-----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, Qine7PLUZyDyM2SzUurkcws99njqnzwMLIIYzkkiydVIcF0a+PwkbAwQvp7a0cRC usp1IJpM0VcNLGq1sjcrqA== 0000882184-99-000007.txt : 19990217 0000882184-99-000007.hdr.sgml : 19990217 ACCESSION NUMBER: 0000882184-99-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 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: SEC FILE NUMBER: 001-14122 FILM NUMBER: 99538802 BUSINESS ADDRESS: STREET 1: 1901 ASCENSION BLVD STREET 2: STE 100 CITY: ARLINGTON STATE: TX ZIP: 76006 BUSINESS PHONE: 8178568200 MAIL ADDRESS: STREET 1: 1901 ASCENSION BLVD STREET 2: SUITE 100 CITY: ARLINGTON STATE: TX ZIP: 76006 10-Q 1 FIRST QUARTER 10Q 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 December 31, 1998 ----------------------- 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 1-14122 --------- 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, former address and former 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 -- 64,145,843 shares as of February 10, 1999 ---------- This Report contains 18 pages. -- INDEX D.R. HORTON, INC. PART I. FINANCIAL INFORMATION. Page ---- ITEM 1. Financial Statements. Consolidated Balance Sheets--December 31, 1998 and September 30, 1998. 3 Consolidated Statements of Income--Three Months Ended December 31, 1998 and 1997. 4 Consolidated Statement of Stockholders' Equity--Three Months Ended December 31, 1998. 5 Consolidated Statements of Cash Flows--Three Months Ended December 31, 1998 and 1997. 6 Notes to Consolidated Financial Statements. 7-9 ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. 10-14 PART II. OTHER INFORMATION. ITEM 2. Changes in Securities. 15 ITEM 6. Exhibits and Reports on Form 8-K. 15-17 SIGNATURES. 18 D.R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, September 30, 1998 1998 ------------ -------------- (In thousands) (Unaudited) ASSETS Homebuilding: Cash $93,820 $76,754 Inventories: Finished homes and construction in progress 758,019 717,709 Residential lots - developed and under development 703,528 630,252 Land held for development 5,734 10,072 ---------- ----------- 1,467,281 1,358,033 Property and equipment (net) 29,841 25,456 Earnest money deposits and other assets 74,808 74,827 Excess of cost over net assets acquired (net) 62,044 56,782 ---------- ----------- 1,727,794 1,591,852 ---------- ----------- Financial Services: Mortgage loans held for sale 64,576 72,325 Other assets 3,393 3,658 ---------- ----------- 67,969 75,983 ---------- ----------- $1,795,763 $1,667,835 ========== =========== LIABILITIES Homebuilding: Accounts payable and other liabilities $256,816 $259,005 Notes payable: Unsecured: Revolving credit facility due 2002 535,000 455,000 8 3/8% senior notes due 2004, net 147,853 147,754 10% senior notes due 2006, net 147,187 147,156 6 7/8% convertible subordinated notes due 2002, net - 58,794 Other secured 17,866 17,303 ---------- ----------- 847,906 826,007 ---------- ----------- 1,104,722 1,085,012 Financial Services: Other liabilities 991 1,444 Notes payable to financial institutions 45,435 28,497 ---------- ----------- 46,426 29,941 ---------- ----------- 1,151,148 1,114,953 ---------- ----------- Minority interest 3,534 3,446 ---------- ----------- STOCKHOLDERS' EQUITY Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued - - Common stock, $.01 par value, 200,000,000 shares authorized, 61,484,982 at December 31, 1998 and 55,836,733 at September 30, 1998, issued and outstanding. 615 558 Additional capital 361,708 301,503 Retained earnings 278,758 247,375 ---------- ----------- 641,081 549,436 ---------- ----------- $1,795,763 $1,667,835 ========== =========== See accompanying notes to consolidatedfinancial statements. -3- D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Ended December 31, -------------------------------- 1998 1997 ---------- ---------- (In thousands, except net income per share) (Unaudited) Homebuilding: Revenues Home sales................................ $611,701 $417,836 Land/lot sales............................ 41,127 820 ---------- ---------- 652,828 418,656 ---------- ---------- Cost of sales Home sales................................ 497,375 341,945 Land/lot sales............................ 36,777 592 ---------- ---------- 534,152 342,537 ---------- ---------- Gross profit Home sales................................ 114,326 75,891 Land/lot sales............................ 4,350 228 ---------- ---------- 118,676 76,119 Selling, general and administrative expense... 65,571 45,727 Interest expense.............................. 2,793 2,475 Other (income)................................ (990) (1,043) ---------- ---------- 51,302 28,960 ---------- ---------- Financial Services: Revenues...................................... 7,802 4,541 Selling, general and administrative expense... 4,974 3,297 Interest expense.............................. 743 317 Other (income)................................ (879) (531) ---------- ---------- 2,964 1,458 ---------- ---------- INCOME BEFORE INCOME TAXES................ 54,266 30,418 Provision for income taxes.................... 21,571 12,094 ---------- ---------- NET INCOME................................ $32,695 $18,324 ========== ========== Net income per share: Basic..................................... $0.54 $0.35 Diluted................................... $0.52 $0.31 ========== ========== Weighted average number of shares of stock outstanding: Basic..................................... 60,011 52,779 Diluted................................... 62,378 62,131 ========== ========== 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, 1998 $558 $301,503 $247,375 $549,436 Net income - - 32,695 32,695 Issuance under D.R. Horton, Inc. employee benefit plans (466 shares) - 6 - 6 Exercise of stock options (78,440 shares) 1 928 - 929 Conversion of convertible subordinated notes (5,569,343 shares) 56 59,271 - 59,327 Cash dividends - - (1,312) (1,312) ------------------------------------------- Balances at December 31, 1998 $615 $361,708 $278,758 $641,081 =========================================== See accompanying notes to consolidated financial statements. -5- D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended December 31, ---------------------- 1998 1997 -------- -------- (In thousands) (Unaudited) OPERATING ACTIVITIES Net income $32,695 $18,324 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,836 2,360 Expense associated with issuance of stock under employee benefit plans - 115 Changes in operating assets and liabilities: Increase in inventories (109,248) (65,399) Increase in earnest money deposits and other assets (895) (3,633) Decrease (increase) in mortgage loans held for sale 7,749 (163) Decrease in accounts payable, accrued expenses and customer deposits (626) (14,582) ---------- ---------- NET CASH USED IN OPERATING ACTIVITIES (66,489) (62,978) ---------- ---------- INVESTING ACTIVITIES Net purchase of property and equipment (7,053) (1,157) Net cash paid for acquisitions (6,300) (1,851) ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (13,353) (3,008) ---------- ---------- FINANCING ACTIVITIES Net increase in notes payable 97,285 61,478 Proceeds from issuance of stock associated with certain employee benefit plans 6 - Proceeds from exercise of stock options 929 444 Payment of cash dividends (1,312) (1,090) ---------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 96,908 60,832 ---------- ---------- INCREASE (DECREASE) IN CASH 17,066 (5,154) Cash at beginning of period 76,754 78,228 ---------- ---------- Cash at end of period $93,820 $73,074 ========== ========== Supplemental cash flow information: Interest paid $5,302 $4,369 ========== ========== Income taxes paid $6,031 $13,952 ========== ========== See accompanying notes to consolidated financial statements. -6- D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) December 31, 1998 NOTE A - BASIS OF PRESENTATION The accompanying unaudited, consolidated financial statements include the accounts of 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 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-month period ended December 31, 1998, are not necessarily indicative of the results that may be expected for the year ending September 30, 1999. Business - The Company is a national builder that is engaged primarily in the construction and sale of single-family housing in the United States. The Company designs, builds and sells single-family houses on lots developed by the Company and on finished lots which it purchases, ready for home construction. Periodically, the Company sells land or lots it has developed. The Company also provides title agency and mortgage brokerage services to its homebuyers. NOTE B - NET INCOME PER SHARE Basic net income per share for the three month periods ended December 31, 1998 and 1997, is based on the weighted average number of shares of common stock outstanding. Diluted net income per share 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 December 31, 1998, not significant. The provisions for income tax expense for the three month periods ended December 31, 1998 and 1997, 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 December 31, -------------------------- 1998 1997 ---- ---- Interest costs are (in thousands): Capitalized interest, beginning of period $35,153 $28,952 Interest incurred-homebuilding 15,283 15,049 Interest expensed: Directly-homebuilding (2,793) (2,475) Amortized to cost of sales (14,884) (8,237) ---------- ---------- Capitalized interest, end of period $32,759 $33,289 ========== ========== -7- D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued) December 31, 1998 NOTE E - EVENTS SUBSEQUENT TO QUARTER END On January 28, 1999, the Company acquired the operating assets (primarily inventories) of Cambridge Homes of Chicago. In the transaction, the Company issued 2,555,911 shares of common stock, valued at $55 million, and assumed debt, consisting primarily of notes payable associated with the acquired assets, of approximately $103 million, which was paid with borrowings under our revolving credit facility. The Cambridge acquisition will be treated as a purchase for accounting purposes. At December 31, 1998, Cambridge had a backlog of homes under contract of approximately $88 million (475 homes). On February 4, 1999, the Company issued $385 million, 8% senior notes, due February 1, 2009, and realized net proceeds of $377 million, which was used to repay borrowings under the revolving credit facility. The notes contain covenants similar to those of the 8 3/8% and 10% senior notes, the most significant of which limit the Company's ability to incur additional debt, pay dividends on or repurchase common stock, invest in subsidiaries which are not guarantors of the notes, and enter into certain transactions with affiliates. NOTE F - SUMMARIZED FINANCIAL INFORMATION The 8%, 8 3/8%, 10% senior notes payable are fully and unconditionally guaranteed, on a joint and several basis, by all direct and indirect subsidiaries other than certain inconsequential subsidiaries. Each of the guarantors is a wholly-owned subsidiary. Summarized financial information of the Company and its subsidiaries, including the non-guarantor subsidiaries, is presented below. Additional financial information relating to the non-guarantor financial services subsidiaries is included in the accompanying primary financial statements. 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 period ended: (In thousands)
December 31, 1998 Nonguarantor Subsidiaries D.R. ------------------------- Inter- (Unaudited) Horton, Guarantor Financial company Inc. Subsidiaries Services Other Eliminations Total ---------- ------------ --------- --------- ------------ ---------- Total assets............ $1,276,543 $1,446,602 $67,969 $39,898 ($1,035,249) $1,795,763 Total liabilities....... 931,953 1,091,345 46,426 40,219 (955,261) 1,154,682 Revenues................ 118,894 527,650 7,802 6,284 0 660,630 Gross profit............ 13,197 104,229 0 1,250 0 118,676 Net income.............. 5,174 25,875 1,785 (139) 0 32,695 December 31, 1997 Nonguarantor Subsidiaries D.R. ------------------------- Inter- (Unaudited) Horton, Guarantor Financial company Inc. Subsidiaries Services Other Eliminations Total ---------- ------------ --------- --------- ------------ ---------- Total assets............ $ 663,954 $ 985,624 $36,202 $31,799 ($405,110) $1,312,469 Total liabilities....... 435,648 768,532 24,455 20,897 (382,667) 866,865 Revenues................ 68,336 347,047 4,541 3,273 0 423,197 Gross profit............ 10,490 64,977 0 652 0 76,119 Net income.............. 1,382 16,390 879 (327) 0 18,324 September 30, 1998 Nonguarantor Subsidiaries D.R. ------------------------- Inter- Horton, Guarantor Financial company Inc. Subsidiaries Services Other Eliminations Total ---------- ------------ --------- --------- ------------ ---------- Total assets............ $1,169,347 $1,548,554 $89,097 $30,672 ($1,169,835) $1,667,835 Total liabilities....... 906,014 1,272,398 81,820 19,301 (1,161,134) 1,118,399 Revenues................ 362,847 1,777,833 21,892 14,369 0 2,176,941 Gross profit............ 44,553 342,300 0 2,586 0 389,439 Net income.............. 2,140 88,128 4,418 (1,306) 0 93,380
-8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - CONSOLIDATED D. R. Horton, Inc. and subsidiaries (the "Company") provide homebuilding activities in 24 states and 41 markets through its 53 homebuilding divisions. Through its financial services activities, the Company also provides mortgage banking and title agency services in many of these same markets. Three Months Ended December 31, 1998 Compared to Three Months Ended December 31, 1997 Consolidated revenues for the three months ended December 31, 1998, increased 56.1%, to $660.6 million, from $423.2 million for the comparable period of 1997, primarily due to increases in both home and land/lot sales revenues. Income before income taxes for the three months ended December 31, 1998, increased 78.4%, to $54.3 million, from $30.4 million for the comparable period of 1997. As a percentage of revenues, income before income taxes for the three months ended December 31, 1998, increased 1.0%, to 8.2%, from 7.2% for the comparable period of 1997 primarily due to the overall reduction in selling, general and administrative expenses as a percentage of revenues. The consolidated provision for income taxes increased 78.4%, to $21.6 million for the three months ended December 31, 1998, from $12.1 million for the same period of 1997, due to the corresponding increase in income before income taxes. The effective income tax rate was 39.8% for both periods. RESULTS OF OPERATIONS - HOMEBUILDING The following tables set forth certain operating and financial data for the Company's homebuilding activities: Percentages of Homebuilding Revenues Three Months Ended December 31, 1998 1997 ----------- ----------- Cost and expenses: Cost of sales 81.8 % 81.8 % Selling, general and administrative expense 10.0 10.9 Interest expense 0.5 0.6 ----------- ----------- Total costs and expenses 92.3 93.3 Other (income) (0.2) (0.2) ----------- ----------- Income before income taxes 7.9 % 6.9 % =========== =========== Three Months Ended December 31, 1998 1997 ---------- ----------- Homes Homes Homes Closed Closed Revenues Closed Revenues ------ -------- ------ -------- ($'s in millions) Mid-Atlantic............... 632 $113.4 250 $ 48.0 Midwest.................... 246 46.2 106 20.3 Southeast.................. 595 93.8 513 74.6 Southwest.................. 1,645 218.8 1,498 191.1 West....................... 728 139.5 454 84.2 ------ -------- ------ ------- 3,846 $611.7 2,821 $418.2 ====== ======== ====== ======= -9- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended December 31, 1998 1997 ---------- ----------- Homes Homes New Sales Contracts (net of cancellations) Sold $ Sold $ ------ -------- ------ -------- ($'s in millions) Mid-Atlantic............... 571 $111.6 296 $ 52.6 Midwest.................... 228 45.5 131 24.7 Southeast.................. 545 84.9 558 80.8 Southwest.................. 1,645 229.6 1,274 164.5 West....................... 548 109.1 621 122.5 ------ -------- ------ ------- 3,537 $580.7 2,880 $445.1 ====== ======== ====== ======= December 31, 1998 1997 ---------- ----------- Sales Backlog Homes $ Homes $ ----- ------- ----- ------- ($'s in millions) Mid-Atlantic............... 871 $ 179.1 380 $ 73.5 Midwest.................... 401 79.8 205 40.0 Southeast.................. 683 107.4 742 107.3 Southwest.................. 3,043 434.7 1,803 234.2 West....................... 1,034 220.9 890 181.1 ----- --------- ------ ------- 6,032 $1,021.9 4,020 $ 636.1 ===== ======== ====== ======= - ---------- The Company's market regions consist of the following markets: Mid-Atlantic Baltimore, Charleston, Charlotte, Greensboro, Greenville, Hilton Head, Myrtle Beach, New Jersey, Newport News, Raleigh/Durham, Richmond, Suburban Washington D.C. and Wilmington Midwest Chicago, Cincinnati, Kansas City, Louisville, Minneapolis/St. Paul and St. Louis Southeast Atlanta, Birmingham, Jacksonville, Nashville, Orlando, Pensacola and South Florida Southwest Albuquerque, Austin, Dallas/Fort Worth, Houston, Killeen, Phoenix, San Antonio and Tucson West Denver, Las Vegas, Los Angeles, Portland, Sacramento, Salt Lake City and San Diego Three Months Ended December 31, 1998 Compared to Three Months Ended December 31, 1997 Revenues from homebuilding activities increased 55.9%, to $652.8 million (3,846 homes closed) for the three months ended December 31, 1998, from $418.7 million (2,821 homes closed) for the comparable period of 1997. Increased land/lot sales accounted for 17.2% of the revenue increase. The number of homes closed increased in all of the Company's market regions, with percentage increases ranging from 152.8% in the Mid-Atlantic region to 9.8% in the Southwest region. The increases in both revenues and homes closed were due to strong housing demand, the Company's entrance into new markets, and the increases attributable to the acquisition of C. Richard Dobson Builders, Inc. (February, 1998); Mareli Development & Construction Co. (May, 1998); and RMP Development, Inc. (June, 1998). In markets where the Company operated during both fiscal years, revenues increased by 36.8%, to $572.2 million (3,588 homes closed). The average selling price of homes closed during the three months ended December 31, 1998 was $159,000, up from $148,100 for the same period in 1997. The increase in average selling price was due an increase in the price mix of homes closed and increased selling prices. -10- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS New net sales contracts increased 22.8%, to 3,537 homes for the three months ended December 31, 1998, from 2,880 for the same period of 1997. Percentage increases in new net sales contracts ranging from 92.9% to 29.1% were achieved in three of the Company's five market regions, while the Southeast and West declined 2.3% and 11.8%, respectively. The overall increase in new net sales contracts was due in part to sales achieved by the 1998 acquisitions, while new net sales contracts increased 12.2%, to 3,230 homes in markets where the Company operated in both periods. The average amount of new net sales contracts in the three months ended December 31, 1998 was $164,200, up 6.2% over the $154,600 average in the three months ended December 31, 1997. This increase was due to an increase in the price mix of homes sold and increased selling prices. The Company was operating in 595 subdivisions at December 31, 1998, compared to 390 at December 31, 1997. At December 31, 1998, the Company's backlog of sales contracts was $1,021.9 million (6,032 homes), up 60.6% from the comparable amount at December 31, 1997. In markets where the Company operated during both quarters, the sales contract backlog was $977.9 million (5,756 homes), up 53.7% from December 31, 1997. The average sales price of homes in sales backlog was $169,400 at December 31, 1998, up 7.1% from the $158,200 average at December 31, 1997. The average sales price of homes in backlog typically is higher than the sales price of closed homes because it takes longer to construct more expensive homes. Cost of sales increased by 55.9%, to $534.2 million for the three months ended December 31, 1998, from $342.5 million for the comparable quarter in 1997. The increase in cost of sales was primarily attributable to the increase in revenues. Cost of home sales as a percentage of home sales revenues was down 0.5% to 81.3% for the three months ended December 31, 1998 from 81.8% for the comparable period of 1997. Cost of land/lot sales increased to 89.4% of land/lot sales revenues for the three months ended December 31, 1998 from 72.2% for the comparable period of 1997. Total homebuilding cost of sales was 81.8% of total homebuilding revenues in both periods. Selling, general and administrative (SG&A) expenses from homebuilding activities increased by 43.4%, to $65.6 million in the three months ended December 31, 1998 from $45.7 million in the comparable period of 1997. As a percentage of revenues, SG&A expenses decreased to 10.0% for the three months ended December 31, 1998 from 10.9% for the comparable period of 1997. The decrease in SG&A expenses as a percentage of revenue is primarily due to the Company's cost containment efforts and the increased revenues that absorb the fixed elements of overhead. Included in SG&A expenses for the three months ended December 31, 1998 is a $4.4 million charge for severance benefits associated with former Continental executives. Interest expense associated with homebuilding activities increased to $2.8 million in the three months ended December 31, 1998, from $2.5 million in the comparable period of 1997. As a percentage of homebuilding revenues, homebuilding interest expense decreased to 0.5% in the three months ended December 31, 1998 from 0.6% in the comparable period of 1997 due to average inventory increasing at a greater rate than average interest-bearing debt. The Company follows a policy of capitalizing interest only on inventory under construction or development. During both periods, the Company expensed the portion of incurred interest and other financing costs which could not be charged to inventory. Capitalized interest and other financing costs are included in cost of sales at the time of home closings. -11- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - FINANCIAL SERVICES The following table summarizes financial and other information for the Company's financial services operations: Three months ended December 31, 1998 1997 ------- ------- Number of loans originated........................ 1,757 1,173 ------- ------- Loan acquisition fees............................. $1,742 $1,326 Sale of servicing and marketing gains............. 3,939 2,021 Other revenues.................................... 805 355 ------- ------- Total mortgage banking revenues................... 6,486 3,702 Title policy premiums, net........................ 1,316 839 ------- ------- Total financial services revenues................. 7,802 4,541 General and administrative expenses............... 4,974 3,297 Interest expense.................................. 743 317 Interest/other (income)........................... (879) (531) ------- ------- Income before income taxes........................ $2,964 $1,458 ======= ======= Three Months Ended December 31, 1998 Compared to Three Months Ended December 31, 1997 Revenues from financial services operations increased 71.8%, to $7.8 million in the three months ended December 31, 1998, from $4.5 million in the comparable period of 1997. The increase in financial services revenues was due to the rapid expansion of the Company's mortgage loan and title services provided to the Company's homebuilding customers. These activities are being expanded to additional markets served by the homebuilding operations. SG&A expenses associated with financial services increased 50.9%, to $5.0 million in the three months ended December 31, 1998, from $3.3 million in the comparable period of 1997. As a percentage of financial services revenues, SG&A expenses decreased by 8.8%, to 63.8% in the three months ended December 31, 1998, from 72.6% in the comparable period in 1997, due primarily to 1997 startup expenses for new markets with limited revenues in the 1997 period. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES At December 31, 1998, the Company had available cash and cash equivalents of $93.8 million. Inventories (including finished homes, construction in progress, and developed residential lots and other land) at December 31, 1998, had increased by $109.2 million since September 30, 1998, due to a general increase in business activity and the expansion of operations in the Company's market areas. The inventory increase was financed largely by borrowing an additional $80 million under the revolving credit facility and retained earnings. The increased borrowing was partially offset by the conversion of $58.8 million of 6 7/8% convertible subordinated notes to common stock. As a result, the Company's ratio of notes payable to total capital at December 31, 1998, was 58.2%, a decrease of 2.7% over the September 30, 1998 level of 60.9%. The stockholders' equity to total assets ratio increased to 35.7% at December 31, 1998, from 32.9% at September 30, 1998. During the quarter, the Company's Board of Directors declared a cash dividend of $.0225 per common share, which was paid on October 23, 1998, to stockholders of record on October 16, 1998. -12- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company has an $825 million, unsecured revolving credit facility, consisting of a $775 million four-year revolving loan and a $50 million four-year letter of credit facility that matures in 2003. At December 31, 1998, the Company had outstanding debt of $893.3 million, of which $535.0 million represented advances under the revolving credit facility. Under the debt covenants associated with the revolving credit facility, at December 31, 1998, the Company had additional borrowing capacity of $266.6 million. The Company has entered into multi-year interest rate swap agreements, aggregating $300 million, that fix the interest rate on a portion of the variable rate revolving credit facility. The mortgage company operations have a $75 million, one-year bank warehouse facility that is secured by mortgage loans held for sale. The warehouse facility is not guaranteed by the parent company. As of December 31, 1998, $45.4 million had been drawn under this facility with additional financing needs provided by the Company. In the future, it is anticipated that all mortgage company activities will be financed under the warehouse facility. On January 28, 1999, the Company acquired the operating assets of Cambridge Properties, a partnership doing business as Cambridge Homes. In the transaction, the Company issued 2,555,911 shares of our common stock under our shelf registration statement, and assumed debt of approximately $103 million, which was repaid with borrowings under our revolving credit facility. 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 new and existing credit facilities. Additionally, an effective shelf registration contains about 7.4 million shares of common stock issuable to effect, in whole or in part, possible future acquisitions. On February 4, 1999, under an existing shelf registration statement, the Company issued $385 million aggregate principal amount of 8% Senior Notes, due 2009. The proceeds of the notes were used to repay outstanding debt under our revolving credit facility and for general corporate purposes. In the future, the company intends to maintain effective shelf registration statements that would facilitate access to the capital markets. In November, 1998, the Company's Board of Directors approved stock and debt repurchase programs for up to $100 million each. These programs were intended to allow the Company to take advantage of favorable market conditions, should they occur. Except for ordinary expenditures for the construction of homes, the acquisition of land and lots for development and sale of homes, at September 30, 1998, the Company had no material commitments for capital expenditures. YEAR 2000 The "Year 2000" issue (Y2K) refers to potential complications that may be caused by computer hardware and software that were not designed for the change in the century. If not corrected, such computer hardware and software may cause management information systems to fail or miscalculate data. The Company has assessed (and continues to assess) its vulnerability to Y2K. Modifications and replacements of computer hardware and software to prepare for Y2K are ongoing. The Company has assessed and tested its principal homebuilding hardware and management information system and believes them to be Y2K compliant. Evaluation, modification and testing of non-principal homebuilder hardware and management information systems are in process and such systems are expected to be converted to the principal management information system or Y2K modifications are expected to be completed by June, 1999, at a cost of less than one million dollars. Management information systems for the Company's financial services activities also are being evaluated and will require modifications or upgraded software packages that are expected to be completed by June, 1999, at minimal cost. -13- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As part of a program on continuous technology updates, for the past several years, the Company has upgraded personal computers in its locations and this process will continue. As this occurs during 1999, personal computers at each company location will be tested for Y2K compliance. These personal computer upgrades are considered to be ongoing and are not considered to be specifically Y2K related. The Company expects to incur costs to replace or repair such equipment, but has not presently determined the amount of these costs. The Company is presently evaluating other potential Y2K issues, including non-management information systems. A Y2K coordinator is directing the Company's overall effort to address these issues. As part of these reviews, the Company's relationships with payroll service providers, vendors, contractors, financial institutions and other third parties will be reviewed to determine the impact, if any, Y2K will have on these relationships. The Company expects to incur Y2K specific costs in the future, but does not anticipate that these costs will be material. It is possible that the Company could encounter disruptions to its business that could have a material adverse effect on its results of operations if all systems are not Y2K compliant. Also, the Company could be materially impacted by widespread economic or financial market disruptions or by Y2K computer system failures at government agencies on which the Company is dependent for utilities, zoning, building permits and related matters. There can be no assurance that Y2K will not adversely affect the Company and its operations. A formal Y2K contingency plan has not been prepared at this time due to alternatives available to the Company. For example, non-principal homebuilding management information systems could be converted to the principal homebuilding system before Y2K becomes an issue. SAFE HARBOR STATEMENT Certain statements contained herein, as well as statements made by the Company in periodic press releases and oral statements made by the Company's officials to analysts and stockholders in the course of presentations about the Company may be construed as "Forward-Looking Statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements may involve unstated risks, uncertainties and other factors that may cause actual results to differ materially from those initially anticipated. Such risks, uncertainties and other factors include, but are not limited to, the Company's substantial leverage, changes in general economic and market conditions, changes in interest rates and the availability of mortgage financing, changes in costs and availability of material, supplies and labor, general competitive conditions, the availability of capital and the ability to successfully effect acquisitions. -14- PART II. OTHER INFORMATION ITEM 2. Changes in Securities. Certain new indebtedness and limitations on payment of dividends or other distributions by the Company on its Common Stock were created in connection with its February 4, 1999 offering and issuance of $385 million principal amount of 8% Senior Notes, due 2009 (the "Notes"). As part of that issuance, the Company executed a Sixth Supplemental Indenture, dated as of February 4, 1999, among the Company, the Guarantors named therein and American Stock Transfer & Trust Company, as Trustee, authorizing the Notes. The Supplemental Indenture, and the Indenture to which it relates (dated June 9, 1997, among the Company, the Guarantors named therein and American Stock Transfer & Trust Company, as Trustee), impose limitations on the ability of the Company and its subsidiaries guaranteeing the Notes to, among other things, incur indebtedness, make "Restricted Payments" (as defined, which includes payments of dividends or other distributions on the Common Stock of the Company), effect certain "Asset Dispositions" (as defined), enter into certain transactions with affiliates, merge or consolidate with any person, or transfer all or substantially all of their properties and assets. These limitations are similar to limitations already existing by reason of the Company's 8-3/8% Senior Notes, due 2004, 10% Senior Notes, due 2006, and the related Indentures and Supplemental Indentures. Other information concerning the offering and issuance of the Notes has previously been reported in, and is described in, Amendment No. 1 to the Company's Registration Statement on Form S-3 (Registration Number 333-57193) dated June 30, 1998, the Company's Prospectus Supplement, dated February 1, 1999 and filed with the Securities Exchange Commission (the "Commission") on February 2, 1999 pursuant to Rule 424(b), and the Company's current report on Form 8-K, dated February 2, 1999 and filed with the Commission on February 2, 1999, each of which is incorporated herein by reference. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 3.1* Amended and Restated Bylaws. 4.1 Indenture, dated as of June 9, 1997, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to Senior Debt Securities, is incorporated herein by reference from Exhibit 4.1(a) to the Company's Registration Statement on Form S-3 (Registration No. 333-27521), filed with the Commission on May 21, 1997. 4.2 First Supplemental Indenture, dated as of June 9, 1997, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, is incorporated by reference from Exhibit 4.1 to the Company's Form 8- K/A, dated April 1, 1997, filed with the Commission on June 6, 1997. 4.3 Second Supplemental Indenture, dated as of September 30, 1997, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, is incorporated by reference from Exhibit 4.4 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997, filed with the Commission on December 8, 1997. 4.4 Third Supplemental Indenture, dated as of April 17, 1998, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, is incorporated by reference from Exhibit 4.3 to the Company's Quarterly -15- Report on Form 10-Q for the quarter ended March 31, 1998, filed with Commission on May 14, 1998. 4.5 Fourth Supplemental Indenture, dated as of April 20, 1998, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, is incorporated by reference from Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, filed with Commission on May 14, 1998. 4.6 Fifth Supplemental Indenture, dated as of August 31, 1998, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, is incorporated herein by reference from Exhibit 4.7 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1998, filed with the Commission on December 10, 1998. 4.7 Sixth Supplemental Indenture, dated as of February 4, 1999, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to the 8% Senior Notes due 2009, including the form of the Company's 8% Senior Notes due 2009, is incorporated herein by reference from Exhibit 4.1 to the Company's Form 8-K, filed with the Commission on February 2, 1999. 4.8 Indenture dated as of April 15, 1996 between Continental Homes Holding Corp. ("Continental") and First Union National Bank, as Trustee, is incorporated herein by reference from Exhibit 4.1 to Continental's Annual Report on Form 10-K for the year ended May 31, 1996. The Commission file number for Continental is 1- 10700. 4.9 First Supplemental Indenture, dated as of April 20, 1998, among the Company, the guarantors named therein and First Union National Bank, as Trustee, is incorporated by reference from Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, filed with the Commission on May 14, 1998. 4.10 Second Supplemental Indenture, dated as of August 31, 1998, among the Company, the guarantors named therein and First Union National Bank, as Trustee, is incorporated herein by reference from Exhibit 4.10 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1998, filed with the Commission on December 10, 1998. 4.11 Master Loan and Inter-Creditor Agreement dated as of April 21, 1998, among D.R. Horton, Inc., as a Borrower; Nationsbank, N.A., Bank of America National Trust and Savings Association, Fleet National Bank, Bank United, Comerica Bank, Credit Lyonnais New York Branch, Societe Generale, Southwest Agency, The First National Bank of Chicago, PNC Bank, National Association, Amsouth Bank, Bank One, Arizona, NA, First American Bank Texas, SSB, Harris Trust and Savings Bank, Sanwa Bank California, Norwest Bank Arizona, National Association and Summit Bank, as Banks; and Nationsbank, N.A., as Administrative Agent, is incorporated by reference from Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, filed with the Commission on August 6, 1998. Sixth Supplemental Indenture, dated as of February 4, 1999, among the Company, the guarantors named therein and American Stock Transfer -16- and Trust Company, as Trustee, relating to the Company's 8% Senior Notes, due 2009, is incorporated herein by reference from Exhibit 4.1 to the Company's Form 8-K dated February 2, 1999, and filed with the Commission on that date. -------- *Filed herewith. (b) The following report was filed on Form 8-K by the Company during the quarter ended December 31, 1998. 1. On November 3, 1998, the Company filed a Current Report on Form 8-K, dated November 1, 1998 (Item 5), in which it reported that all but $6,000 principal amount of the 6-7/8% Convertible Subordinated Notes due 2002 had been converted into Common Stock of the Company and that the remaining $6,000 principal amount of these notes had been redeemed. -17- 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: February 12, 1999 By /s/ David J. Keller ----------------------------------------------- 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) -18- EX-3.1 2 AMENDED AND RESTATED BYLAWS EXHIBIT 3.1 D.R. HORTON, INC. AMENDED AND RESTATED BYLAWS D.R. HORTON, INC. AMENDED AND RESTATED BYLAWS Table of Contents Page ARTICLE I - MEETING OF STOCKHOLDERS Section 1. Time and Place of Meetings................................1 Section 2. Annual Meeting............................................1 Section 3. Special Meetings..........................................2 Section 4. Notice of Meetings........................................2 Section 5. Quorum....................................................2 Section 6. Voting....................................................2 ARTICLE II - DIRECTORS Section 1. Powers....................................................3 Section 2. Number and Term of Office.................................3 Section 3. Election, Term of Office and Nomination...................3 Section 4. Vacancies and New Directorships...........................4 Section 5. Regular Meetings..........................................4 Section 6. Special Meetings..........................................4 Section 7. Quorum....................................................4 Section 8. Written Action............................................4 Section 9. Participation in Meetings by Conference Telephone.........5 Section 10. Committees................................................5 Section 11. Compensation..............................................5 Section 12. Rules.....................................................5 ARTICLE III - NOTICES Section 1. Generally.................................................5 Section 2. Waivers...................................................6 ARTICLE IV - OFFICERS Section 1. Generally.................................................6 Section 2. Compensation..............................................6 Section 3. Term......................................................6 Section 4. Authority and Duties......................................6 Section 5. Chairman..................................................7 Section 6. Vice Chairmen.............................................7 (i) Table of Contents Page Section 7. President.................................................7 Section 8. Chief Executive Officer...................................7 Section 9. Executive Vice Presidents.................................7 Section 10. Execution of Documents and Action with Respect to Securities of Other Corporations..........................7 Section 11. Other Vice Presidents.....................................8 Section 12. Secretary and Assistant Secretaries.......................8 Section 13. Treasurer and Assistant Treasurers........................8 Section 14. Chief Financial Officer...................................9 Section 15. General Counsel...........................................9 ARTICLE V - STOCK Section 1. Certificates..............................................9 Section 2. Transfer..................................................9 Section 3. Lost, Stolen or Destroyed Certificates....................9 Section 4. Record Date..............................................10 ARTICLE VI - GENERAL PROVISIONS Section 1. Fiscal Year..............................................11 Section 2. Corporate Seal...........................................11 Section 3. Reliance upon Books, Reports and Records.................11 Section 4. Time Periods.............................................11 Section 5. Dividends................................................11 ARTICLE VII - AMENDMENTS Section 1. Amendments...............................................11 (ii) D.R. HORTON, INC. AMENDED AND RESTATED BYLAWS ARTICLE I MEETINGS OF STOCKHOLDERS Section 1. Time and Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, within or without the State of Delaware, as may be designated by the Board of Directors, or by the Chairman of the Board, a Vice Chairman, the President or the Secretary in the absence of a designation by the Board of Directors, and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meeting. (A) An annual meeting of the stockholders, commencing with the year 1992, shall be held at such date, place and time as shall be designated from time to time by resolution of the Board of Directors, at which meeting the stockholders shall elect by a plurality vote the directors to succeed those whose terms expire and shall transact such other business as may properly be brought before the meeting. (B) At any annual meeting of stockholders, only such new business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before the meeting (i) by, or at the direction of, the Board of Directors or (ii) by any stockholder entitled to vote at such meeting. Only such new business and only such proposals as have been raised in accordance with the procedures set forth in this Section 2(B) shall be eligible for action or consideration at an annual meeting. In order for a proposal to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation as set forth in this Section 2(B). To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive office of the corporation not less than thirty (30) calendar days prior to the date of the originally scheduled meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that, if less than forty (40) calendar days' notice or prior public disclosure of the date of the scheduled meeting is given or made by the Corporation, notice by the stockholder to be timely must be so received not later than the close of business on the tenth calendar day following the earlier of the day on which such notice of the date of the scheduled meeting was mailed or the day on which such public disclosure was made. Such stockholder's notice shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a description of the proposal desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation beneficially owned by such stockholder on the date of such stockholder's notice and (d) any financial or other interest of such stockholder in the proposal. Section 3. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by law or by the Restated Certificate of Incorporation, as amended or further restated from time to time, may be called at any time by the Board of Directors or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors or in these bylaws, include the power to call such meetings, but such special meetings may not be called by any other person or persons. Section 4. Notice of Meetings. Written notice of every meeting of the stockholders, stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting, except as otherwise provided herein or by law. When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 5. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by law or by the Restated Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. Section 6. Voting. Except as otherwise provided by law or by the Restated Certificate of Incorporation, each stockholder shall be entitled at every meeting of the stockholders to one vote for each share of stock having voting power standing in the name of such stockholder on the books of the Corporation on the record date for the meeting and such votes may be cast either in person or by written proxy. Every proxy must be duly executed and filed with the Secretary of the Corporation. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Every vote taken by written ballot shall be counted by one or more inspectors of election appointed by the Board of Directors. When a quorum is present at any meeting, the vote of the holders of a majority of the stock which has voting power present in person or represented by proxy shall decide any question properly brought before such meeting, unless the question is one upon which by express provision of law, the (2) Restated Certificate of Incorporation or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. ARTICLE II DIRECTORS Section 1. Powers. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Restated Certificate of Incorporation directed or required to be exercised or done by the stockholders. Section 2. Number and Term of Office. The Board of Directors shall consist of one or more members. Subject to the provisions of the Restated Certificate of Incorporation as amended or restated from time to time, the number of directors shall be fixed by resolution of the Board of Directors or by the stockholders at the annual meeting or a special meeting. Any decrease in the authorized number of directors shall not be effective until the expiration of the term of the directors then in office, unless, at the time of such decrease, there shall be vacancies on the Board which are being eliminated by such decrease. Section 3. Election, Term of Office and Nomination. (A) Except as provided in Section 4 of this Article, the directors shall be elected at each annual meeting of stockholders, but if any such annual meeting is not held or the directors are not elected thereat, then the directors may be elected at any special meeting of stockholders held for that purpose. Each director shall hold office until a successor has been elected and qualified. (B) Only persons who are nominated in accordance with the following procedures shall be eligible for election by the stockholders as directors. Nominations of persons for election as directors of the Corporation may be made at a meeting of stockholders at which directors are being elected (i) by, or at the direction of, the Board of Directors or by, or at the direction of, any committee or person authorized or appointed for that purpose by the Board of Directors or (ii) by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 3(B). Any nomination other than those governed by clause (i) of the preceding sentence shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal executive office of the Corporation not less than thirty (30) calendar days prior to the date of the originally scheduled meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that, if less than forty (40) calendar days' notice or prior public disclosure of the date of the scheduled meeting is given or made by the Corporation, notice by the stockholder, to be timely, must be so received not later than the close of business on the tenth calendar day following the earlier of the day on which such notice of the date of the scheduled meeting was mailed or the day on which such public disclosure was made. Such stockholder's notice to the Secretary (3) shall set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of any shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations for proxies for election of directors pursuant to any then existing rule or regulation promulgated under the Securities Exchange Act of 1934, as amended (whether or not then applicable to the Corporation); and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee as a director. No person shall be eligible for election as a director unless nominated as set forth herein. Section 4. Vacancies and New Directorships. Vacancies and newly created directorships resulting from any increase in the authorized number of directors which occur between annual meetings of the stockholders may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so elected shall hold office until the next annual meeting of the stockholders and until their successors are elected and qualified, except as required by law. Section 5. Regular Meetings. Regular meetings of the Board of Directors may be held without notice immediately after the annual meeting of the stockholders and at such other time and place as shall from time to time be determined by the Board of Directors. Section 6. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, a Vice Chairman or the President on one day's written notice to each director by whom such notice is not waived, given either personally or by mail or telegram, and shall be called by the President or the Secretary in like manner and on like notice on the written request of any two directors. Section 7. Quorum. At all meetings of the Board of Directors, a majority of the total number of directors then in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time to another place, time or date, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Written Action. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes or proceedings of the Board or Committee. (4) Section 9. Participation in Meetings by Conference Telephone. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any such committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 10. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation and each to have such lawfully delegable powers and duties as the Board may confer. Each such committee shall serve at the pleasure of the Board of Directors. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Except as otherwise provided by law, any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Any committee or committees so designated by the Board shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Unless otherwise prescribed by the Board of Directors, a majority of the members of the committee shall constitute a quorum for the transaction of business, and the act of a majority of the members present at a meeting at which there is a quorum shall be the act of such committee. Each committee shall prescribe its own rules for calling and holding meetings and its method of procedure, subject to any rules prescribed by the Board of Directors, and shall keep a written record of all actions taken by it. Section 11. Compensation. The Board of Directors may establish such compensation for, and reimbursement of the expenses of, directors for attendance at meetings of the Board of Directors or committees, or for other services by directors to the Corporation, as the Board of Directors may determine. Section 12. Rules. The Board of Directors may adopt such special rules and regulations for the conduct of their meetings and the management of the affairs of the Corporation as they may deem proper, not inconsistent with law or these bylaws. ARTICLE III NOTICES Section 1. Generally. Whenever by law or under the provisions of the Restated Certificate of Incorporation or these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the (5) Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, telephone or facsimile transmission. Section 2. Waivers. Whenever any notice is required to be given by law or under the provisions of the Restated Certificate of Incorporation or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE IV OFFICERS Section 1. Generally. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a President, a Secretary, and a Treasurer. The Board of Directors may also choose any or all of the following: a Chairman of the Board, one or more Vice Chairmen, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents, a Chief Financial Officer, a General Counsel, a Controller, one or more Assistant Secretaries and Assistant Treasurers and such other officers as the Board of Directors shall deem necessary or desirable in the conduct of the affairs of the Company, with such designations, titles, duties and responsibilities as are set forth in these bylaws, or as the Board of Directors shall determine. Section 2. Compensation. The compensation of all officers and agents of the Corporation who are designated executive officers by the Board of Directors shall be fixed by the Board of Directors. The Board of Directors may delegate the power to fix the compensation of some or all of the other officers and agents of the Corporation to a committee of the Board, or may delegate that power to any officer of the Corporation in respect of some or all of the other officers under his or her supervision. Section 3. Term. The officers of the Corporation shall hold office until their successors are elected and qualified. Any officer may be removed at any time by the affirmative vote of a majority of the directors. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. Section 4. Authority and Duties. Each of the officers of the Corporation shall have such authority and shall perform such duties as are stated in these bylaws and as may be stated from time to time by the Board of Directors, or a duly authorized committee of the Board, in a resolution which is (6) not inconsistent with these bylaws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board of Directors. Section 5. Chairman. The Chairman of the Board of Directors, if one be chosen, shall be a member of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and of the Board of Directors, and he shall have such other authority and shall perform such other duties as may be established in accordance with Section 4 of this Article. The Chairman may delegate to any qualified person authority to chair any meeting of the stockholders, either on a temporary or a permanent basis. Section 6. Vice Chairmen. The Vice Chairmen, if one or more be chosen, shall be members the Board of Directors. In case no Chairman of the Board is chosen, or of the inability or failure of the Chairman to perform the duties of that office, the Vice Chairmen in order of their seniority shall perform the duties of Chairman. In addition, the Vice Chairmen shall have such authority and shall perform such duties as may be established in accordance with Section 4 of this Article. Section 7. President. The President shall be a member of the Board of Directors. In case no Chairman of the Board or Vice Chairman is chosen, or of the inability or failure of the Chairman or any Vice Chairman to perform the duties of Chairman, the President shall perform the duties of the Chairman. In addition, the President shall have such authority and shall perform such duties as may be established in accordance with Section 4 of this Article. Section 8. Chief Executive Officer. The officer who is designated the Chief Executive Officer shall be responsible for the active management and direction of the business and the affairs of the Corporation. In addition, the Chief Executive Officer shall have such authority and shall perform such duties as may be established in accordance with Section 4 of this Article. Section 9. Executive Vice Presidents. The Executive Vice Presidents, if one or more be chosen, shall have such authority and shall perform such duties as may be established in accordance with Section 4 of this Article. Section 10. Execution of Documents and Action with Respect to Securities of Other Corporations. The Chairman, the Chief Executive Officer, any Vice Chairman, the President and any Executive Vice President shall have and each is hereby given, full power and authority, except as otherwise required by law or directed by the Board of Directors, (a) to execute, on behalf of the Corporation, all duly authorized contracts, agreements, deeds, conveyances or other obligations of the Corporation, applications, consents, proxies and other powers of attorney, and other documents and instruments, and (b) to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders (or with respect to any action of such stockholders) of any other corporation in which the Corporation may hold securities and otherwise to exercise any and all rights and powers which the Corporation may possess by (7) reason of its ownership of securities of such other corporation. In addition, each of such officers may delegate to other officers, employees and agents of the Corporation the power and authority to take any respective action which he or she is authorized to take under this Section 10, with such limitations as he or she may specify; such authority so delegated shall not be re-delegated by the person to whom such execution authority has been delegated. Section 11. Other Vice Presidents. Each Vice President other than an Executive Vice President, however titled, shall perform such duties and services and shall have such authority and responsibilities as are set forth in these bylaws or as shall be assigned or required from time to time by the Board of Directors, the Chairman, the Chief Executive Officer, a Vice Chairman, or the President, or by the Executive Vice President or the Senior Vice President to whom such Vice President reports. Section 12. Secretary and Assistant Secretaries. (A) The Secretary shall attend all meetings of the stockholders and all meetings of the Board of Directors and record all proceedings of the meetings of the stockholders and of the Board of Directors and shall perform like duties for the standing committees when requested by the Board of Directors, the Chairman, the Chief Executive Officer, a Vice Chairman, the President or an Executive Vice President. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and meetings of the Board of Directors. The Secretary shall have charge of the seal of the Corporation and authority to affix the seal to any instrument. The Secretary or any Assistant Secretary may attest to the corporate seal by handwritten or facsimile signature. The Secretary shall keep and account for all books, documents, papers and records of the Corporation except those for which some other officer or agent has been designated or is otherwise properly accountable. The Secretary shall have authority to sign stock certificates. In addition, the Secretary shall have such authority and shall perform such duties as may be established in accordance with Section 4 of this Article. (B) Assistant Secretaries, in the order of their seniority, shall assist the Secretary and, if the Secretary is unavailable or fails to act, perform the duties and exercise the authority of the Secretary. Section 13. Treasurer and Assistant Treasurers. (A) The Treasurer shall have the custody of the funds and securities belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Treasurer with the prior approval of the Board of Directors, the Chairman, the Chief Executive Officer or the President. The Treasurer shall disburse the funds and pledge the credit of the Corporation as may be directed by the Board of Directors and shall render to the Board of Directors, the Chairman, the Chief Executive Officer or the President, as and when required by them, or any of them, an account of all transactions by the Treasurer. (B) Assistant Treasurers, in the order of their seniority, shall assist the Treasurer and, if the Treasurer is unable or fails to act, perform the duties and exercise the powers of the Treasurer. (8) Section 14. Chief Financial Officer. The Chief Financial Officer shall be the chief accounting officer of the Corporation. The Chief Financial Officer shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation in accordance with accepted accounting methods and procedures. The Chief Financial Officer shall initiate periodic audits of the accounting records, methods and systems of the Corporation. The Chief Financial Officer shall render to the Board of Directors, the Chairman, the Chief Executive Officer or the President, as and when required by them, or any of them, a statement of the financial condition of the Corporation. In case no Chief Financial Officer is chosen, or of the inability of failure of the Chief Financial Officer to perform the duties of that office, the Treasurer shall perform the duties of the Chief Financial Officer. Section 15. General Counsel. The General Counsel shall be the chief legal officer of the Corporation. The General Counsel shall provide legal counsel and advice to the Board of Directors and to the officers with respect to compliance with applicable laws and regulations. The General Counsel shall also provide or obtain legal representation of the Corporation in proceedings by or against the Corporation. The General Counsel shall render to the Board of Directors, the Chairman, the Chief Executive Officer, the President or an Executive Vice President, as and when required by them, or any of them, a report on the status of claims against, and pending litigation of, the Corporation. ARTICLE V STOCK Section 1. Certificates. Certificates representing shares of stock of the Corporation shall be in such form as shall be determined by the Board of Directors, subject to applicable legal requirements. Such certificates shall be numbered and their issuance recorded in the books of the Corporation, and such certificate shall exhibit the holder's name and the number of shares and shall be signed by, or in the name of the Corporation by the Chairman of the Board or the President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation and shall bear the corporate seal. Any or all of the signatures and the seal of the Corporation, if any, upon such certificates may be facsimiles, engraved or printed. Section 2. Transfer. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue, or to cause its transfer agent to issue, a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 3. Lost, Stolen or Destroyed Certificates. The Secretary may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact, satisfactory to the Secretary, by the person claiming the certificate of (9) stock to be lost, stolen or destroyed. As a condition precedent to the issuance of a new certificate or certificates the Secretary may require the owner of such lost, stolen or destroyed certificate or certificates to give the Corporation a bond in such sum and with such surety or sureties as the Secretary may direct as indemnity against any claims that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of the new certificate. Section 4. Record Date. (A) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (B) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which resolution fixing the record date is adopted by the Board of Directors and which date shall not be more than ten days which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (C) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such (10) action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. ARTICLE VI GENERAL PROVISIONS Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed from time to time by the Board of Directors. Section 2. Corporate Seal. The Board of Directors may adopt a corporate seal and use the same by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 3. Reliance upon Books, Reports and Records. Each director, each member of a committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person as to matters the director, committee member or officer believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. Section 4. Time Periods. In applying any provision of these bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded and the day of the event shall be included. Section 5. Dividends. The Board of Directors may from time to time declare and the Corporation may pay dividends upon its outstanding shares of capital stock, in the manner and upon the terms and conditions provided by law and the Restated Certificate of Incorporation. ARTICLE VII AMENDMENTS Section 1. Amendments. These bylaws may be altered, amended or repealed, or new bylaws may be adopted, by the stockholders or by the Board of Directors; provided, however, that the stockholders may not alter, amend or repeal the provisions of Section 2 of Article I or Sections 2 or 3 of Article II of these Bylaws or this Section 1 of this Article VII except upon the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the total voting power of all outstanding shares of voting stock of the Corporation. (11) EX-27 3 FDS FOR D.R. HORTON, INC.
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 3-MOS SEP-30-1999 OCT-01-1998 DEC-31-1998 93,820 0 0 0 1,467,281 1,625,677 29,841 0 1,795,763 257,807 0 0 0 615 640,466 1,795,763 652,828 660,630 534,152 534,152 0 0 3,536 54,266 21,571 32,695 0 0 0 32,695 0.54 0.52
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