Segment Information

3 Months Ended

Dec. 31, 2020

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 55 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 lot 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.

During fiscal 2020, the Company began constructing and leasing homes as income-producing single-family rental communities. After a rental community is constructed and achieves a stabilized level of leased occupancy, the Company generally expects to market the community for a bulk sale of homes. These operations are reported in the Company’s homebuilding segment. During the three months ended December 31, 2020, the Company completed its first sale of a single-family rental community representing 124 homes for $31.8 million, resulting in a gain on sale of $14.0 million. At December 31, 2020, the Company’s homebuilding fixed assets included $106.6 million of assets related to its single-family rental platform, representing 13 communities totaling 890 single-family rental homes and finished lots, which included 440 completed homes. At September 30, 2020, the Company’s homebuilding fixed assets included $87.2 million of assets related to its single-family rental platform, representing 10 communities totaling 740 single-family rental homes and finished lots, which included 440 completed homes.

The Forestar segment is a residential lot development company with operations in 51 markets across 21 states. Forestar has made significant investments in land acquisition and development to expand its business across the United States. 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 majority of the related servicing rights to third-party purchasers.

In addition to its homebuilding, Forestar and financial services operations, the Company engages in other business activities through its subsidiaries. The Company conducts insurance-related operations, constructs and owns income-producing multi-family rental properties, owns non-residential real estate including ranch land and improvements and owns and operates oil and gas related assets. The results of these operations are immaterial for separate reporting and therefore are grouped together and presented as other. The Company’s multi-family rental operations develop, construct, lease and own multi-family rental properties, which are typically marketed for sale after achieving a stabilized level of leased occupancy. At December 31, 2020, the Company had four multi-family rental projects under active construction and four projects that were substantially complete. These eight projects represent 2,325 multi-family units, including 1,015 units under active construction and 1,310 completed units. At December 31, 2020 and September 30, 2020, the consolidated balance sheets included $294.3 million and $246.2 million, respectively, of multi-family rental assets.

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, 2020. Financial information relating to the Company’s reporting segments is as follows:

	December 31, 2020
	Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated
	(In millions)
Assets
Cash and cash equivalents	$	2,129.3	$	237.4	$	65.3	$	22.9	$	—	$	2,454.9
Restricted cash	10.8		—		9.0		0.2		—		20.0
Inventories:
Construction in progress and finished homes	6,665.1		—		—		—		(66.3)		6,598.8
Residential land and lots — developed and under development	5,407.3		1,484.9		—		—		(36.1)		6,856.1
Land held for development	42.3		55.5		—		—		—		97.8
Land held for sale	23.8		—		—		—		—		23.8
	12,138.5		1,540.4		—		—		(102.4)		13,576.5
Mortgage loans held for sale	—		—		1,438.9		—		—		1,438.9
Deferred income taxes, net	142.6		—		—		—		(0.6)		142.0
Property and equipment, net	388.3		1.9		3.7		359.1		(4.6)		748.4
Other assets	1,121.7		29.4		121.5		56.5		(92.9)		1,236.2
Goodwill	134.3		—		—		—		29.2		163.5
	$	16,065.5	$	1,809.1	$	1,638.4	$	438.7	$	(171.3)	$	19,780.4
Liabilities
Accounts payable	$	786.4	$	42.2	$	—	$	17.0	$	—	$	845.6
Accrued expenses and other liabilities	1,741.6		218.8		101.0		10.9		(133.4)		1,938.9
Notes payable	2,606.2		654.1		969.1		—		(3.8)		4,225.6
	$	5,134.2	$	915.1	$	1,070.1	$	27.9	$	(137.2)	$	7,010.1

______________

(1)Amounts are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

(2)Amounts primarily represent the elimination of intercompany transactions and, to a lesser extent, purchase accounting adjustments related to the Forestar acquisition.

	September 30, 2020
	Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated
	(In millions)
Assets
Cash and cash equivalents	$	2,551.1	$	394.3	$	55.6	$	17.5	$	—	$	3,018.5
Restricted cash	9.5		—		11.9		0.2		—		21.6
Inventories:
Construction in progress and finished homes	6,037.5		—		—		—		(53.4)		5,984.1
Residential land and lots — developed and under development	4,901.4		1,304.3		—		—		(33.9)		6,171.8
Land held for development	47.8		5.4		—		—		—		53.2
Land held for sale	28.3		—		—		—		—		28.3
	11,015.0		1,309.7		—		—		(87.3)		12,237.4
Mortgage loans held for sale	—		—		1,529.0		—		—		1,529.0
Deferred income taxes, net	142.3		—		—		—		2.6		144.9
Property and equipment, net	372.8		1.1		3.9		308.9		(3.0)		683.7
Other assets	996.4		34.8		125.8		52.8		(96.1)		1,113.7
Goodwill	134.3		—		—		—		29.2		163.5
	$	15,221.4	$	1,739.9	$	1,726.2	$	379.4	$	(154.6)	$	18,912.3
Liabilities
Accounts payable	$	859.3	$	29.2	$	—	$	12.0	$	—	$	900.5
Accrued expenses and other liabilities	1,438.3		197.8		86.8		12.2		(128.1)		1,607.0
Notes payable	2,514.4		641.1		1,132.6		—		(4.8)		4,283.3
	$	4,812.0	$	868.1	$	1,219.4	$	24.2	$	(132.9)	$	6,790.8

______________

(1)Amounts are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

(2)Amounts primarily represent the elimination of intercompany transactions and, to a lesser extent, purchase accounting adjustments related to the Forestar acquisition.

	Three Months Ended December 31, 2020
	Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		Consolidated
	(In millions)
Revenues
Home sales	$	5,698.7	$	—	$	—	$	—	$	—	$	5,698.7
Land/lot sales and other	19.9		307.1		—		14.7		(294.2)		47.5
Financial services	—		—		187.2		—		—		187.2
	5,718.6		307.1		187.2		14.7		(294.2)		5,933.4
Cost of sales
Home sales (3)	4,325.1		—		—		—		(27.7)		4,297.4
Land/lot sales and other	13.8		262.5		—		—		(249.5)		26.8
Inventory and land option charges	7.9		0.4		—		—		—		8.3
	4,346.8		262.9		—		—		(277.2)		4,332.5
Selling, general and administrative expense	451.2		15.5		109.5		9.6		0.1		585.9
Gain on sale of assets	(13.1)		—		—		(0.9)		—		(14.0)
Other (income) expense	(1.5)		(0.5)		(6.4)		3.8		(0.7)		(5.3)
Income before income taxes	$	935.2	$	29.2	$	84.1	$	2.2	$	(16.4)	$	1,034.3
Summary Cash Flow Information
Depreciation and amortization	$	15.4	$	0.1	$	0.4	$	4.4	$	0.1	$	20.4
Cash (used in) provided by operating activities	$	(269.2)	$	(158.7)	$	173.1	$	1.2	$	1.5	$	(252.1)

______________

(1)Results are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance.

(2)Amounts primarily represent the elimination of intercompany transactions and, to a lesser extent, purchase accounting adjustments related to the Forestar acquisition.

(3)Amount in the Eliminations and Other Adjustments 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, 2019
	Homebuilding		Forestar (1)		Financial Services		Other		Eliminations and Other Adjustments (2)		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 (3)	3,051.6		—		—		—		(6.7)		3,044.9
Land/lot sales and other	13.3		216.3		—		—		(194.1)		35.5
Inventory and land option charges	3.5		0.3		—		—		—		3.8
	3,068.4		216.6		—		—		(200.8)		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	$	(20.6)	$	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.

(2)Amounts primarily represent the elimination of intercompany transactions and, to a lesser extent, purchase accounting adjustments related to the Forestar acquisition.

(3)Amount in the Eliminations and Other Adjustments 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, 2020		September 30, 2020
	(In millions)
East	$	1,444.3	$	1,328.3
Midwest	1,079.7		958.5
Southeast	3,142.8		2,919.9
South Central	3,255.8		2,879.9
Southwest	849.2		695.8
West	2,143.6		2,009.1
Corporate and unallocated (2)	223.1		223.5
	$	12,138.5	$	11,015.0

_________________

(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,
	2020		2019
	(In millions)
Revenues
East	$	809.2	$	520.5
Midwest	413.1		282.6
Southeast	1,778.4		1,150.6
South Central	1,474.9		958.7
Southwest	232.6		211.0
West	1,010.4		759.6
	$	5,718.6	$	3,883.0
Inventory and Land Option Charges
East	$	0.6	$	0.1
Midwest	0.1		0.1
Southeast	6.7		1.4
South Central	0.1		1.5
Southwest	0.1		0.1
West	0.3		0.3
	$	7.9	$	3.5
Income before Income Taxes
East	$	132.5	$	59.9
Midwest	49.2		18.6
Southeast	305.8		146.3
South Central	264.7		132.6
Southwest	38.6		34.5
West	144.4		69.7
	$	935.2	$	461.6