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Segment Information
 9 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
SEGMENT INFORMATION SEGMENT INFORMATION

The Company is a national homebuilder that is primarily engaged in the acquisition and development of land and the construction and sale of residential homes, with operations in 87 markets in 29 states across the United States. The Company’s operating segments are its 51 homebuilding divisions, its majority-owned Forestar residential lot development operations, its financial services operations and its other business activities. The Company’s reporting segments are its homebuilding reporting segments, its Forestar land development segment and its financial services segment. The homebuilding operating segments are aggregated into the following six reporting segments: East, Midwest, Southeast, South Central, Southwest and West. These reporting segments have homebuilding operations located in the following states:
 
East:
 
Delaware, Georgia (Savannah only), Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina and Virginia
 
Midwest:
 
Colorado, Illinois, Indiana, Iowa, Minnesota and Ohio
 
Southeast:
 
Alabama, Florida, Georgia, Mississippi and Tennessee
 
South Central:
 
Louisiana, Oklahoma and Texas
 
Southwest:
 
Arizona and New Mexico
 
West:
 
California, Hawaii, Nevada, Oregon, Utah and Washington

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

The Forestar segment is a residential lot development company with operations in 50 markets and 20 states. The Company’s homebuilding divisions and Forestar are identifying land development opportunities to expand Forestar’s platform, and the homebuilding divisions acquire finished lots from Forestar in accordance with the master supply agreement between the two companies. Forestar’s segment results are presented on their historical cost basis, consistent with the manner in which management evaluates segment performance.

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

In addition to its homebuilding, Forestar and financial services operations, the Company has subsidiaries that engage in other business activities. These subsidiaries conduct insurance-related operations, construct and own income-producing rental properties, own non-residential real estate including ranch land and improvements and own and operate oil and gas related assets. The operating results of these subsidiaries are immaterial for separate reporting and therefore are grouped together and presented as other. One of these subsidiaries, DHI Communities, constructs multi-family rental properties and has five projects under active construction and one project that was substantially complete at June 30, 2019. In January 2019, DHI Communities sold its first multi-family rental property for $73.4 million and recorded a gain on the sale of $29.3 million. In June 2019, DHI Communities sold its second multi-family rental property for $60.0 million and recorded a gain on the sale of $22.6 million. At June 30, 2019 and September 30, 2018, the consolidated balance sheets included $167.2 million and $173.2 million, respectively, of assets related to DHI Communities.


The accounting policies of the reporting segments are described throughout Note A included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2018. Financial information relating to the Company’s reporting segments is as follows:
 
 
June 30, 2019
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
577.9

 
$
223.0

 
$
44.7

 
$
18.6

 
$
—

 
$
—

 
$
864.2

Restricted cash
 
9.8

 
0.2

 
11.1

 
—

 
—

 
—

 
21.1

Inventories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Construction in progress and finished homes
 
5,723.5

 
—

 
—

 
—

 
(0.9
)
 
—

 
5,722.6

     Residential land and lots — developed and under development
 
4,847.4

 
988.7

 
—

 
—

 
(27.6
)
 
2.9

 
5,811.4

     Land held for development
 
64.9

 
60.8

 
—

 
—

 
—

 
—

 
125.7

     Land held for sale
 
42.6

 
—

 
—

 
—

 
—

 
—

 
42.6


 
10,678.4

 
1,049.5

 
—

 
—

 
(28.5
)
 
2.9

 
11,702.3

Mortgage loans held for sale
 
—

 
—

 
954.9

 
—

 
—

 
—

 
954.9

Deferred income taxes, net
 
154.4

 
21.0

 
—

 
—

 
3.7

 
(5.2
)
 
173.9

Property and equipment, net
 
234.2

 
2.4

 
3.2

 
214.4

 
—

 
—

 
454.2

Other assets
 
824.2

 
29.1

 
67.7

 
40.2

 
(83.0
)
 
11.7

 
889.9

Goodwill
 
134.3

 
—

 
—

 
—

 
—

 
29.2

 
163.5

 
 
$
12,613.2

 
$
1,325.2

 
$
1,081.6

 
$
273.2

 
$
(107.8
)
 
$
38.6

 
$
15,224.0

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
640.6

 
$
19.5

 
$
18.4

 
$
3.4

 
$
(0.7
)
 
$
—

 
$
681.2

Accrued expenses and other liabilities
 
1,155.8

 
151.5

 
56.9

 
19.7

 
(93.7
)
 
(12.7
)
 
1,277.5

Notes payable
 
2,191.3

 
458.9

 
796.5

 
—

 
—

 
3.9

 
3,450.6

 
 
$
3,987.7

 
$
629.9

 
$
871.8

 
$
23.1

 
$
(94.4
)
 
$
(8.8
)
 
$
5,409.3

______________
(1)
Amounts are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate balances of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.

 
 
September 30, 2018
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,111.8

 
$
318.8

 
$
33.7

 
$
8.8

 
$
—

 
$
—

 
$
1,473.1

Restricted cash
 
8.6

 
16.2

 
8.1

 
—

 
—

 
—

 
32.9

Inventories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Construction in progress and finished homes
 
5,084.4

 
—

 
—

 
—

 
1.9

 
—

 
5,086.3

     Residential land and lots — developed and under development
 
4,689.3

 
463.1

 
—

 
—

 
(7.2
)
 
27.2

 
5,172.4

     Land held for development
 
61.2

 
34.9

 
—

 
—

 
—

 
—

 
96.1

     Land held for sale
 
40.2

 
—

 
—

 
—

 
—

 
—

 
40.2


 
9,875.1

 
498.0

 
—

 
—

 
(5.3
)
 
27.2

 
10,395.0

Mortgage loans held for sale
 
—

 
—

 
796.4

 
—

 
—

 
—

 
796.4

Deferred income taxes, net
 
176.5

 
26.9

 
—

 
—

 
1.1

 
(10.5
)
 
194.0

Property and equipment, net
 
207.1

 
1.8

 
3.0

 
189.2

 
—

 
—

 
401.1

Other assets
 
673.7

 
31.4

 
43.6

 
0.9

 
(48.6
)
 
11.9

 
712.9

Goodwill
 
80.0

 
—

 
—

 
—

 
—

 
29.2

 
109.2

 
 
$
12,132.8

 
$
893.1

 
$
884.8

 
$
198.9

 
$
(52.8
)
 
$
57.8

 
$
14,114.6

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
612.4

 
$
11.2

 
$
0.2

 
$
4.2

 
$
(3.3
)
 
$
—

 
$
624.7

Accrued expenses and other liabilities
 
1,041.3

 
95.7

 
41.9

 
9.9

 
(46.1
)
 
(15.2
)
 
1,127.5

Notes payable
 
2,445.9

 
111.7

 
637.7

 
—

 
—

 
8.2

 
3,203.5

 
 
$
4,099.6

 
$
218.6

 
$
679.8

 
$
14.1

 
$
(49.4
)
 
$
(7.0
)
 
$
4,955.7

______________
(1)
Amounts are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate balances of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions and the reclassification of Forestar interest expense to inventory.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.

 
 
Three Months Ended June 30, 2019
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
$
4,734.6

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
4,734.6

Land/lot sales and other
 
27.5

 
88.2

 
—

 
9.6

 
(73.2
)
 
—

 
52.1

Financial services
 
—

 
—

 
119.6

 
—

 
—

 
—

 
119.6

 
 
4,762.1

 
88.2

 
119.6

 
9.6

 
(73.2
)
 
—

 
4,906.3

Cost of sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales (5)
 
3,773.0

 
—

 
—

 
—

 
(1.3
)
 
—

 
3,771.7

Land/lot sales and other
 
23.2

 
75.3

 
—

 
—

 
(66.0
)
 
8.2

 
40.7

Inventory and land option charges
 
19.2

 
—

 
—

 
—

 
—

 
—

 
19.2

 
 
3,815.4

 
75.3

 
—

 
—

 
(67.3
)
 
8.2

 
3,831.6

Selling, general and administrative expense
 
387.4

 
7.9

 
76.4

 
8.2

 
—

 
0.1

 
480.0

Gain on sale of assets
 
—

 
(1.5
)
 
—

 
(22.6
)
 
—

 
1.5

 
(22.6
)
Other (income) expense
 
(2.5
)
 
(1.9
)
 
(4.9
)
 
(0.1
)
 
—

 
—

 
(9.4
)
Income before income taxes
 
$
561.8

 
$
8.4

 
$
48.1

 
$
24.1

 
$
(5.9
)
 
$
(9.8
)
 
$
626.7

______________
(1)
Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate results of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.
(5)
Amount in the Eliminations column represents the profit on lots sold from Forestar to the homebuilding segment. Intercompany profit is eliminated in the consolidated financial statements when Forestar sells lots to the homebuilding segment and is recognized in the consolidated financial statements when the homebuilding segment closes homes on the lots to homebuyers.


 
 
Nine Months Ended June 30, 2019
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
$
12,125.8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
12,125.8

Land/lot sales and other
 
49.2

 
192.0

 
—

 
22.4

 
(141.8
)
 
—

 
121.8

Financial services
 
—

 
—

 
306.4

 
—

 
—

 
—

 
306.4

 
 
12,175.0

 
192.0

 
306.4

 
22.4

 
(141.8
)
 
—

 
12,554.0

Cost of sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales (5)
 
9,716.5

 
—

 
—

 
—

 
(3.1
)
 
—

 
9,713.4

Land/lot sales and other
 
37.6

 
149.6

 
—

 
—

 
(122.2
)
 
20.0

 
85.0

Inventory and land option charges
 
41.0

 
—

 
—

 
—

 
—

 
—

 
41.0

 
 
9,795.1

 
149.6

 
—

 
—

 
(125.3
)
 
20.0

 
9,839.4

Selling, general and administrative expense
 
1,071.4

 
19.8

 
213.4

 
22.1

 
—

 
0.3

 
1,327.0

Gain on sale of assets
 
(2.0
)
 
(2.4
)
 
—

 
(51.9
)
 
—

 
2.4

 
(53.9
)
Other (income) expense
 
(6.1
)
 
(4.6
)
 
(12.6
)
 
(0.4
)
 
—

 
—

 
(23.7
)
Income before income taxes
 
$
1,316.6

 
$
29.6

 
$
105.6

 
$
52.6

 
$
(16.5
)
 
$
(22.7
)
 
$
1,465.2

Summary Cash Flow Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
46.4

 
$
0.2

 
$
1.1

 
$
4.3

 
$
—

 
$
0.4

 
$
52.4

Cash provided by (used in) operating activities
 
$
605.7

 
$
(450.1
)
 
$
(65.5
)
 
$
(2.5
)
 
$
(2.5
)
 
$
(4.4
)
 
$
80.7

______________
(1)
Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate results of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.
(5)
Amount in the Eliminations column represents the profit on lots sold from Forestar to the homebuilding segment. Intercompany profit is eliminated in the consolidated financial statements when Forestar sells lots to the homebuilding segment and is recognized in the consolidated financial statements when the homebuilding segment closes homes on the lots to homebuyers.



 
 
Three Months Ended June 30, 2018
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
$
4,265.5

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
4,265.5

Land/lot sales and other
 
59.1

 
23.6

 
—

 
—

 
(8.8
)
 
(1.2
)
 
72.7

Financial services
 
—

 
—

 
97.1

 
—

 
—

 
—

 
97.1

 
 
4,324.6

 
23.6

 
97.1

 
—

 
(8.8
)
 
(1.2
)
 
4,435.3

Cost of sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
3,332.8

 
—

 
—

 
—

 
—

 
—

 
3,332.8

Land/lot sales and other
 
45.4

 
10.0

 
—

 
—

 
(5.6
)
 
5.7

 
55.5

Inventory and land option charges
 
8.9

 
—

 
—

 
—

 
—

 
—

 
8.9

 
 
3,387.1

 
10.0

 
—

 
—

 
(5.6
)
 
5.7

 
3,397.2

Selling, general and administrative expense
 
349.1

 
6.5

 
71.1

 
8.1

 
—

 
0.1

 
434.9

Gain on sale of assets
 
—

 
(1.3
)
 
—

 
—

 
—

 
1.3

 
—

Interest expense
 
—

 
1.6

 
—

 
—

 
(1.6
)
 
—

 
—

Other (income) expense
 
(1.3
)
 
(3.7
)
 
(4.3
)
 
(5.0
)
 
—

 
1.3

 
(13.0
)
Income (loss) before income taxes
 
$
589.7

 
$
10.5

 
$
30.3

 
$
(3.1
)
 
$
(1.6
)
 
$
(9.6
)
 
$
616.2

______________
(1)
Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate results of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions and the reclassification of Forestar interest expense to inventory.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.


 
 
Nine Months Ended June 30, 2018
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
$
11,122.1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
11,122.1

Land/lot sales and other
 
109.2

 
77.0

 
—

 
—

 
(17.3
)
 
(1.2
)
 
167.7

Financial services
 
—

 
—

 
273.1

 
—

 
—

 
—

 
273.1

 
 
11,231.3

 
77.0

 
273.1

 
—

 
(17.3
)
 
(1.2
)
 
11,562.9

Cost of sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
8,761.7

 
—

 
—

 
—

 
—

 
—

 
8,761.7

Land/lot sales and other
 
88.7

 
45.5

 
—

 
—

 
(12.3
)
 
12.6

 
134.5

Inventory and land option charges
 
42.8

 
—

 
—

 
—

 
—

 
—

 
42.8

 
 
8,893.2

 
45.5

 
—

 
—

 
(12.3
)
 
12.6

 
8,939.0

Selling, general and administrative expense
 
976.6

 
25.6

 
199.6

 
17.8

 
—

 
0.3

 
1,219.9

Gain on sale of assets
 
(13.4
)
 
(4.0
)
 
—

 
—

 
—

 
2.9

 
(14.5
)
Interest expense
 
—

 
5.8

 
—

 
—

 
(5.8
)
 
—

 
—

Other (income) expense
 
(4.6
)
 
(15.0
)
 
(10.5
)
 
(11.4
)
 
—

 
7.7

 
(33.8
)
Income (loss) before income taxes
 
$
1,379.5

 
$
19.1

 
$
84.0

 
$
(6.4
)
 
$
0.8

 
$
(24.7
)
 
$
1,452.3

Summary Cash Flow Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
39.8

 
$
0.2

 
$
1.0

 
$
5.2

 
$
—

 
$
0.4

 
$
46.6

Cash provided by (used in) operating activities
 
$
565.2

 
$
(219.2
)
 
$
(27.0
)
 
$
(4.4
)
 
$
—

 
$
(8.1
)
 
$
306.5


______________
(1)
Results are presented from the date of acquisition and on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate results of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions and the reclassification of Forestar interest expense to inventory.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.


Homebuilding Inventories by Reporting Segment (1)
 
June 30,
2019
 
September 30,
2018
 
 
(In millions)
East
 
$
1,300.8

 
$
1,192.0

Midwest
 
818.5

 
583.1

Southeast
 
2,733.1

 
2,668.7

South Central
 
2,660.5

 
2,439.4

Southwest
 
606.2

 
499.7

West
 
2,325.7

 
2,268.5

Corporate and unallocated (2)
 
233.6

 
223.7

 
 
$
10,678.4

 
$
9,875.1

_________________

(1)
Homebuilding inventories are the only assets included in the measure of homebuilding segment assets used by the Company’s chief operating decision makers.
(2)
Corporate and unallocated consists primarily of capitalized interest and property taxes.

Homebuilding Results by Reporting Segment
 
Three Months Ended 
 June 30,
 
Nine Months Ended 
 June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
East
 
$
675.2

 
$
529.1

 
$
1,640.9

 
$
1,357.9

Midwest
 
303.3

 
256.7

 
800.5

 
621.7

Southeast
 
1,388.1

 
1,263.3

 
3,607.2

 
3,293.9

South Central
 
1,178.0

 
1,005.4

 
3,040.8

 
2,733.2

Southwest
 
240.6

 
220.1

 
557.5

 
548.6

West
 
976.9

 
1,050.0

 
2,528.1

 
2,676.0

 
 
$
4,762.1

 
$
4,324.6

 
$
12,175.0

 
$
11,231.3

Inventory and Land Option Charges
 
 
 
 
 
 
 
 
East
 
$
0.6

 
$
0.3

 
$
2.3

 
$
0.9

Midwest
 
1.3

 
4.3

 
1.8

 
4.7

Southeast
 
5.1

 
1.1

 
8.6

 
27.3

South Central
 
3.0

 
1.5

 
4.9

 
3.5

Southwest
 
0.3

 
—

 
0.5

 
0.8

West
 
8.9

 
1.7

 
22.9

 
5.6

 
 
$
19.2

 
$
8.9

 
$
41.0

 
$
42.8

Income before Income Taxes (1)
 
 
 
 
 
 
 
 
East
 
$
74.1

 
$
67.1

 
$
158.0

 
$
158.7

Midwest
 
18.7

 
23.0

 
38.8

 
55.0

Southeast
 
168.4

 
156.1

 
411.6

 
374.9

South Central
 
164.3

 
143.3

 
389.6

 
365.2

Southwest
 
33.5

 
32.3

 
69.8

 
69.1

West
 
102.8

 
167.9

 
248.8

 
356.6

 
 
$
561.8

 
$
589.7

 
$
1,316.6

 
$
1,379.5

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