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Segment Information
 3 Months Ended
Dec. 31, 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 90 markets across 29 states. The Company’s operating segments are its 52 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 51 markets across 20 states. Forestar is making significant investments in land acquisition and development to expand its business across a geographically diversified national platform. 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 multi-family 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 four projects under active construction and one project that was substantially complete at December 31, 2019. In November 2019, DHI Communities sold a multi-family rental property for $61.5 million and recorded a gain on the sale of $31.2 million. At December 31, 2019 and September 30, 2019, the consolidated balance sheets included $209.8 million and $204.0 million, respectively, of assets owned by 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, 2019. Financial information relating to the Company’s reporting segments is as follows:
 
 
December 31, 2019
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,152.9

 
$
373.3

 
$
37.5

 
$
19.6

 
$
—

 
$
—

 
$
1,583.3

Restricted cash
 
6.6

 
—

 
5.9

 
0.1

 
—

 
—

 
12.6

Inventories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Construction in progress and finished homes
 
5,603.3

 
—

 
—

 
—

 
(23.2
)
 
—

 
5,580.1

     Residential land and lots — developed and under development
 
5,192.7

 
1,051.4

 
—

 
—

 
(32.1
)
 
2.1

 
6,214.1

     Land held for development
 
66.7

 
15.4

 
—

 
—

 
—

 
—

 
82.1

     Land held for sale
 
22.9

 
—

 
—

 
—

 
—

 
—

 
22.9


 
10,885.6

 
1,066.8

 
—

 
—

 
(55.3
)
 
2.1

 
11,899.2

Mortgage loans held for sale
 
—

 
—

 
1,025.1

 
—

 
—

 
—

 
1,025.1

Deferred income taxes, net
 
140.1

 
11.8

 
—

 
—

 
8.2

 
(6.0
)
 
154.1

Property and equipment, net
 
292.8

 
0.9

 
3.1

 
267.6

 
(1.0
)
 
—

 
563.4

Other assets
 
864.4

 
27.1

 
59.7

 
46.1

 
(86.1
)
 
10.5

 
921.7

Goodwill
 
134.3

 
—

 
—

 
—

 
—

 
29.2

 
163.5

 
 
$
13,476.7

 
$
1,479.9

 
$
1,131.3

 
$
333.4

 
$
(134.2
)
 
$
35.8

 
$
16,322.9

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
624.7

 
$
19.8

 
$
1.4

 
$
13.4

 
$
—

 
$
—

 
$
659.3

Accrued expenses and other liabilities
 
1,240.6

 
172.4

 
62.3

 
9.7

 
(94.5
)
 
(13.1
)
 
1,377.4

Notes payable
 
2,470.0

 
462.1

 
850.2

 
—

 
—

 
1.0

 
3,783.3

 
 
$
4,335.3

 
$
654.3

 
$
913.9

 
$
23.1

 
$
(94.5
)
 
$
(12.1
)
 
$
5,820.0

______________
(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, 2019
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,043.0

 
$
382.8

 
$
43.4

 
$
25.1

 
$
—

 
$
—

 
$
1,494.3

Restricted cash
 
8.0

 
—

 
11.6

 
0.1

 
—

 
—

 
19.7

Inventories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Construction in progress and finished homes
 
5,249.0

 
—

 
—

 
—

 
(4.0
)
 
—

 
5,245.0

     Residential land and lots — developed and under development
 
4,956.1

 
1,011.8

 
—

 
—

 
(31.4
)
 
2.9

 
5,939.4

     Land held for development
 
60.7

 
17.1

 
—

 
—

 
—

 
—

 
77.8

     Land held for sale
 
19.8

 
—

 
—

 
—

 
—

 
—

 
19.8


 
10,285.6

 
1,028.9

 
—

 
—

 
(35.4
)
 
2.9

 
11,282.0

Mortgage loans held for sale
 
—

 
—

 
1,072.0

 
—

 
—

 
—

 
1,072.0

Deferred income taxes, net
 
146.4

 
17.4

 
—

 
—

 
5.1

 
(5.8
)
 
163.1

Property and equipment, net
 
272.4

 
2.4

 
3.2

 
221.2

 
—

 
—

 
499.2

Other assets
 
826.2

 
24.2

 
68.3

 
71.5

 
(88.5
)
 
11.1

 
912.8

Goodwill
 
134.3

 
—

 
—

 
—

 
—

 
29.2

 
163.5

 
 
$
12,715.9

 
$
1,455.7

 
$
1,198.5

 
$
317.9

 
$
(118.8
)
 
$
37.4

 
$
15,606.6

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
598.6

 
$
16.8

 
$
7.0

 
$
11.6

 
$
—

 
$
—

 
$
634.0

Accrued expenses and other liabilities
 
1,152.5

 
169.5

 
53.0

 
9.3

 
(93.6
)
 
(12.6
)
 
1,278.1

Notes payable
 
2,047.6

 
460.5

 
888.9

 
—

 
—

 
2.4

 
3,399.4

 
 
$
3,798.7

 
$
646.8

 
$
948.9

 
$
20.9

 
$
(93.6
)
 
$
(10.2
)
 
$
5,311.5

______________
(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.

 
 
Three Months Ended December 31, 2019
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
$
3,863.3

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
3,863.3

Land/lot sales and other
 
19.7

 
247.2

 
—

 
8.8

 
(221.2
)
 
—

 
54.5

Financial services
 
—

 
—

 
102.9

 
—

 
—

 
—

 
102.9

 
 
3,883.0

 
247.2

 
102.9

 
8.8

 
(221.2
)
 
—

 
4,020.7

Cost of sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales (5)
 
3,051.6

 
—

 
—

 
—

 
(6.7
)
 
—

 
3,044.9

Land/lot sales and other
 
13.3

 
216.3

 
—

 
—

 
(193.4
)
 
(0.7
)
 
35.5

Inventory and land option charges
 
3.5

 
0.3

 
—

 
—

 
—

 
—

 
3.8

 
 
3,068.4

 
216.6

 
—

 
—

 
(200.1
)
 
(0.7
)
 
3,084.2

Selling, general and administrative expense
 
358.4

 
10.5

 
77.9

 
8.8

 
—

 
0.2

 
455.8

Loss (gain) on sale of assets
 
—

 
0.1

 
—

 
(31.2
)
 
—

 
—

 
(31.1
)
Other (income) expense
 
(5.4
)
 
(2.2
)
 
(5.5
)
 
1.6

 
—

 
—

 
(11.5
)
Income before income taxes
 
$
461.6

 
$
22.2

 
$
30.5

 
$
29.6

 
$
(21.1
)
 
$
0.5

 
$
523.3

Summary Cash Flow Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
16.5

 
$
0.1

 
$
0.4

 
$
1.9

 
$
—

 
$
0.1

 
$
19.0

Cash (used in) provided by operating activities
 
$
(178.4
)
 
$
(11.7
)
 
$
83.5

 
$
3.9

 
$
(11.1
)
 
$
—

 
$
(113.8
)
______________
(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 December 31, 2018
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
$
3,410.6

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
3,410.6

Land/lot sales and other
 
6.7

 
38.5

 
—

 
6.9

 
(29.0
)
 
—

 
23.1

Financial services
 
—

 
—

 
85.3

 
—

 
—

 
—

 
85.3

 
 
3,417.3

 
38.5

 
85.3

 
6.9

 
(29.0
)
 
—

 
3,519.0

Cost of sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales (5)
 
2,729.2

 
—

 
—

 
—

 
(1.1
)
 
—

 
2,728.1

Land/lot sales and other
 
5.1

 
30.7

 
—

 
—

 
(24.4
)
 
3.6

 
15.0

Inventory and land option charges
 
8.0

 
—

 
—

 
—

 
—

 
—

 
8.0

 
 
2,742.3

 
30.7

 
—

 
—

 
(25.5
)
 
3.6

 
2,751.1

Selling, general and administrative expense
 
324.7

 
5.7

 
65.6

 
6.7

 
—

 
0.1

 
402.8

Gain on sale of assets
 
(2.0
)
 
(0.9
)
 
—

 
—

 
—

 
0.9

 
(2.0
)
Other (income) expense
 
(2.0
)
 
(1.9
)
 
(3.9
)
 
(0.8
)
 
—

 
—

 
(8.6
)
Income before income taxes
 
$
354.3

 
$
4.9

 
$
23.6

 
$
1.0

 
$
(3.5
)
 
$
(4.6
)
 
$
375.7

Summary Cash Flow Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
14.7

 
$
0.1

 
$
0.4

 
$
1.6

 
$
—

 
$
0.1

 
$
16.9

Cash (used in) provided by operating activities
 
$
(396.8
)
 
$
(164.1
)
 
$
193.8

 
$
(1.6
)
 
$
—

 
$
(4.4
)
 
$
(373.1
)
______________
(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.


 



Homebuilding Inventories by Reporting Segment (1)
 
December 31,
2019
 
September 30,
2019
 
 
(In millions)
East
 
$
1,305.4

 
$
1,288.8

Midwest
 
919.0

 
836.8

Southeast
 
2,915.4

 
2,768.0

South Central
 
2,703.8

 
2,533.2

Southwest
 
612.1

 
574.4

West
 
2,195.6

 
2,056.0

Corporate and unallocated (2)
 
234.3

 
228.4

 
 
$
10,885.6

 
$
10,285.6

_________________

(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 
 December 31,
 
 
2019
 
2018
 
 
(In millions)
Revenues
 
 
 
 
East
 
$
520.5

 
$
447.5

Midwest
 
282.6

 
249.0

Southeast
 
1,150.6

 
1,013.9

South Central
 
958.7

 
872.5

Southwest
 
211.0

 
143.6

West
 
759.6

 
690.8

 
 
$
3,883.0

 
$
3,417.3

Inventory and Land Option Charges
 
 
 
 
East
 
$
0.1

 
$
1.4

Midwest
 
0.1

 
0.3

Southeast
 
1.4

 
1.2

South Central
 
1.5

 
0.5

Southwest
 
0.1

 
0.1

West
 
0.3

 
4.5

 
 
$
3.5

 
$
8.0

Income before Income Taxes (1)
 
 
 
 
East
 
$
59.9

 
$
38.0

Midwest
 
18.6

 
10.6

Southeast
 
146.3

 
112.3

South Central
 
132.6

 
106.0

Southwest
 
34.5

 
17.6

West
 
69.7

 
69.8

 
 
$
461.6

 
$
354.3

_________________
(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.