 1996. The increase in SG&A expenses as a percentage of revenues was primarily due to costs associated with integrating the three 1997 acquisitions into the Company. Interest expense totalled $1.7 million in the three months ended June 30, 1997, compared to $0.2 million in the comparable period of 1996. The Company follows a policy of capitalizing interest only on inventory under construction or development. During the three months ended June 30, 1997, the Company expensed a larger portion of incurred interest and other financing costs due to increased levels of developed lots and finished homes. Capitalized interest and other financing costs are included in cost of sales at the time of home closings. Other income, which consists mainly of interest income and the pre-tax earnings of the DRH Title Companies and DRH Mortgage Company, Ltd., increased to $754,000 in the three months ended June 30, 1997, from $449,000 in the same period of 1996. The provision for income taxes increased 38.6%, to $6.4 million in the three months ended June 30, 1997, from $4.6 million in the comparable period of 1996, due primarily to the increase in taxable income and an increase in the overall estimated income tax rate anticipated for fiscal 1997. -11- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Nine Months Ended June 30, 1997 Compared to Nine Months Ended June 30, 1996 Revenues for the nine months ended June 30, 1997, increased by 46.4%, to $554.1 million, from $378.4 million in the comparable period of 1996. The number of homes closed by the Company increased by 44.4%, to 3,306 in the nine months ended June 30, 1997, from 2,289 in the same period of 1996. Percentage increases in revenues ranging from 14.8% to 106.3% were achieved in each of the Company's market regions. The increases in both revenues and homes closed were due in part to the acquisition of Torrey in February, 1997. In the nine months ended June 30, 1997, Torrey closed 528 homes, generating $77.7 million in revenues. Torrey comprised 16.0% of the homes closed in the period, and 14.0% of the revenues generated. Excluding Torrey, revenues increased by 25.9%, to $476.4 million in the nine months ended June 30, 1997. The average selling price of homes closed in the nine months ended June 30, 1997, was $167,400, a 1.3% increase over the comparable period of 1996. The increase in average sales price was attributable to differences in the geographic mix of markets in which homes were closed. New net sales contracts increased 34.0%, to 3,649 homes for the nine months ended June 30, 1997, from 2,723 homes for the nine months ended June 30, 1996. Percentage increases in the value of new net sales contracts ranging from 4.0% to 109.3% were achieved in four of the Company's five market regions, with a 12.7% decline in the Midwest region. Torrey had 595 home sales contracts during the current period. Excluding Torrey, new sales contracts were 3,054 homes in the current nine-month period, a 12.2% increase over the comparable period of 1996. Cost of sales increased by 46.0%, to $453.7 million in the nine months ended June 30, 1997, from $310.8 million in the comparable period of 1996. The increase was attributable to the increase in revenues, as the cost of sales as a percentage of revenues decreased to 81.9% in the nine months ended June 30, 1997, from 82.1% in the same period of 1996. Selling, general and administrative (SG&A) expense increased by 57.7%, to $61.0 million in the nine months ended June 30, 1997, from $38.7 million in the comparable period of 1996. As a percentage of revenues, SG&A expense increased to 11.0% for the nine months ended June 30, 1997, from 10.2% for the same period of 1996. The increase in SG&A expense as a percentage of revenues is partially due to the costs associated with integrating the three 1997 acquisitions into the Company. Interest expense during the nine months ended June 30, 1997 amounted to $3.3 million, compared to $1.2 million in the comparable period of 1996. The Company follows a policy of capitalizing interest only on inventory under construction or development. During the nine months ended June 30, 1997, the Company expensed a larger portion of incurred interest and other financing costs due to increased levels of developed lots and finished homes. Capitalized interest and other financing costs are included in cost of sales at the time of home closings. Other income, which consists mainly of interest income and the pre-tax earnings of the DRH Title Companies and DRH Mortgage Company, Ltd., increased to $1,876,000 in the nine months ended June 30, 1997, from $1,046,000 in the same period of 1996. The provision for income taxes increased by 34.9%, to $14.6 million in the nine months ended June 30, 1997, from $10.8 million in the comparable period of 1996, due primarily to the increase in taxable income and an increase in the overall estimated income tax rate anticipated for fiscal 1997. -12- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES At June 30, 1997, the Company had available cash and cash equivalents of $56.4 million. Inventories (including finished homes, construction in progress, and developed residential lots and other land) at June 30, 1997, had increased by $232.7 million since September 30, 1996, due to the acquisitions of the assets (primarily inventories) of Trimark and SGS and the purchase of Torrey. Inventories also increased due to a general increase in business activity and the expansion of operations in the newer market areas. The inventory increase and the acquisitions were financed by borrowing, $40.0 million raised from the public sale of 3.8 million shares of the Company's common stock, the issuance of 0.8 million shares of the Company's common stock as partial consideration for the Torrey acquisition, and $147.4 million net proceeds of a $150 million issuance of public debt. As a result, the Company's ratio of notes payable to total capital at June 30, 1997, increased to 59.0%, from 48.9% at September 30, 1996. The Company's equity to total assets ratio was 35.7% at June 30, 1997, compared to the September 30, 1996 level of 44.1%. In June, 1997, the Company increased and restructured its major unsecured bank credit facility, to $625 million. The restructured facility consists of a $200 million five-year term loan, a $400 million four-year revolving loan, and a $25 million four-year letter of credit facility. The restructured facility, along with another $25 million unsecured bank credit facility, brings the Company's total borrowing capacity from banks to $625 million. In June, 1997, the Company sold to the public under its shelf registration statement $150,000,000 of 8 3/8% Senior Notes due 2004, realizing net proceeds of $147.4 million. At June 30, 1997, the Company had outstanding debt under the unsecured bank facilities, senior notes, and other credit agreements, of $360.2 million, of which $207.5 million represented advances under existing bank credit facilities. Based upon the most restrictive existing debt covenants, at June 30, 1997, the Company had additional borrowing capacity of $129 million. During fiscal 1997, the Company's Board of Directors has declared three quarterly cash dividends of $.02 per common share, the last of which is payable on August 22, 1997, to stockholders of record on August 8, 1997. The Company has made three acquisitions during fiscal 1997. In October, 1996, the Company completed the acquisition of the principal assets (approximately $7.7 million, primarily inventories) of Trimark for $6.8 million in cash and the assumption of approximately $1.0 million in trade accounts and notes payable associated with the acquired assets. In December, 1996, the Company purchased the principal assets (approximately $19.5 million, primarily inventories) of SGS for $10.6 million in cash and the assumption of $10.1 million in trade accounts and notes payable associated with the acquired assets. In February, 1997, the Company completed the acquisition of all the outstanding capital stock of the entities comprising Torrey and purchased assets from affiliated entities. The Company paid consideration consisting of $37.5 million in cash and 844,444 newly issued, restricted shares of the Company's common stock, valued at $9.2 million, and agreed to a contingent payment estimated at $1 million. Estimated market values of the net assets acquired in the Torrey acquisition total $24.3 million. The Company's rapid growth and acquisition strategy require significant amounts of cash. It is anticipated that future home construction, lot and land purchases and acquisitions will be funded through internally generated funds and existing credit facilities. The Company maintains a shelf registration statement for debt securities and common and preferred stock aggregating $100 million. Market conditions will determine when and whether the Company will sell additional securities using this registration statement. Except for ordinary expenditures for the construction of homes, the acquisition of land and lots for development and sale of homes, at June 30, 1996, the Company had no material commitments for capital expenditures. -13- PART II. OTHER INFORMATION. ITEM 2. Changes in Securities. Certain limitations on payment of dividends or other distributions by Registrant on its Common Stock were created in connection with its June 1997 public offering and sale of $150 million aggregate principal amount of 8 3/8% Senior Notes, due 2004 (the "Notes"). As part of that offering the Registrant signed the following documents: (i) Indenture, dated as of June 9, 1997, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to the Notes (the "Indenture"). The Indenture is incorporated herein by reference from Exhibit 4.1(a) to the Registrant's Registration Statement on Form S-3 (Registration No. 333-27521) filed with the Securities and Exchange Commission (the "Commission") on May 21, 1997. (ii) First Supplemental Indenture, dated as of June 9, 1997, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to the Notes (the "Supplemental Indenture"). The Supplemental Indenture, particularly Section 3.03 "Limitations on Restricted Payments," is incorporated herein by reference from Exhibit 4.1 to the Registrant's Form 8-K/A dated April 1, 1997 and filed with the Commission on June 6, 1997. The Indenture, including the Supplemental Indenture, imposes limitations on the ability of the Registrant and its subsidiaries guaranteeing the Notes to, among other things, incur indebtedness, make "Restricted Payments" (as defined, which includes payment of dividends or other distributions on the Common Stock of the Registrant), effect certain "Asset Dispositions" (as defined), enter into certain transactions with affiliates, merge or consolidate with any other person or transfer all or substantially all of their properties and assets. The material set forth in the section captioned "Description of Notes," particularly the portion captioned "Limitations on Restricted Payments" on pages S-22 and S-23, in Registrant's Prospectus Supplement, dated June 4, 1997, filed with the Commission pursuant to Rule 424(b) and incorporated by reference in Registrant's Amendment No. 1 to Form S-3 Registration Statement filed with the Commission on June 2, 1997, is incorporated herein by reference. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 4.1 Indenture, dated as of June 9, 1997, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to the Notes, is incorporated herein by reference from Exhibit 4.1(a) to the Registrant's Registration Statement on Form S-3 filed with the Commission on May 21, 1997. 4.2 First Supplemental Indenture, dated as of June 9, 1997, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to the Notes, is incorporated herein by reference from Exhibit 4.1 to the Registrant's Form 8-K/A dated April 1, 1997 and filed with the Commission on June 6, 1997. 27 Financial Data Schedule. (b) Reports on Form 8-K. The Registrant filed: (i) a Current Report on Form 8-K dated April 1, 1997 (ii) a Current Report on Form 8-K/A dated April 1, 1997 (iii)a Current Report on Form 8-K dated June 12, 1997 -14- 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: August 5, 1997 By David J. Keller, on behalf of D.R. Horton, Inc. and as Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 FDS FOR THIRD QUARTER 10-Q
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets and Consolidated Statements of Income found on pages 3 and 4 of the Company's Form 10-Q for the year-to-date, and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS SEP-30-1997 OCT-01-1996 JUN-30-1997 56,358 0 0 0 577,970 634,328 12,783 0 700,067 89,890 147,402 0 0 372 249,585 700,067 554,073 554,073 453,729 453,729 0 0 3,331 37,881 14,631 23,250 0 0 0 23,250 .66 0
-----END PRIVACY-ENHANCED MESSAGE-----