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New words:
Abilene, agreed, Albuquerque, Asheville, Augusta, Beaumont, Charleston, Charlotte, Chattanooga, Christi, Columbia, comment, escrow, final, Head, Hilton, Lubbock, Nashville, Northeast, Oahu, penalty, prioritizing, Reno, Savannah, Station, Tulsa, Valdosta, Wilmington
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improved, pipeline, slight, uncertainty
Financial report summary
?Risks
- Our homebuilding, rental and land development operations are cyclical and affected by changes in economic, real estate or other conditions that could adversely affect our business and financial results.
- Adverse developments affecting the capital markets and financial institutions could limit our ability to access capital, increase our cost of capital and impact our liquidity and capital resources.
- Reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs, a decrease in our ability to sell mortgage loans on attractive terms or an increase in mortgage interest rates could decrease our buyers’ ability to obtain financing and adversely affect our business and financial results.
- The risks associated with our land, lot and rental inventory could adversely affect our business and financial results.
- We cannot make any assurances that our growth strategies, acquisitions, investments or other strategic initiatives will be successful or will not expose us to additional risks or other negative consequences.
- Our business and financial results could be adversely affected by significant inflation, higher interest rates or deflation.
- Supply shortages and other risks related to acquiring land, building materials and skilled labor and obtaining regulatory approvals could increase our costs and delay deliveries.
- Public health issues such as a major epidemic or pandemic could adversely affect our business and financial results.
- Our business and financial results could be adversely affected by weather conditions and natural disasters.
- Homebuilding is subject to home warranty and construction defect claims in the ordinary course of business that can be significant.
- A health and safety incident relating to our operations could be costly in terms of potential liability and reputational damage.
- We are required to obtain performance bonds, the unavailability of which could adversely affect our results of operations and cash flows.
- Increases in the costs of owning a home could prevent potential customers from buying our homes and adversely affect our business and financial results.
- Information technology failures, data security breaches, and the failure to satisfy privacy and data protection laws and regulations could harm our business.
- Governmental regulations and environmental matters could increase the cost and limit the availability of our land development and homebuilding projects and adversely affect our business and financial results.
- Governmental regulation of our financial services operations could adversely affect our business and financial results.
- We operate in competitive industries, and competitive conditions could adversely affect our business and financial results.
- We have significant amounts of debt and may incur additional debt, which could affect our financial health and our ability to raise additional capital to fund our operations or potential acquisitions.
- Servicing our debt requires a significant amount of cash, and we or our subsidiaries may not have sufficient cash flow from our respective businesses to pay our substantial debt.
- The instruments governing our and our subsidiaries’ indebtedness impose certain restrictions on our and our subsidiaries’ business, and the ability of us and our subsidiaries to comply with related covenants, restrictions or limitations could adversely affect our and our subsidiaries’ financial condition or operating flexibility.
- Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our debt ratings.
- The instruments governing our indebtedness contain change of control provisions which could affect the timing of repayment.
- Damage to our corporate reputation or brands from negative publicity could adversely affect our business, financial results and/or stock price.
- Our business could be adversely affected by the loss of key personnel.
- Our business could be negatively impacted as a result of actions by activist stockholders or others.
Management Discussion
- In fiscal 2023, our number of homes closed increased slightly compared to the prior year, and our consolidated revenues increased 6% to $35.5 billion compared to $33.5 billion in the prior year. Our pre-tax income was $6.3 billion in fiscal 2023 compared to $7.6 billion in fiscal 2022, and our pre-tax operating margin was 17.8% compared to 22.8%. Net income was $4.8 billion in fiscal 2023 compared to $5.9 billion in fiscal 2022, and our diluted earnings per share was $13.82 compared to $16.51.
- Consolidated net cash provided by operating activities was $4.3 billion in fiscal 2023 and $561.8 million in fiscal 2022, and cash provided by our homebuilding operations was $3.1 billion in fiscal 2023 compared to $1.9 billion in fiscal 2022. In fiscal 2023, our return on equity (ROE) was 22.7% compared to 34.5% in fiscal 2022, and our homebuilding return on inventory (ROI) was 29.7% compared to 42.8%. ROE is calculated as net income attributable to D.R. Horton for the year divided by average stockholders’ equity, where average stockholders’ equity is the sum of ending stockholders’ equity balances of the trailing five quarters divided by five. Homebuilding ROI is calculated as homebuilding pre-tax income for the year divided by average inventory, where average inventory is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five.
- Demand for new homes remained solid during fiscal 2023 as our net sales orders increased 3% compared to fiscal 2022. Although inflationary pressures and mortgage interest rates remain elevated, demand improved beginning in the second quarter of fiscal 2023 due to typical seasonal factors, coupled with our use of incentives and pricing adjustments to adapt to market conditions. The disruptions in the supply chain for certain building materials and tightness in the labor market we experienced during the past two years have largely subsided, and our construction cycle times are improving. Our homebuilding operating margins are lower than last year due to pricing adjustments, incentives and cost inflation, but margins improved in the second half of the year as home prices and incentives stabilized and some reductions in construction costs were realized. Although higher interest rates and economic uncertainty may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. We believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply and will manage our home pricing, sales incentives and number of homes in inventory based on the level of homebuyer demand.