Percentages of
Financial Services Revenues
Three Months Ended
March 31, Six Months Ended
March 31,
2019 2018 2019 2018
General and administrative expense 70.2 % 70.3 % 73.3 % 73.0 %
Other (income) expense (3.6 )% (3.4 )% (4.1 )% (3.5 )%
Financial services pre-tax income 33.5 % 33.1 % 30.8 % 30.5 %
50

Mortgage Loan Activity

The volume of loans originated by our mortgage operations is directly related to the number of homes closed by our homebuilding operations. In the three and six months ended March 31, ~~2019,~~2020, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers increased 7%30% and 5%32%, respectively, ~~primarily as a result of~~due to increases in the number of homes closed by our homebuilding operations of 8% and 10% and ~~8%. The~~increases in the percentage of homes closed for which DHI Mortgage handled the homebuyers’ ~~financing was 56%~~financing. These percentages were 67% and ~~55%~~66% in the three and six months ended March 31, ~~2019,~~2020, respectively, compared to ~~57%~~56% and 55% in ~~both~~the prior year periods. Increases in the portion of home closings financed by DHI Mortgage were primarily due to the Company’s program to offer below market interest rates to D.R. Horton homebuyers, expanded coverage in certain markets and increased efficiencies resulting from technology advances.

Homes closed by our homebuilding operations constituted 98% and 97% of DHI Mortgage loan originations in ~~both~~ the three and six months ended March 31, ~~2019~~2020, respectively, compared to ~~97%~~98% in both prior year periods. These percentages reflect DHI Mortgage’s consistent focus on the captive business provided by our homebuilding operations.

The number of loans sold increased 3%26% and 7%25% in the three and six months ended March 31, ~~2019,~~2020, respectively, compared to the prior year periods. Virtually all of the mortgage loans held for sale on March 31, ~~2019~~2020 were eligible for sale to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Government National Mortgage Association (Ginnie Mae). Approximately ~~93%~~90% of the mortgage loans sold by DHI Mortgage during the six months ended March 31, ~~2019~~2020 were sold to four major financial entities, ~~the largest~~ of which one entity purchased ~~32%~~33%. Due to the disruption in the secondary mortgage markets beginning in late March 2020 caused by COVID-19 and the uncertainty of the ~~total loans sold.~~impact of the CARES Act, many financial entities have begun offering lower pricing and limiting their purchases of our mortgages and servicing rights. This could result in a greater concentration of our mortgage sales in future periods to fewer financial entities and directly to Fannie Mae or Ginnie Mae, and we may make other adjustments to our mortgage operations to adapt to changes in market conditions.

Financial Services Revenues and Expenses

Revenues from our mortgage operations ~~increased 6%~~decreased 1% to ~~$81.8~~$80.9 million and ~~$149.4~~increased 8% to $162.0 million in the three and six months ended March 31, ~~2019,~~2020, respectively, from ~~$77.1~~$81.8 million and ~~$141.6~~$149.4 million in the prior year periods, while the number of loan originations increased 5%31% and 4%33% over those same periods. Revenues increased at a lower rate than origination volume due to lower pricing and resulting net gains on loan originations due to disruption in the secondary mortgage market caused by COVID-19 and the uncertainty of the impact of the CARES Act, which included changes to current forbearance options for government-backed loans designed to keep homeowners in their homes. Due to the uncertainty surrounding these forbearance options, servicing values declined rapidly at the end of March. The significant decline in servicing values resulted in lower net gains on loan originations during the three months ended March 31, 2020 compared to the prior year period even as loan originations increased 31%.

General and administrative (G&A) expense related to our financial services operations increased 7%20% to ~~$71.3~~$85.9 million and ~~$137.0~~$163.8 million in the three and six months ended March 31, ~~2019,~~2020, respectively, from ~~$66.7~~$71.3 million and ~~$128.4~~$137.0 million in the prior year periods. The increases were primarily due to increases in employee related ~~costs.~~costs to support a higher volume of transactions. Our financial services operations employed ~~1,923~~1,934 and ~~1,862~~1,923 employees at March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

As a percentage of financial services revenues, G&A expense was ~~70.2%~~82.2% and ~~73.3%~~79.0% in the three and six months ended March 31, ~~2019,~~2020, respectively, compared to ~~70.3%~~70.2% and ~~73.0%~~73.3% in the prior year periods. Fluctuations in financial services G&A expense as a percentage of revenues can be expected to occur, as some components of revenue may fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned.

Other income, net of other expense, included in our financial services operations consists primarily of the interest income of our mortgage subsidiary.

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RESULTS OF OPERATIONS - OTHER BUSINESSES

Through DHI Communities, a 100% owned subsidiary, we develop, construct and own multi-family residential properties that produce rental income. DHI Communities is primarily focused on constructing garden style multi-family products, which typically accommodate 200 to 400 dwelling units, in high growth suburban markets. After DHI Communities has completed construction and achieved a stabilized occupancy rate, the property is typically marketed for sale. We currently have three projects under active construction and one project that is substantially complete. 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. In February 2020, DHI Communities sold a multi-family rental property for $67.0 million and recorded a gain on the sale of $28.2 million.

RESULTS OF OPERATIONS - CONSOLIDATED

Income before Income Taxes

Pre-tax income for the three and six months ended March 31, ~~2019~~2020 was $621.3 million and $1.1 billion, respectively, compared to $462.8 million and $838.5 million ~~respectively, compared to $444.8 million and $836.1 million~~ in the prior year periods. The increases were primarily due to increases in pre-tax income generated by our homebuilding operations as a result of higher revenues from increased home closings and an increase in home sales gross margin.

Income Taxes

Our income tax expense for the three and six months ended March 31, ~~2019~~2020 was $137.3 million and $228.1 million, respectively, compared to $108.4 million and $197.4 ~~million, respectively, compared to $94.0 million and $296.4~~ million in the prior year periods. Our effective tax rate was ~~23.4%~~22.1% and ~~23.5%~~19.9% for the three and six months ended March 31, ~~2019,~~2020, respectively, compared to ~~21.1%~~23.4% and ~~35.5%~~23.5% in the prior year periods. The ~~higher~~ effective tax rate for the three and six months ended March 31, ~~2018 was primarily due to~~2020 includes a tax benefit of $6.6 million and $39.5 million, respectively, from the ~~remeasurement of our deferred tax assets and liabilities as a result~~enactment of the Taxpayer Certainty and Disaster Tax Relief Act ~~which was enacted into law~~of 2019 (the Act). The Act retroactively reinstated the federal energy efficient homes tax credit that expired on December ~~22, 2017.~~31, 2017 to homes closed from January 1, 2018 to December 31, 2020. The effective tax rates for all periods include an expense for state income taxes, reduced by tax benefits related to stock-based compensation.

The Tax Act reduced the federal corporate tax rate from 35% to 21% for all corporations effective January 1, 2018. For fiscal year companies, the change in law required the application of a blended tax rate in the year of change, which for us was 24.5% for the fiscal year ended September 30, 2018. For the fiscal year ending September 30, 2019 and thereafter, the applicable statutory federal tax rate is 21%. The Tax Act also repealed the domestic production activities deduction effective for us for fiscal 2019.

Our deferred tax assets, net of deferred tax liabilities, were ~~$188.9~~$167.3 million at March 31, ~~2019~~2020 compared to ~~$211.7~~$181.8 million at September 30, ~~2018.~~2019. We have a valuation allowance of $17.8 million at March 31, 2020 and $18.7 million at September 30, 2019 related to state deferred tax assets for net operating loss (NOL) carryforwards ~~of $17.0 million at March 31, 2019 and $17.7 million at September 30, 2018.~~that are more likely than not to expire before being realized. We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to our remaining state NOL carryforwards. Any reversal of the valuation allowance in future periods will impact our effective tax rate.

The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on our consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of our deferred tax assets.

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CAPITAL RESOURCES AND LIQUIDITY

We have historically funded our operations with cash flows from operating activities, borrowings under bank credit facilities and the issuance of new debt securities. Our current levels of cash, borrowing capacity and balance sheet leverage provide us with the operational flexibility to adjust to the recent sudden, significant changes in ~~market~~economic conditions and ~~allow us to increase~~the current uncertainty in the housing market across the United States. Currently, we are cautiously managing our ~~investments in~~ homes ~~finished lots,~~under construction and limiting land acquisition and land development ~~to expand~~activities as a result of the COVID-19 pandemic and its potential impact on our ~~operations and grow our revenues and profitability.~~business.

At March 31, ~~2019,~~2020, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was ~~27.9%~~29.2% compared to ~~26.3%~~25.3% at September 30, ~~2018~~2019 and ~~28.3%~~27.9% at March 31, ~~2018.~~2019. Our ratio of homebuilding debt to total capital (homebuilding notes payable divided by stockholders’ equity plus homebuilding notes payable) was ~~22.9%~~19.2% compared to ~~21.4%~~17.0% at September 30, ~~2018~~2019 and ~~24.2%~~22.9% at March 31, ~~2018.~~2019. Over the long term, we intend to maintain our ratio of homebuilding debt to total capital below 35%, and we expect it to remain significantly lower than 35% throughout fiscal ~~2019.~~2020. We believe that the ratio of homebuilding debt to total capital is useful in understanding the leverage employed in our homebuilding operations and comparing our capital structure with other homebuilders. We exclude the debt of Forestar and our financial services business because they are separately capitalized and not guaranteed by our parent company or any of our homebuilding entities.

We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations, pay dividends, repurchase our common stock and support other general corporate and operational needs, and we regularly evaluate our opportunities to raise additional capital. D.R. Horton has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in August 2018, registering debt and equity securities that may be issued from time to time in amounts to be determined. Forestar also has an effective shelf registration statement filed with the SEC in September 2018, registering $500 million of equity ~~securities.~~securities, of which $394.3 million remains available. As market conditions permit, we may issue new debt or equity securities through the capital markets or obtain additional bank financing to fund our projected capital requirements or provide additional liquidity. Due to the current economic uncertainties related to COVID-19 and the related disruption in the financial markets, we may be limited in accessing the capital markets or obtaining additional bank financing or the cost of accessing this financing could become more expensive. We believe that our existing cash resources, revolving credit facilities, mortgage repurchase facility and ability to access the capital markets or obtain additional bank financing will provide sufficient liquidity to fund our near-term working capital needs and debt obligations.

Capital Resources - Homebuilding

Cash and Cash Equivalents — At March 31, ~~2019~~,2020, cash and cash equivalents of our homebuilding segment totaled ~~$557.3 million.~~$1.0 billion.

Bank Credit Facility — We have a ~~$1.325~~$1.59 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to ~~$1.9~~$2.5 billion, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to ~~approximately 50%~~100% of the revolving credit commitment. Letters of credit issued under the facility reduce the available borrowing capacity. The interest rate on borrowings under the revolving credit facility may be based on either the Prime Rate or London Interbank Offered Rate (LIBOR) plus an applicable margin, as defined in the credit agreement governing the facility. The maturity date of the facility is ~~September 25, 2023.~~October 2, 2024. Borrowings and repayments under the facility were ~~$1.8 billion~~$800 million and ~~$1.0 billion,~~$300 million, respectively, during the six months ended March 31, ~~2019.~~2020. At March 31, ~~2019,~~2020, there were ~~$750~~$500 million of borrowings outstanding at a ~~3.7%~~1.7% annual interest rate and ~~$128.0~~$116.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of ~~$447.0~~$973.7 million.

Our homebuilding revolving credit facility imposes restrictions on our operations and activities, including requiring the maintenance of a maximum allowable leverage ratio ~~of debt to tangible net worth~~ and a borrowing base restriction if our leverage ratio ~~of debt to tangible net worth~~ exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens. At March 31, ~~2019~~,2020, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility.

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Public Unsecured Debt — We have $1.95 billion principal amount of homebuilding senior notes outstanding as of March 31, ~~2019~~2020 that mature from ~~February~~December 2020 through ~~August 2023. On March 1,~~October 2024. In October 2019, we issued $500 million principal amount of 2.5% senior notes due October 15, 2024, with interest payable semi-annually. The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 2.7%. In February 2020, we repaid $500 million principal amount of our ~~3.75%~~4.0% senior notes at maturity. The ~~indenture~~indentures governing our senior notes ~~imposes~~impose restrictions on the creation of secured debt and liens. At March 31, ~~2019,~~2020, we were in compliance with all of the limitations and restrictions associated with our public debt obligations.

Repurchases of Common Stock — During the three and six months ended March 31, ~~2019,~~2020, we repurchased ~~2.0~~4.0 million and ~~6.1~~7.0 million shares, respectively, of our common stock for ~~$75.6~~$197.3 million and ~~$216.2 million.~~$360.4 million, respectively.

Debt and Equity Repurchase Authorizations — Effective ~~August 1, 2018,~~July 30, 2019, our Board of Directors authorized the repurchase of up to $500 million of debt securities and ~~$400 million~~$1.0 billion of our common ~~stock effective through September 30, 2019. The~~stock. At March 31, 2020, the full amount of the debt repurchase authorization was remaining ~~at March 31, 2019. Repurchases~~and $535.3 million of ~~common stock from August 1, 2018 through March 31, 2019 totaled $240.7 million, reducing~~ the ~~stock~~equity repurchase authorization ~~to $159.3 million.~~was remaining. These authorizations have no expiration date.

Capital Resources - Forestar

At March 31, 2019, Forestar had cash and cash equivalents of $66.4 million. In August 2018, Forestar entered into a $380 million senior unsecured bank credit facility. In September 2018, Forestar filed an effective shelf registration statement with the SEC, registering $500 million of equity securities. Forestar’s ability to achieve its long-term growth objectives will depend on its ability to obtain financing in sufficient capacities. As market conditions permit, Forestar may issue new debt or equity securities through the capital markets or obtain additional bank financing to provide capital for future growth and additional liquidity. ~~In April 2019,~~

Cash and Cash Equivalents — At March 31, 2020, Forestar ~~raised capital through the issuance~~had cash and cash equivalents of ~~senior notes as discussed below.~~$438.2 million.

Bank Credit Facility — Forestar has a $380 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $570 million, subject to certain conditions and availability of additional bank commitments. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the revolving credit commitment. Borrowings under the revolving credit facility are subject to a borrowing base based on Forestar’s book value of its real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At March 31, 2020, there were no borrowings outstanding and $31.0 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $349.0 million. The maturity date of the facility is ~~August 16, 2021. The maturity date of the revolving credit facility may~~October 2, 2022, which can be extended by up to one year on up to ~~three~~two additional occasions, subject to the approval of lenders holding a majority of the commitments. ~~At March 31, 2019, there were $35 million of borrowings outstanding at a 4.8% annual interest rate and $3.8 million of letters of credit issued under the revolving credit facility.~~

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. ~~At March 31, 2019,~~

Unsecured Debt — In February 2020, Forestar ~~was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.~~

~~Letter of Credit Facility~~ — Forestar has a secured letter of credit agreement that requires it to deposit cash as collateral with the issuing bank. At March 31, 2019, letters of credit outstanding under the letter of credit facility totaled $15.0 million, secured by $15.7 million in cash, which is included in restricted cash in the consolidated balance sheet.

~~Unsecured Debt~~ ~~— Forestar has $118.9~~issued $300 million principal amount of 3.75% convertible senior notes outstanding as of March 31, 2019 that are expected to be settled in cash upon their maturity at March 1, 2020. In April 2019, Forestar issued $350 million principal amount of 8.0%5.0% senior notes pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The notes are due ~~April 15, 2024,~~March 1, 2028, with interest payable ~~semi-annually,~~semiannually, and represent unsecured obligations of Forestar. The annual effective interest rate of these notes after giving effect to the amortization of financing costs is ~~8.5%~~5.2%. These notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreement. Forestar also has $350 million principal amount of 8.0% senior notes that mature April 15, 2024. In March 2020, Forestar repaid $118.9 million principal amount of its 3.75% convertible senior notes in cash at maturity.

Forestar’s revolving credit facility ~~its senior notes~~ and its ~~convertible~~ senior notes are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee our homebuilding debt. At March 31, 2020, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

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Capital Resources - Financial Services

Cash and Cash Equivalents — At March 31, ~~2019,~~2020, cash and cash equivalents of our financial services operations totaled ~~$61.1~~$45.8 million.

Mortgage Repurchase Facility — Our mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that provides financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties upon receipt of funds from the counterparties. DHI Mortgage then has the right and obligation to repurchase the purchased loans upon their sale to third-party purchasers in the secondary market or within specified time frames from 45 to 60 days in accordance with the terms of the mortgage repurchase facility. In February ~~2019,~~2020, the mortgage repurchase facility was amended to extend its maturity date to February ~~21, 2020.~~19, 2021. The total capacity of the facility is ~~$600 million;~~$1.2 billion; however, the capacity increases without requiring additional commitments to ~~$725 million~~$1.4 billion for approximately 30 days at each quarter end and ~~to $800 million for approximately~~ 45 days at fiscal year end. The capacity of the facility can also be increased to ~~$1.0~~$1.5 billion subject to the availability of additional commitments. ~~Additional~~Through additional commitments, ~~were obtained to increase~~ the capacity of the facility was temporarily increased to ~~$800 million for approximately 30 days at the~~$1.5 billion effective March ~~2019 quarter end.~~26, 2020 through April 23, 2020.

As of March 31, ~~2019, $784.5 million~~2020, $1.3 billion of mortgage loans held for sale with a collateral value of ~~$759.4 million~~$1.2 billion were pledged under the mortgage repurchase facility. DHI Mortgage had an obligation of ~~$690.7 million~~$1.2 billion outstanding under the mortgage repurchase facility at March 31, ~~2019~~2020 at a ~~4.2%~~2.6% annual interest rate.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee our homebuilding debt. The facility contains financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable leverage ratio ~~of debt to tangible net worth~~ and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At March 31, ~~2019~~,2020, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.

In the past, DHI Mortgage has been able to renew or extend its mortgage credit facility at a sufficient capacity and on satisfactory terms prior to its maturity and obtain temporary additional commitments through amendments to the credit agreement during periods of higher than normal volumes of mortgages held for sale. The liquidity of our financial services business depends upon its continued ability to renew and extend the mortgage repurchase facility or to obtain other additional financing in sufficient capacities.

Operating Cash Flow Activities

In the six months ended March 31, ~~2019,~~2020, net cash used in operating activities was ~~$461.7~~$395.1 million compared to ~~$98.8~~$461.7 million in the prior year period. Cash used in operating activities in the current year period primarily consisted of ~~$215.9~~$312.1 million and ~~$287.8~~$123.8 million of cash used in our ~~homebuilding~~financial services and Forestar segments, respectively, partially offset by ~~$48.8~~$52.1 million of cash provided by our ~~financial services~~homebuilding segment.

WeCash used ~~$755.2 million of cash~~ to increase ~~our~~ construction in progress and finished home inventory was $724.4 million in the current year period compared to ~~$514.5~~$755.2 million in the prior year period. In both periods, the expenditures were made to support the ~~current period increase~~expected increases in sales and closing ~~volumes, as well as the expected increase in future periods.~~volumes. Cash used to increase residential land and lots in the current year period was $324.2 million compared to $445.6 million ~~of which~~in the prior year period. Of these amounts, $171.4 million and $341.8 million related to Forestar, ~~compared to $271.5 million in the prior year period, of which $167.6 million related to Forestar.~~respectively. The most significant source of cash provided by operating activities in both periods was net income.

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Investing Cash Flow Activities

In the six months ended March 31, ~~2019,~~2020, net cash used in investing activities was ~~$321.1~~$34.6 million compared to ~~cash provided by investing activities of $31.4~~$321.1 million in the prior year period. ~~The most significant investing~~In the current year period, uses of cash inincluded expenditures related to our rental properties totaling $113.0 million and purchases of property and equipment totaling $47.6 million, partially offset by proceeds from the ~~current~~sale of assets primarily consisting of $128.5 million related to the sale of two multi-family rental properties. In the prior year period, the most significant uses of cash were the purchases of the homebuilding operations of Westport Homes, Classic Builders and Terramor Homes, whereby $309.6 million of the aggregate purchase price was paid during the ~~current year~~ period. ~~Proceeds from the sale~~

Table of assets in the current year period included $73.4 million related to the sale of the first multi-family rental property constructed by DHI Communities. In the prior year period, we paid $558.3 million to purchase 75% of the outstanding shares of Forestar, which had $401.9 million of cash on the acquisition date. Proceeds from the sale of assets in the prior year period included $228.6 million related to Forestar, primarily from the strategic sale of assets.Contents

Financing Cash Flow Activities

We expect the short-term financing needs of our operations will be funded with existing cash, cash generated from operations and borrowings under our credit facilities. Long-term financing needs for ~~the growth of~~ our homebuilding and Forestar operations may be funded with the issuance of senior unsecured debt securities or equity securities through the capital markets.

During the six months ended March 31, 2020, net cash provided by financing activities was $453.0 million, consisting primarily of note proceeds of $800 million from draws on our homebuilding revolving credit facility, our issuance of $500 million principal amount of 2.5% homebuilding senior notes, Forestar’s issuance of $300 million principal amount of 5.0% senior notes and net advances of $297.6 million on our mortgage repurchase facility. Note proceeds were partially offset by repayment of amounts drawn on our homebuilding revolving credit facility totaling $300 million, repayment of $500 million principal amount of our 4.0% senior notes at maturity, Forestar’s repayment of $118.9 million principal amount of its 3.75% convertible senior notes at maturity, cash used to repurchase 7.0 million shares of our common stock for $360.4 million and payment of cash dividends totaling $128.7 million.

During the six months ended March 31, 2019, net cash provided by financing activities was $8.0 million, consisting primarily of note proceeds of $1.8 billion from draws on our homebuilding revolving credit facility and net advances of $53.0 million on our mortgage repurchase facility. Note proceeds were largely offset by note repayments, repurchases of common stock and payments of cash dividends. Note proceeds of $1.8 billion were due to draws on our revolving credit facilities. Note repayments of $1.5 billion included repaymentsrepayment of amounts drawn on our homebuilding revolving credit facility oftotaling $1.0 billion, ~~and~~ repayment of $500 million principal amount of our 3.75% homebuilding senior notes at ~~maturity. We also~~maturity, cash used ~~cash of $216.2 million~~ to repurchase 6.1 million shares of our common stock for $216.2 million and $111.9 million to pay dividends to our common stockholders. During the six months ended March 31, 2018, net cash provided by financing activities was $109.3 million, consisting primarily of note proceeds, partially offset by note repayments, paymentspayment of cash dividends and repurchases of common stock. Note proceeds of $1.9 billion included draws of $1.5 billion on our homebuilding revolving credit facility and our issuance of $400 million principal amount of 2.55% senior notes due December 2020. Note repayments of $1.8 billion included our early redemptiontotaling $111.9 million.

During each of the ~~$400 million principal amount~~first two quarters of fiscal 2020, our ~~3.625% senior notes due~~Board of Directors approved and paid quarterly cash dividends of $0.175 per common share, the most recent of which was paid on February ~~2018 and repayments~~24, 2020 to stockholders of ~~amounts drawn~~record on ~~our homebuilding revolving credit facility of $1.3 billion. We also used cash to repurchase 1.0 million shares of our common stock for $47.9 million during the prior year period.~~

~~During the three months ended March 31, 2019,~~February 10, 2020. In April 2020, our Board of Directors approved a quarterly cash dividend of ~~$0.15 per common share, which was paid on February 25, 2019 to stockholders of record on February 11, 2019. In April 2019, our Board of Directors approved a quarterly cash dividend of $0.15~~$0.175 per common share, payable on May ~~28, 2019~~21, 2020 to stockholders of record on May ~~13, 2019.~~11, 2020. Cash dividends of ~~$0.125~~$0.15 per common share were approved and paid in each quarter of fiscal ~~2018.~~2019. The declaration of future cash dividends is at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, cash flows, capital requirements, financial condition and general business conditions.

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CONTRACTUAL CASH OBLIGATIONS, COMMERCIAL COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS

Our primary contractual cash obligations are payments under our debt agreements and lease payments under operating leases. We expect to fund our contractual obligations in the ordinary course of business through a combination of our existing cash resources, cash flows generated from profits, our credit facilities or other bank financing, and the issuance of new debt or equity securities through the public capital markets as market conditions may permit.

At March 31, ~~2019,~~2020, we had outstanding letters of credit of ~~$148.3~~$147.3 million and surety bonds of ~~$1.6~~$1.8 billion, issued by third parties to secure performance under various contracts. We expect that our performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms. When we complete our performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving us with no continuing obligations. We have no material third-party guarantees.

Our mortgage subsidiary enters into various commitments related to the lending activities of our mortgage operations. Further discussion of these commitments is provided in Item 3 “Quantitative and Qualitative Disclosures about Market Risk” under Part I of this quarterly report on Form 10-Q.

We enter into land and lot purchase contracts to acquire land or lots for the construction of homes. Lot purchase contracts enable us to control significant lot positions with limited capital investment. Among our homebuilding land and lot purchase contracts at March 31, ~~2019,~~2020, there were a limited number of contracts, representing ~~$96.8~~$70.7 million of remaining purchase price, subject to specific performance provisions that may require us to purchase the land or lots upon the land sellers meeting their respective contractual obligations. Of this amount, ~~$50.9~~$24.2 million related to contracts between our homebuilding segment and Forestar. Further information about our land purchase contracts is provided in the “Homebuilding Inventories, Land and Lot Position and Homes in Inventory” section included herein.

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SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

As of March 31, 2020, D.R. Horton, Inc. had outstanding $1.95 billion principal amount of homebuilding senior notes due through October 2024 and $500 million drawn on its homebuilding revolving credit facility.

All of the homebuilding senior notes and the homebuilding revolving credit facility are fully and unconditionally guaranteed, on a joint and several basis, by certain subsidiaries of D.R. Horton, Inc. (Guarantors or Guarantor Subsidiaries). Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by D.R. Horton, Inc. Our subsidiaries associated with the Forestar lot development operation, financial services operations, multi-family residential construction and certain other subsidiaries do not guarantee the homebuilding senior notes or the homebuilding revolving credit facility (collectively, Non-Guarantor Subsidiaries). The guarantees are senior unsecured obligations of each Guarantor and rank equal with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees are effectively subordinated to any secured debt of such Guarantor to the extent of the value of the assets securing such debt. The guarantees will be structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries of the Guarantors.

The guarantees by a Guarantor Subsidiary will be automatically and unconditionally released and discharged upon: (1) the sale or other disposition of its common stock whereby it is no longer a subsidiary of ours; (2) the sale or other disposition of all or substantially all of its assets (other than to us or another Guarantor); (3) its merger or consolidation with an entity other than us or another Guarantor; or (4) its ceasing to guarantee any of our publicly traded debt securities and ceasing to guarantee any of our obligations under our homebuilding revolving credit facility.

The following tables present summarized financial information for D.R. Horton, Inc. and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among D.R. Horton, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.


D.R. Horton, Inc. and Guarantor Subsidiaries

Summarized Balance Sheet Data	March 31, 2020		September 30, 2019
	(In millions)
Assets
Cash	$	959.2	$	992.9
Inventories	10,938.7		10,056.8
Amount due from Non-Guarantor Subsidiaries	515.0		473.2
Total assets	13,866.3		12,874.1
Liabilities & Stockholders’ Equity
Notes payable	$	2,480.0	$	1,970.1
Total liabilities	4,255.3		3,657.5
Stockholders’ equity	9,611.0		9,216.6

Summarized Statement of Operations Data	Six Months Ended March 31, 2020		Fiscal Year Ended September 30, 2019
	(In millions)
Revenues	$	8,269.1	$	17,023.0
Cost of sales	6,531.3		13,651.8
Selling, general and administrative expense	717.7		1,476.2
Income before income taxes	1,028.1		1,903.5
Net income	826.7		1,447.1

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A court could void or subordinate any Guarantor’s guarantee under the fraudulent conveyance laws if existing or future creditors of any such Guarantor were successful in establishing that:

•such guarantee was incurred with fraudulent intent; or

•such Guarantor did not receive fair consideration or reasonably equivalent value for issuing its guarantee; and

•was insolvent at the time of the guarantee;

•was rendered insolvent by reason of the guarantee;

•was engaged in a business or transaction for which its assets constituted unreasonably small capital to carry on its business; or

•intended to incur, or believed that it would incur, debt beyond its ability to pay such debt as it matured.

The measures of insolvency for purposes of determining whether a fraudulent conveyance occurred would vary depending upon the laws of the relevant jurisdiction and upon the valuation assumptions and methodology applied by the court. Generally, however, a company would be considered insolvent for purposes of the foregoing if:

•the sum of the company’s debts, including contingent, unliquidated and unmatured liabilities, is greater than all of such company’s property at a fair valuation; or

•the present fair saleable value of the company’s assets is less than the amount that will be required to pay the probable liability on its existing debts as they become absolute and matured.

The indentures governing our homebuilding senior notes contain a “savings clause,” which limits the liability of each Guarantor on its guarantee to the maximum amount that such Guarantor can incur without risk that its guarantee will be subject to avoidance as a fraudulent transfer. This provision may not be effective to protect such guarantees from fraudulent transfer challenges or, if it does, it may reduce such Guarantor’s obligation such that the remaining amount due and collectible under the guarantees would not suffice, if necessary, to pay the notes in full when due.

On the basis of historical financial information, operating history and other factors, we believe that each of the Guarantors, after giving effect to the issuance of the guarantees when such guarantees were issued, was not insolvent, did not have unreasonably small capital for the business in which it engaged and did not and has not incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

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CRITICAL ACCOUNTING POLICIES

As disclosed in our annual report on Form 10-K for the fiscal year ended September 30, ~~2018,~~2019, our most critical accounting policies relate to revenue recognition, inventories and cost of sales, ~~business acquisitions, goodwill,~~ warranty claims and legal claims and ~~insurance, income taxes, stock-based compensation and fair value measurements.~~insurance. Since September 30, ~~2018,~~2019, there have been no significant changes to those critical accounting policies.

As disclosed in our critical accounting policies in our Form 10-K for the fiscal year ended September 30, ~~2018,~~2019, our reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims. At March 31, 2020 and September 30, 2019, we had reserves for approximately 220 and 180 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the six months ended March 31, 2020, we established reserves for approximately 85 new construction defect claims and resolved 45 construction defect claims for a total cost of $18.3 million. At March 31, 2019 and September 30, 2018, we had reserves for approximately 160 and 155 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the six months ended March 31, 2019, we established reserves for approximately 50 new construction defect claims and resolved 45 construction defect claims for a total cost of $5.4 million. At March 31, 2018 and September 30, 2017, we had reserves for approximately 135 and 140 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the six months ended March 31, 2018, we established reserves for approximately 45 new construction defect claims and resolved 50 construction defect claims for a total cost of $12.3 million.

SEASONALITY

Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again in the future, we generally close more homes and generate greater revenues and operating income in the third and fourth quarters of our fiscal year. The seasonal nature of our business can also cause significant variations in our working capital requirements in ~~both~~ our homebuilding, lot development and financial services operations. As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular fiscal quarter are not necessarily representative of the balance of our fiscal year. Due to the impact of COVID-19, our homes closed, revenues and operating income in fiscal 2020 may not follow our historical seasonal patterns.

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Forward-Looking Statements

Some of the statements contained in this report, as well as in other materials we have filed or will file with the ~~Securities and Exchange Commission (SEC),~~SEC, statements made by us in periodic press releases and oral statements we make to analysts, stockholders and the press in the course of presentations about us, may be construed as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “projection,” “seek,” “should,” “strategy,” “target,” “will,” “would” or other words of similar meaning. Any or all of the forward-looking statements included in this report and in any other of our reports or public statements may not approximate actual experience, and the expectations derived from them may not be realized, due to risks, uncertainties and other factors. As a result, actual results may differ materially from the expectations or results we discuss in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:

•the effects of public health issues such as a major epidemic or pandemic, including the impact of COVID-19 on the economy and our businesses;

•the cyclical nature of the homebuilding ~~industry~~and lot development industries and changes in economic, real estate and other conditions;

•constriction of the credit and public capital markets, which could limit our ability to access capital and increase our costs of capital;

•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;

•the risks associated with our land and lot inventory;

•our ability to effect our growth strategies, acquisitions or investments successfully;

•the impact of an inflationary, deflationary or higher interest rate environment;

•home warranty and construction defect claims;

•the effects of health and safety incidents;

•the effects of negative publicity;

•supply shortages and other risks of acquiring land, building materials and skilled labor;

•reductions in the availability of performance bonds;

•increases in the costs of owning a home;

•the effects of governmental regulations and environmental matters on our homebuilding and land development operations;

•the effects of governmental regulations on our financial services operations;

~~our significant debt and~~ •our ability to manage and service our debt and comply with related debt covenants, restrictions and limitations;

•competitive conditions within the homebuilding, lot development and financial services industries;

•the effects of the loss of key personnel; and

•information technology failures and data security breaches.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. Additional information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained in our annual report on Form 10-K for the fiscal year ended September 30, ~~2018~~,2019, including the section entitled “Risk Factors,” as supplemented by Part II, Item 1A. in this quarterly report on Form 10-Q, which is filed with the SEC.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to interest rate risk on our long-term debt. We monitor our exposure to changes in interest rates and utilize both fixed and variable rate debt. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument, but may affect our future earnings and cash flows. Except in very limited circumstances, we do not have an obligation to prepay fixed-rate debt prior to maturity and, as a result, interest rate risk and changes in fair value would not have a significant impact on our cash flows related to our fixed-rate debt until such time as we are required to refinance, repurchase or repay such debt.

We are exposed to interest rate risk associated with our mortgage loan origination services. We manage interest rate risk through the use of forward sales of mortgage-backed securities (MBS), which are referred to as “hedging instruments” in the following discussion. We do not enter into or hold derivatives for trading or speculative purposes.

Interest rate lock commitments (IRLCs) are extended to borrowers who have applied for loan funding and who meet defined credit and underwriting criteria. Typically, the IRLCs have a duration of less than six months. Some IRLCs are committed immediately to a specific purchaser through the use of best-efforts whole loan delivery commitments, while other IRLCs are funded prior to being committed to third-party purchasers. The hedging instruments related to IRLCs are classified and accounted for as derivative instruments in an economic hedge, with gains and losses recognized in revenues in the consolidated statements of operations. Hedging instruments related to funded, uncommitted loans are accounted for at fair value, with changes recognized in revenues in the consolidated statements of operations, along with changes in the fair value of the funded, uncommitted loans. The fair value change related to the hedging instruments generally offsets the fair value change in the uncommitted loans. The net fair value change, which for the three and six months ended March 31, ~~2019~~2020 and ~~2018~~2019 was not significant, is recognized in current earnings. At March 31, ~~2019~~,2020, hedging instruments used to mitigate interest rate risk related to uncommitted mortgage loans held for sale and uncommitted IRLCs totaled a notional amount of ~~$1.2 billion~~.$2.3 billion. Uncommitted IRLCs totaled a notional amount of approximately ~~$663.9 million~~$1.6 billion and uncommitted mortgage loans held for sale totaled a notional amount of approximately ~~$567.1~~$792.1 million at March 31, ~~2019.~~2020.

We occasionally enter into forward sales of MBS as part of a program to offer below market interest rate financing to our homebuyers in certain markets. At March 31, 2020, we had MBS totaling $383.4 million that did not yet have IRLCs or closed loans created or assigned and recorded a liability of $4.9 million for the fair value of such MBS position.

The following table sets forth principal cash flows by scheduled maturity, effective weighted average interest rates and estimated fair value of our debt obligations as of March 31, ~~2019~~.2020. Because the mortgage repurchase facility is effectively secured by certain mortgage loans held for sale that are typically sold within 60 days, its outstanding balance is included in the most current period presented. The interest rate for our variable rate debt represents the weighted average interest rate in effect at March 31, ~~2019~~.2020.


	Six Months Ending September 30, 2020	Fiscal Year Ending September 30,															Fair Value at March 31, 2020
			2021		2022		2023		2024		2025		Thereafter		Total
	($ in millions)
Debt:
Fixed rate	$—	$435.8		$350.3		$700.4		$350.3		$500.4		$300.8		$2,638.0		$2,579.2
Average interest rate	—%	2.8%		4.5%		5.5%		8.6%		2.7%		5.3%		4.2%
Variable rate	$1,186.5	$—		$—		$—		$—		$500.0		$—		$1,686.5		$1,686.5
Average interest rate	2.6%	—%		—%		—%		—%		1.7%		—%		2.3%

Six Months
Ending
September 30, 2019 Fiscal Year Ending September 30, Fair Value at March 31, 2019
2020 2021 2022 2023 2024 Thereafter Total
($ in millions)
Debt:
Fixed rate $ 3.1
$ 696.4
$ 403.3
$ 350.0
$ 700.0
$ —
$ —
$ 2,152.8
$ 2,208.2
Average interest rate 4.1 % 3.8 % 2.8 % 4.5 % 5.5 % — % — % 4.3 %
Variable rate $ 690.7
$ —
$ 35.0
$ —
$ 750.0
$ —
$ —
$ 1,475.7
$ 1,475.7
Average interest rate 4.2 % — % 4.8 % — % 3.7 % — % — % 3.9 %
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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures as of March 31, ~~2019~~2020 were effective in providing reasonable assurance that information required to be disclosed in the reports the Company files, furnishes, submits or otherwise provides the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed in reports filed by the Company under the Exchange Act is accumulated and communicated to the Company’s management, including the CEO and CFO, in such a manner as to allow timely decisions regarding the required disclosure.

There have been no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in lawsuits and other contingencies in the ordinary course of business. While the outcome of such contingencies cannot be predicted with certainty, we believe that the liabilities arising from these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds our estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

In fiscal 2013, our mortgage subsidiary was subpoenaed by the United States Department of Justice (DOJ) regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years. We have provided information related to these loans and our processes to theDOJ, and communications are ongoing. The DOJ has to date not asserted any formal claim amount, penalty or fine.

In May and July of 2014, we received Notices of Violation from the United States Environmental Protection Agency (EPA) related to stormwater compliance at certain of our sites in our Southeast region. This matter could potentially result in monetary sanctions to the Company; however, we do not believe it is reasonably possible that this matter would result in a loss that would have a material effect on our consolidated financial position, results of operations or cash flows.

In October 2018, we reached an agreement in principle with the EPA to settle an alleged violation of the wetlands provisions of the Clean Water Act at one of our development sites in our Southeast region. Upon finalizing the agreement in March 2019, we paid a penalty of $267,000 without an admission of liability. We ~~also~~ are participating in settlement discussions with the U.S. Army Corps of Engineers (ACOE) and DOJ concerning alleged violations of the wetlands provisions of the Clean Water Act at ~~another~~a development site in our Southeast region relating to a violation notice the ACOE issued in April 2017. This matter could potentially result in a settlement that includes a penalty ~~that could range between $100,000 and~~of approximately $350,000 without an admission of ~~liability, but the final scope of the potential penalty is not known at this time.~~liability. We do not believe it is reasonably possible that this matter ~~would~~will result in a loss that would have a material effect on our consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

In addition to the risk factors previously presented in our annual report on Form 10-K for the year ended September 30, 2019, we have expanded our discussion of risks related to public health issues by adding the following risk factor to address the current COVID-19 pandemic.

Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results.

The U.S. and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk. In December 2019, a novel coronavirus (COVID-19) emerged in the Wuhan region of China and has subsequently spread worldwide. The World Health Organization has declared COVID-19 a pandemic, resulting in federal, state and local governments and private entities mandating various restrictions, requiring closure of non-essential businesses and recommending people remain at home in all of the markets we serve. Although there can be no assurance decisions will not change in the future, in almost all of the municipalities across the U.S. where we operate, residential construction and financial services have been designated as essential businesses as part of critical infrastructure. We have continued our homebuilding, lot development and financial services operations in those markets where allowed and have implemented operational protocols to comply with social distancing and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.

Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence and consumer confidence. There is significant uncertainty regarding the extent to which and how long COVID-19 and related government directives, actions and economic relief efforts will disrupt the U.S. economy and level of employment, capital markets, secondary mortgage markets, consumer confidence, demand for our homes and availability of mortgage loans to homebuyers. The extent to which COVID-19 impacts our operational and financial performance will depend on future developments, including the duration and spread of COVID-19 and the impact on our customers, trade partners and employees, all of which are highly uncertain and cannot be predicted. If COVID-19 has a significant negative impact on economic conditions over a prolonged period of time, our results of operations and financial condition could be adversely impacted.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

We may repurchase shares of our common stock from time to time pursuant to our common stock repurchase authorization. The following table sets forth information concerning our common stock repurchases during the three months ended March 31, ~~2019.~~2020. All share repurchases were made in accordance with the safe harbor provisions of Rule 10b-18 under the Securities Exchange Act of 1934.


	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1) (In millions)
January 1, 2020 - January 31, 2020	—	$	—	—	$	732.6
February 1, 2020 - February 29, 2020	2,221,240	$	55.69	2,221,240	608.9
March 1, 2020 - March 31, 2020	1,778,760	$	41.38	1,778,760	535.3
Total	4,000,000	$	49.33	4,000,000	$	535.3

Total Number of Shares Purchased (1)

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1)
(In millions)
January 1, 2019 - January 31, 2019 —
$ —
—
$ 234.9
February 1, 2019 - February 28, 2019 2,000,000
37.84
2,000,000
159.3
March 1, 2019 - March 31, 2019 —
—
—
159.3
Total 2,000,000
$ 37.84
2,000,000
$ 159.3

~~______________~~_________________

(1) Shares purchased during the three months ended March 31, ~~2019~~2020 were part of a ~~$400 million~~$1.0 billion common stock repurchase authorization approved by our Board of Directors effective ~~from August 1, 2018 through September~~July 30, 2019. The authorization has no expiration date. At March 31, ~~2019,~~2020, there was ~~$159.3~~$535.3 million remaining on the repurchase authorization.

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ITEM 6. EXHIBITS

(a)

Exhibits.

2.1

Agreement and Plan of Merger dated June 29, 2017 by and among D.R. Horton, Inc., Force Merger Sub, Inc. and Forestar Group Inc. ~~(1)~~(incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K dated June 29, 2017, filed with the SEC on June 29, 2017).

3.1

Certificate of Amendment of the Amended and Restated Certificate of Incorporation, as amended, of the Company dated January 31, 2006, and the Amended and Restated Certificate of Incorporation, as amended, of the Company dated March 18, ~~1992. (2)~~

~~3.2~~

~~Amended and Restated Bylaws of the Company. (3)~~

~~10.1~~

~~Amendment No. 8 to Credit Agreement, dated February 15, 2019 by and among the Registrant, Mizuho Bank, Ltd., as successor Administrative Agent, and the Lenders named therein. (*)~~

~~10.2~~

Sixth Amendment to Second Amended and Restated Master Repurchase Agreement, dated February 22, 2019, among DHI Mortgage Company, Ltd., U.S. Bank National Association, as Administrative Agent, Sole Book Runner, Lead Arranger, and a Buyer, and all other Buyers. (4)

~~31.1~~

~~Certificate of Chief Executive Officer provided pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. (*)~~

~~31.2~~

~~Certificate of Chief Financial Officer provided pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. (*)~~

~~32.1~~

~~Certificate provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Company’s Chief Executive Officer. (*)~~

~~32.2~~

~~Certificate provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Company’s Chief Financial Officer. (*)~~

~~101~~

The following financial statements from D.R. Horton, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed on April 30, 2019, formatted in XBRL (Extensible Business Reporting Language); (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Total Equity, (iv) Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements. (*)



*	~~Filed herewith.~~
~~(1)~~	~~Incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K dated June 29, 2017, filed with the SEC on June 29, 2017.~~
~~(2)~~	~~Incorporated~~1992 (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2005, filed with the SEC on February 2, ~~2006.~~2006).
	~~(3)~~3.2	~~Incorporated~~	Amended and Restated Bylaws of the Company (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K dated November 2, 2017, filed with the SEC on November 8, ~~2017.~~2017).
	~~(4)~~4.1	~~Incorporated~~	Indenture, dated as of February 25, 2020, by and among Forestar Group Inc., the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of Forestar’s Current Report on Form 8-K filed with the SEC on February 25, 2020).
	10.1		Ninth Amendment to Second Amended and Restated Master Repurchase Agreement, dated February 21, 2020, among DHI Mortgage Company, Ltd., U.S. Bank National Association, as Administrative Agent, Sole Book Runner, Lead Arranger, and a Buyer, and all other Buyers (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February ~~22, 2019,~~21, 2020, filed with the SEC on February ~~22, 2019.~~26, 2020).
	22.1	*	List of Guarantor Subsidiaries.
	31.1	*	Certificate of Chief Executive Officer provided pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
	31.2	*	Certificate of Chief Financial Officer provided pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
	32.1	*	Certificate provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Company’s Chief Executive Officer.
	32.2	*	Certificate provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Company’s Chief Financial Officer.
	101.INS	**	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
	101.SCH	**	Inline XBRL Taxonomy Extension Schema Document.
	101.CAL	**	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
	101.DEF	**	Inline XBRL Taxonomy Extension Definition Linkbase Document.
	101.LAB	**	Inline XBRL Taxonomy Extension Label Linkbase Document.
	101.PRE	**	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
	104	**	Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101).
	*		Filed or furnished herewith.
	**		Submitted electronically herewith.

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SIGNATURES

~~SIGNATURE~~

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:	April ~~30, 2019~~29, 2020	By:	/s/ Bill W. Wheat
			Bill W. Wheat ~~on behalf of D.R. Horton, Inc.,~~
			as Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)
Date:	April 29, 2020	By:	/s/ Aron M. Odom
			Aron M. Odom
			Vice President and Controller
			(Principal Accounting Officer)

7267


			Delaware			75-2386963
			(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)




	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Balance Sheets at March 31, ~~2019~~20 20 and September 30, ~~2018~~2019		3
Consolidated Statements of Operations for the three and six months ended March 31, ~~2019~~20 20 and ~~2018~~20 19		4
Consolidated Statements of Total Equity for the three and six months ended March 31, ~~2019~~20 20 and ~~2018~~20 19		5
Consolidated Statements of Cash Flows for the six months ended March 31, ~~2019~~20 20 and ~~2018~~20 19		7
Notes to Consolidated Financial Statements		8
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		4133
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk		6862
ITEM 4. Controls and Procedures		6963
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings		7064
ITEM 1A. Risk Factors		64
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		7065
ITEM 6. Exhibits		7166
~~SIGNATURE~~SIGNATURES		7267


	March 31, 2020		September 30, 2019
	(In millions) (Unaudited)
ASSETS
Cash and cash equivalents	$	1,522.8	$	1,494.3
Restricted cash	14.5		19.7
Total cash, cash equivalents and restricted cash	1,537.3		1,514.0
Inventories:
Construction in progress and finished homes	5,969.4		5,245.0
Residential land and lots — developed and under development	6,151.9		5,939.4
Land held for development	77.1		77.8
Land held for sale	26.1		19.8
Total inventory	12,224.5		11,282.0
Mortgage loans held for sale	1,379.4		1,072.0
Deferred income taxes, net of valuation allowance of $17.8 million and $18.7 million at March 31, 2020 and September 30, 2019, respectively	149.5		163.1
Property and equipment, net	589.7		499.2
Other assets	1,086.1		912.8
Goodwill	163.5		163.5
Total assets	$	17,130.0	$	15,606.6
LIABILITIES
Accounts payable	$	707.0	$	634.0
Accrued expenses and other liabilities	1,381.6		1,278.1
Notes payable	4,306.6		3,399.4
Total liabilities	6,395.2		5,311.5
Commitments and contingencies (Note L)
EQUITY
Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued	—		—
Common stock, $.01 par value, 1,000,000,000 shares authorized, 394,279,177 shares issued and 363,537,810 shares outstanding at March 31, 2020 and 392,172,821 shares issued and 368,431,454 shares outstanding at September 30, 2019	3.9		3.9
Additional paid-in capital	3,191.3		3,179.1
Retained earnings	8,425.4		7,640.1
Treasury stock, 30,741,367 shares and 23,741,367 shares at March 31, 2020 and September 30, 2019, respectively, at cost	(1,162.6)		(802.2)
Stockholders’ equity	10,458.0		10,020.9
Noncontrolling interests	276.8		274.2
Total equity	10,734.8		10,295.1
Total liabilities and equity	$	17,130.0	$	15,606.6



	March 31, 2019			September 30, 2018
	(In millions) (Unaudited)
ASSETS
Cash and cash equivalents	$	698.8		$	1,473.1
Restricted cash	32.4			32.9
Total cash, cash equivalents and restricted cash	731.2			1,506.0
Inventories:
Construction in progress and finished homes	6,087.6			5,086.3
Residential land and lots — developed and under development	5,672.9			5,172.4
Land held for development	110.8			96.1
Land held for sale	49.0			40.2
Total inventory	11,920.3			10,395.0
Mortgage loans held for sale	796.5			796.4
Deferred income taxes, net of valuation allowance of $17.0 million and $17.7 million at March 31, 2019 and September 30, 2018, respectively	171.9			194.0
Property and equipment, net	437.9			401.1
Other assets	785.7			712.9
Goodwill	163.5			109.2
Total assets	$	15,007.0		$	14,114.6
LIABILITIES
Accounts payable	$	658.5		$	624.7
Accrued expenses and other liabilities	1,192.1			1,127.5
Notes payable	3,622.4			3,203.5
Total liabilities	5,473.0			4,955.7
Commitments and contingencies (Note K)
EQUITY
Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued	—			—
Common stock, $.01 par value, 1,000,000,000 shares authorized, 391,091,572 shares issued and 373,132,964 shares outstanding at March 31, 2019 and 388,120,243 shares issued and 376,261,635 shares outstanding at September 30, 2018	3.9			3.9
Additional paid-in capital	3,123.4			3,085.0
Retained earnings	6,771.6			6,217.9
Treasury stock, 17,958,608 shares and 11,858,608 shares at March 31, 2019 and September 30, 2018, respectively, at cost	(538.6		)	(322.4		)
Stockholders’ equity	9,360.3			8,984.4
Noncontrolling interests	173.7			174.5
Total equity	9,534.0			9,158.9
Total liabilities and equity	$	15,007.0		$	14,114.6


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(In millions, except per share data) (Unaudited)
Revenues	$	4,500.0	$	4,128.7	$	8,520.7	$	7,647.7
Cost of sales	3,450.8		3,256.7		6,535.0		6,007.8
Selling, general and administrative expense	466.8		444.2		922.6		847.0
Gain on sale of assets	(28.5)		(29.3)		(59.5)		(31.3)
Other (income) expense	(10.4)		(5.7)		(21.9)		(14.3)
Income before income taxes	621.3		462.8		1,144.5		838.5
Income tax expense	137.3		108.4		228.1		197.4
Net income	484.0		354.4		916.4		641.1
Net income attributable to noncontrolling interests	1.3		3.1		2.4		2.7
Net income attributable to D.R. Horton, Inc.	$	482.7	$	351.3	$	914.0	$	638.4

Basic net income per common share attributable to D.R. Horton, Inc.	$	1.32	$	0.94	$	2.49	$	1.71
Weighted average number of common shares	365.8		373.3		367.1		374.2

Diluted net income per common share attributable to D.R. Horton, Inc.	$	1.30	$	0.93	$	2.46	$	1.68
Adjusted weighted average number of common shares	370.1		377.7		371.8		378.9



(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Non-controlling Interests		Total Equity
	(In millions, except common stock share data) (Unaudited)
Balances at September 30, 2019 (368,431,454 shares)	$	3.9	$	3,179.1	$	7,640.1	$	(802.2)	$	274.2	$	10,295.1
Net income	—		—		431.3		—		1.2		432.5
Exercise of stock options (258,800 shares)	—		4.1		—		—		—		4.1
Stock issued under employee benefit plans (582,936 shares)	—		—		—		—		—		—
Cash paid for shares withheld for taxes	—		(17.3)		—		—		—		(17.3)
Stock-based compensation expense	—		16.6		—		—		—		16.6
Cash dividends declared ($0.175 per share)	—		—		(64.6)		—		—		(64.6)
Repurchases of common stock (3,000,000 shares)	—		—		—		(163.1)		—		(163.1)
Distributions to noncontrolling interests	—		—		—		—		(0.4)		(0.4)
Change of ownership interest in Forestar	—		(0.5)		—		—		0.5		—
Balances at December 31, 2019 (366,273,190 shares)	$	3.9	$	3,182.0	$	8,006.8	$	(965.3)	$	275.5	$	10,502.9
Net income	—		—		482.7		—		1.3		484.0
Exercise of stock options (310,032 shares)	—		6.2		—		—		—		6.2
Stock issued under employee benefit plans (954,588 shares)	—		2.6		—		—		—		2.6
Cash paid for shares withheld for taxes	—		(20.8)		—		—		—		(20.8)
Stock-based compensation expense	—		21.3		—		—		—		21.3
Cash dividends declared ($0.175 per share)	—		—		(64.1)		—		—		(64.1)
Repurchases of common stock (4,000,000 shares)	—		—		—		(197.3)		—		(197.3)

Balances at March 31, 2020 (363,537,810 shares)	$	3.9	$	3,191.3	$	8,425.4	$	(1,162.6)	$	276.8	$	10,734.8



	Six Months Ended March 31,
	2019			2018
	(In millions) (Unaudited)
OPERATING ACTIVITIES
Net income	$	641.1		$	539.7
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	34.1			33.1
Amortization of discounts and fees	5.1			2.4
Stock-based compensation expense	35.9			31.0
Equity in earnings of unconsolidated entities	(0.5		)	(2.7		)
Distributions of earnings of unconsolidated entities	0.5			0.2
Deferred income taxes	12.6			145.0
Inventory and land option charges	21.8			33.8
Gain on sale of assets	(31.3		)	(14.5		)
Changes in operating assets and liabilities:
Increase in construction in progress and finished homes	(755.2		)	(514.5		)
Increase in residential land and lots – developed, under development, held for development and held for sale	(445.6		)	(271.5		)
(Increase) decrease in other assets	(39.9		)	4.4
Increase in mortgage loans held for sale	—			(70.7		)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	59.7			(14.5		)
Net cash used in operating activities	(461.7		)	(98.8		)
INVESTING ACTIVITIES
Expenditures for property and equipment	(69.8		)	(39.5		)
Proceeds from sale of assets	83.8			253.4
Expenditures related to multi-family rental properties	(28.3		)	(39.5		)
Return of investment in unconsolidated entities	4.4			15.1
Net principal increase of other mortgage loans and real estate owned	(1.6		)	—
Payments related to business acquisitions, net of cash acquired	(309.6		)	(158.1		)
Net cash (used in) provided by investing activities	(321.1		)	31.4
FINANCING ACTIVITIES
Proceeds from notes payable	1,815.0			1,913.6
Repayment of notes payable	(1,531.0		)	(1,752.5		)
Advances on mortgage repurchase facility, net	53.0			69.8
Proceeds from stock associated with certain employee benefit plans	22.3			32.7
Cash paid for shares withheld for taxes	(19.5		)	(10.3		)
Cash dividends paid	(111.9		)	(94.1		)
Repurchases of common stock	(216.2		)	(47.9		)
Distributions to noncontrolling interests, net	(3.7		)	(2.0		)
Net cash provided by financing activities	8.0			109.3
Net (decrease) increase in cash, cash equivalents and restricted cash	(774.8		)	41.9
Cash, cash equivalents and restricted cash at beginning of period	1,506.0			1,024.3
Cash, cash equivalents and restricted cash at end of period	$	731.2		$	1,066.2
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
Notes payable issued for inventory	$	80.8		$	—
Stock issued under employee incentive plans	$	49.0		$	63.4
Accrual for holdback payment related to acquisition	$	16.3		$	—



Inventories	$	265.5
Other assets	23.3
Goodwill	54.3
Intangible assets	8.6
Other liabilities	(25.8		)
Net assets acquired	$	325.9



			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


	March 31, 2019																	March 31, 2020
	Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)			Other Adjustments (4)			Consolidated			Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)		Other Adjustments (4)		Consolidated
	(In millions)																	(In millions)
Assets																	Assets
Cash and cash equivalents	$	557.3	$	66.4	$	61.1	$	14.0	$	—		$	—		$	698.8	Cash and cash equivalents	$	1,012.6	$	438.2	$	45.8	$	26.2	$	—	$	—	$	1,522.8
Restricted cash	9.4		15.7		7.3		—		—			—			32.4		Restricted cash	7.8		—		6.6		0.1		—		—		14.5
Inventories:																	Inventories:
Construction in progress and finished homes	6,086.1		—		—		—		1.5			—			6,087.6		Construction in progress and finished homes	6,003.8		—		—		—		(34.4)		—		5,969.4
Residential land and lots — developed and under development	4,879.4		803.0		—		—		(22.1		)	12.6			5,672.9		Residential land and lots — developed and under development	5,009.6		1,171.0		—		—		(29.9)		1.2		6,151.9
Land held for development	62.3		48.5		—		—		—			—			110.8		Land held for development	48.9		28.2		—		—		—		—		77.1
Land held for sale	49.0		—		—		—		—			—			49.0		Land held for sale	26.1		—		—		—		—		—		26.1
	11,076.8		851.5		—		—		(20.6		)	12.6			11,920.3			11,088.4		1,199.2		—		—		(64.3)		1.2		12,224.5
Mortgage loans held for sale	—		—		796.5		—		—			—			796.5		Mortgage loans held for sale	—		—		1,379.4		—		—		—		1,379.4
Deferred income taxes, net	155.0		22.9		—		—		1.5			(7.5		)	171.9		Deferred income taxes, net	136.7		8.0		—		—		10.8		(6.0)		149.5
Property and equipment, net	220.2		2.4		3.4		211.9		—			—			437.9		Property and equipment, net	327.2		1.0		3.3		259.2		(1.0)		—		589.7
Other assets	732.8		26.0		52.1		37.4		(75.2		)	12.6			785.7		Other assets	891.5		29.2		203.5		47.9		(97.6)		11.6		1,086.1
Goodwill	134.3		—		—		—		—			29.2			163.5		Goodwill	134.3		—		—		—		—		29.2		163.5
	$	12,885.8	$	984.9	$	920.4	$	263.3	$	(94.3	)	$	46.9		$	15,007.0		$	13,598.5	$	1,675.6	$	1,638.6	$	333.4	$	(152.1)	$	36.0	$	17,130.0
Liabilities																	Liabilities
Accounts payable	$	631.7	$	16.1	$	9.4	$	3.0	$	(1.7	)	$	—		$	658.5	Accounts payable	$	670.6	$	23.1	$	0.2	$	13.1	$	—	$	—	$	707.0
Accrued expenses and other liabilities	1,102.2		131.9		43.8		10.9		(83.3		)	(13.4		)	1,192.1		Accrued expenses and other liabilities	1,165.7		175.6		146.7		10.5		(105.1)		(11.8)		1,381.6
Notes payable	2,777.2		149.2		690.7		—		—			5.3			3,622.4		Notes payable	2,480.0		640.1		1,186.5		—		—		—		4,306.6
	$	4,511.1	$	297.2	$	743.9	$	13.9	$	(85.0	)	$	(8.1	)	$	5,473.0		$	4,316.3	$	838.8	$	1,333.4	$	23.6	$	(105.1)	$	(11.8)	$	6,395.2


~~(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																	September 30, 2019
	Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)			Other Adjustments (4)			Consolidated			Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)		Other Adjustments (4)		Consolidated
	(In millions)																	(In millions)
Assets																	Assets
Cash and cash equivalents	$	1,111.8	$	318.8	$	33.7	$	8.8	$	—		$	—		$	1,473.1	Cash and cash equivalents	$	1,043.0	$	382.8	$	43.4	$	25.1	$	—	$	—	$	1,494.3
Restricted cash	8.6		16.2		8.1		—		—			—			32.9		Restricted cash	8.0		—		11.6		0.1		—		—		19.7
Inventories:																	Inventories:
Construction in progress and finished homes	5,084.4		—		—		—		1.9			—			5,086.3		Construction in progress and finished homes	5,249.0		—		—		—		(4.0)		—		5,245.0
Residential land and lots — developed and under development	4,689.3		463.1		—		—		(7.2		)	27.2			5,172.4		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	61.2		34.9		—		—		—			—			96.1		Land held for development	60.7		17.1		—		—		—		—		77.8
Land held for sale	40.2		—		—		—		—			—			40.2		Land held for sale	19.8		—		—		—		—		—		19.8
	9,875.1		498.0		—		—		(5.3		)	27.2			10,395.0			10,285.6		1,028.9		—		—		(35.4)		2.9		11,282.0
Mortgage loans held for sale	—		—		796.4		—		—			—			796.4		Mortgage loans held for sale	—		—		1,072.0		—		—		—		1,072.0
Deferred income taxes, net	176.5		26.9		—		—		1.1			(10.5		)	194.0		Deferred income taxes, net	146.4		17.4		—		—		5.1		(5.8)		163.1
Property and equipment, net	207.1		1.8		3.0		189.2		—			—			401.1		Property and equipment, net	272.4		2.4		3.2		221.2		—		—		499.2
Other assets	673.7		31.4		43.6		0.9		(48.6		)	11.9			712.9		Other assets	826.2		24.2		68.3		71.5		(88.5)		11.1		912.8
Goodwill	80.0		—		—		—		—			29.2			109.2		Goodwill	134.3		—		—		—		—		29.2		163.5
	$	12,132.8	$	893.1	$	884.8	$	198.9	$	(52.8	)	$	57.8		$	14,114.6		$	12,715.9	$	1,455.7	$	1,198.5	$	317.9	$	(118.8)	$	37.4	$	15,606.6
Liabilities																	Liabilities
Accounts payable	$	612.4	$	11.2	$	0.2	$	4.2	$	(3.3	)	$	—		$	624.7	Accounts payable	$	598.6	$	16.8	$	7.0	$	11.6	$	—	$	—	$	634.0
Accrued expenses and other liabilities	1,041.3		95.7		41.9		9.9		(46.1		)	(15.2		)	1,127.5		Accrued expenses and other liabilities	1,152.5		169.5		53.0		9.3		(93.6)		(12.6)		1,278.1
Notes payable	2,445.9		111.7		637.7		—		—			8.2			3,203.5		Notes payable	2,047.6		460.5		888.9		—		—		2.4		3,399.4
	$	4,099.6	$	218.6	$	679.8	$	14.1	$	(49.4	)	$	(7.0	)	$	4,955.7		$	3,798.7	$	646.8	$	948.9	$	20.9	$	(93.6)	$	(10.2)	$	5,311.5


																							Three Months Ended March 31, 2020
	Three Months Ended March 31, 2019																						Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)		Other Adjustments (4)		Consolidated
	Homebuilding			Forestar (1)			Financial Services			Other (2)			Eliminations (3)			Other Adjustments (4)			Consolidated				(In millions)
	(In millions)
Revenues:
Revenues																						Revenues
Home sales	$	3,980.5		$	—		$	—		$	—		$	—		$	—		$	3,980.5		Home sales	$	4,363.3	$	—	$	—	$	—	$	—	$	—	$	4,363.3
Land/lot sales and other	14.9			65.4			—			6.0			(39.7		)	—			46.6			Land/lot sales and other	15.5		159.1		—		9.5		(151.9)		—		32.2
Financial services	—			—			101.6			—			—			—			101.6			Financial services	—		—		104.5		—		—		—		104.5
	3,995.4			65.4			101.6			6.0			(39.7		)	—			4,128.7				4,378.8		159.1		104.5		9.5		(151.9)		—		4,500.0
Cost of sales:
Cost of sales																						Cost of sales
Home sales (5)	3,214.2			—			—			—			(0.7		)	—			3,213.5			Home sales (5)	3,435.5		—		—		—		(11.0)		—		3,424.5
Land/lot sales and other	9.3			43.7			—			—			(31.8		)	8.2			29.4			Land/lot sales and other	11.3		136.5		—		—		(130.4)		—		17.4
Inventory and land option charges	13.8			—			—			—			—			—			13.8			Inventory and land option charges	8.8		0.1		—		—		—		—		8.9
	3,237.3			43.7			—			—			(32.5		)	8.2			3,256.7				3,455.6		136.6		—		—		(141.4)		—		3,450.8
Selling, general and administrative expense	359.3			6.2			71.3			7.3			—			0.1			444.2			Selling, general and administrative expense	361.8		11.2		85.9		7.8		—		0.1		466.8
Gain on sale of assets	—			—			—			(29.3		)	—			—			(29.3		)	Gain on sale of assets	—		(0.3)		—		(28.2)		—		—		(28.5)
Other (income) expense	(1.6		)	(0.9		)	(3.7		)	0.5			—			—			(5.7		)	Other (income) expense	(4.1)		(2.1)		(6.1)		1.9		—		—		(10.4)
Income before income taxes	$	400.4		$	16.4		$	34.0		$	27.5		$	(7.2	)	$	(8.3	)	$	462.8		Income before income taxes	$	565.5	$	13.7	$	24.7	$	28.0	$	(10.5)	$	(0.1)	$	621.3


~~(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.~~


~~(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.


	Six Months Ended March 31, 2019																						Six Months Ended March 31, 2020
	Homebuilding			Forestar (1)			Financial Services			Other (2)			Eliminations (3)			Other Adjustments (4)			Consolidated				Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)		Other Adjustments (4)		Consolidated
	(In millions)																						(In millions)
Revenues:																						Revenues:
Home sales	$	7,391.2		$	—		$	—		$	—		$	—		$	—		$	7,391.2		Home sales	$	8,226.6	$	—	$	—	$	—	$	—	$	—	$	8,226.6
Land/lot sales and other	21.7			103.8			—			12.8			(68.7		)	—			69.6			Land/lot sales and other	35.2		406.4		—		18.3		(373.2)		—		86.7
Financial services	—			—			186.9			—			—			—			186.9			Financial services	—		—		207.4		—		—		—		207.4
	7,412.9			103.8			186.9			12.8			(68.7		)	—			7,647.7				8,261.8		406.4		207.4		18.3		(373.2)		—		8,520.7
Cost of sales:																						Cost of sales:
Home sales (5)	5,943.4			—			—			—			(1.7		)	—			5,941.7			Home sales (5)	6,487.0		—		—		—		(17.7)		—		6,469.3
Land/lot sales and other	14.5			74.3			—			—			(56.3		)	11.8			44.3			Land/lot sales and other	24.7		352.8		—		—		(323.9)		(0.7)		52.9
Inventory and land option charges	21.8			—			—			—			—			—			21.8			Inventory and land option charges	12.4		0.4		—		—		—		—		12.8
	5,979.7			74.3			—			—			(58.0		)	11.8			6,007.8				6,524.1		353.2		—		—		(341.6)		(0.7)		6,535.0
Selling, general and administrative expense	683.9			11.9			137.0			13.9			—			0.3			847.0			Selling, general and administrative expense	720.2		21.7		163.8		16.7		—		0.2		922.6
Gain on sale of assets	(2.0		)	(0.9		)	—			(29.3		)	—			0.9			(31.3		)	Gain on sale of assets	—		(0.1)		—		(59.4)		—		—		(59.5)
Other (income) expense	(3.5		)	(2.8		)	(7.7		)	(0.3		)	—			—			(14.3		)	Other (income) expense	(9.6)		(4.2)		(11.6)		3.5		—		—		(21.9)
Income before income taxes	$	754.8		$	21.3		$	57.6		$	28.5		$	(10.7	)	$	(13.0	)	$	838.5		Income before income taxes	$	1,027.1	$	35.8	$	55.2	$	57.5	$	(31.6)	$	0.5	$	1,144.5
Summary Cash Flow Information:																						Summary Cash Flow Information:
Depreciation and amortization	$	30.1		$	0.1		$	0.7		$	2.9		$	—		$	0.3		$	34.1		Depreciation and amortization	$	33.7	$	0.1	$	0.8	$	3.9	$	—	$	0.3	$	38.8
Cash (used in) provided by operating activities	$	(215.9	)	$	(283.4	)	$	48.8		$	(4.1	)	$	(2.7	)	$	(4.4	)	$	(461.7	)
Cash provided by (used in) operating activities																						Cash provided by (used in) operating activities	$	52.1	$	(123.8)	$	(312.1)	$	5.5	$	(16.8)	$	—	$	(395.1)


																							Three Months Ended March 31, 2019
	Three Months Ended March 31, 2018																						Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)		Other Adjustments (4)		Consolidated
	Homebuilding			Forestar (1)			Financial Services			Other (2)			Eliminations (3)			Other Adjustments (4)			Consolidated				(In millions)
	(In millions)
Revenues:
Revenues																						Revenues
Home sales	$	3,672.1		$	—		$	—		$	—		$	—		$	—		$	3,672.1		Home sales	$	3,980.5	$	—	$	—	$	—	$	—	$	—	$	3,980.5
Land/lot sales and other	13.6			22.6			—			—			(8.5		)	—			27.7			Land/lot sales and other	14.9		65.4		—		6.0		(39.7)		—		46.6
Financial services	—			—			94.9			—			—			—			94.9			Financial services	—		—		101.6		—		—		—		101.6
	3,685.7			22.6			94.9			—			(8.5		)	—			3,794.7				3,995.4		65.4		101.6		6.0		(39.7)		—		4,128.7
Cost of sales:
Home sales	2,907.5			—			—			—			—			—			2,907.5
Cost of sales																						Cost of sales
Home sales (5)																						Home sales (5)	3,214.2		—		—		—		(0.7)		—		3,213.5
Land/lot sales and other	12.0			16.2			—			—			(6.7		)	2.5			24.0			Land/lot sales and other	9.3		43.7		—		—		(31.8)		8.2		29.4
Inventory and land option charges	30.1			—			—			—			—			—			30.1			Inventory and land option charges	13.8		—		—		—		—		—		13.8
	2,949.6			16.2			—			—			(6.7		)	2.5			2,961.6				3,237.3		43.7		—		—		(32.5)		8.2		3,256.7
Selling, general and administrative expense	322.7			5.6			66.7			5.8			—			0.1			400.9			Selling, general and administrative expense	359.3		6.2		71.3		7.3		—		0.1		444.2
Gain on sale of assets	—			(2.7		)	—			—			—			1.6			(1.1		)	Gain on sale of assets	—		—		—		(29.3)		—		—		(29.3)
Interest expense	—			2.1			—			—			(2.1		)	—			—
Other (income) expense	(2.6		)	(3.2		)	(3.2		)	(3.6		)	—			1.1			(11.5		)	Other (income) expense	(1.6)		(0.9)		(3.7)		0.5		—		—		(5.7)
Income (loss) before income taxes	$	416.0		$	4.6		$	31.4		$	(2.2	)	$	0.3		$	(5.3	)	$	444.8
Income before income taxes																						Income before income taxes	$	400.4	$	16.4	$	34.0	$	27.5	$	(7.2)	$	(8.3)	$	462.8


	Six Months Ended March 31, 2018																						Six Months Ended March 31, 2019
	Homebuilding			Forestar (1)			Financial Services			Other (2)			Eliminations (3)			Other Adjustments (4)			Consolidated				Homebuilding		Forestar (1)		Financial Services		Other (2)		Eliminations (3)		Other Adjustments (4)		Consolidated
	(In millions)																						(In millions)
Revenues:																						Revenues:
Home sales	$	6,856.6		$	—		$	—		$	—		$	—		$	—		$	6,856.6		Home sales	$	7,391.2	$	—	$	—	$	—	$	—	$	—	$	7,391.2
Land/lot sales and other	50.0			53.5			—			—			(8.5		)	—			95.0			Land/lot sales and other	21.7		103.8		—		12.8		(68.7)		—		69.6
Financial services	—			—			176.0			—			—			—			176.0			Financial services	—		—		186.9		—		—		—		186.9
	6,906.6			53.5			176.0			—			(8.5		)	—			7,127.6				7,412.9		103.8		186.9		12.8		(68.7)		—		7,647.7
Cost of sales:																						Cost of sales:
Home sales	5,429.0			—			—			—			—			—			5,429.0
Home sales (5)																						Home sales (5)	5,943.4		—		—		—		(1.7)		—		5,941.7
Land/lot sales and other	43.3			35.5			—			—			(6.7		)	6.9			79.0			Land/lot sales and other	14.5		74.3		—		—		(56.3)		11.8		44.3
Inventory and land option charges	33.8			—			—			—			—			—			33.8			Inventory and land option charges	21.8		—		—		—		—		—		21.8
	5,506.1			35.5			—			—			(6.7		)	6.9			5,541.8				5,979.7		74.3		—		—		(58.0)		11.8		6,007.8
Selling, general and administrative expense	627.5			19.1			128.4			9.8			—			0.3			785.1			Selling, general and administrative expense	683.9		11.9		137.0		13.9		—		0.3		847.0
Gain on sale of assets	(13.4		)	(2.7		)	—			—			—			1.6			(14.5		)	Gain on sale of assets	(2.0)		(0.9)		—		(29.3)		—		0.9		(31.3)
Interest expense	—			4.2			—			—			(4.2		)	—			—
Other (income) expense	(3.4		)	(11.3		)	(6.1		)	(6.5		)	—			6.4			(20.9		)	Other (income) expense	(3.5)		(2.8)		(7.7)		(0.3)		—		—		(14.3)
Income (loss) before income taxes	$	789.8		$	8.7		$	53.7		$	(3.3	)	$	2.4		$	(15.2	)	$	836.1
Income before income taxes																						Income before income taxes	$	754.8	$	21.3	$	57.6	$	28.5	$	(10.7)	$	(13.0)	$	838.5
Summary Cash Flow Information:																						Summary Cash Flow Information:
Depreciation and amortization	$	26.3		$	2.5		$	0.7		$	3.3		$	—		$	0.3		$	33.1		Depreciation and amortization	$	30.1	$	0.1	$	0.7	$	2.9	$	—	$	0.3	$	34.1
Cash provided by (used in) operating activities	$	90.7		$	(150.2	)	$	(30.7	)	$	(0.5	)	$	—		$	(8.1	)	$	(98.8	)
Cash (used in) provided by operating activities																						Cash (used in) provided by operating activities	$	(215.9)	$	(283.4)	$	48.8	$	(4.1)	$	(2.7)	$	(4.4)	$	(461.7)


~~(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.


Homebuilding Inventories by Reporting Segment (1)	March 31, 2019		September 30, 2018		Homebuilding Inventories by Reporting Segment (1)	March 31, 2020		September 30, 2019
	(In millions)					(In millions)
East	$	1,354.4	$	1,192.0	East	$	1,329.8	$	1,288.8
Midwest	817.7		583.1		Midwest	903.2		836.8
Southeast	2,852.1		2,668.7		Southeast	2,968.1		2,768.0
South Central	2,720.6		2,439.4		South Central	2,845.4		2,533.2
Southwest	628.1		499.7		Southwest	633.8		574.4
West	2,466.9		2,268.5		West	2,174.1		2,056.0
Corporate and unallocated (2)	237.0		223.7		Corporate and unallocated (2)	234.0		228.4
	$	11,076.8	$	9,875.1		$	11,088.4	$	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 March 31,				Six Months Ended March 31,
	2019		2018		2019		2018
	(In millions)
Revenues
East	$	518.2	$	435.8	$	965.7	$	828.9
Midwest	248.1		203.6		497.2		365.0
Southeast	1,205.3		1,042.0		2,219.2		2,030.6
South Central	990.2		919.0		1,862.7		1,727.8
Southwest	173.2		172.1		316.9		328.5
West	860.4		913.2		1,551.2		1,625.8
	$	3,995.4	$	3,685.7	$	7,412.9	$	6,906.6
Inventory and Land Option Charges
East	$	0.3	$	0.7	$	1.7	$	0.6
Midwest	0.2		0.2		0.5		0.4
Southeast	2.2		25.1		3.5		26.2
South Central	1.4		0.6		1.9		1.9
Southwest	0.1		—		0.2		0.8
West	9.6		3.5		14.0		3.9
	$	13.8	$	30.1	$	21.8	$	33.8
Income before Income Taxes (1)
East	$	45.9	$	46.7	$	83.9	$	91.7
Midwest	9.5		18.7		20.2		32.0
Southeast	131.0		96.3		243.2		218.8
South Central	119.3		120.5		225.3		222.0
Southwest	18.6		22.0		36.3		36.7
West	76.1		111.8		145.9		188.6
	$	400.4	$	416.0	$	754.8	$	789.8


		Fair Value at March 31, 2020
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Debt securities collateralized by residential real estate	Other assets	$	—	$	—	$	3.9	$	3.9
Mortgage loans held for sale (a)	Mortgage loans held for sale	—		1,356.6		14.1		1,370.7
Derivatives not designated as hedging instruments (b):
Interest rate lock commitments	Other assets	—		64.4		—		64.4
Forward sales of mortgage-backed securities	Other liabilities	—		(69.1)		—		(69.1)
Best-efforts and mandatory commitments	Other liabilities	—		(11.7)		—		(11.7)



		Fair Value at March 31, 2019
	Balance Sheet Location	Level 1		Level 2			Level 3		Total
		(In millions)
Debt securities collateralized by residential real estate	Other assets	$	—	$	—		$	3.9	$	3.9
Mortgage loans held for sale (a)	Mortgage loans held for sale	—		784.4			8.4		792.8
Derivatives not designated as hedging instruments (b):
Interest rate lock commitments	Other assets	—		19.8			—		19.8
Forward sales of mortgage-backed securities	Other liabilities	—		(8.0		)	—		(8.0		)
Best-efforts and mandatory commitments	Other liabilities	—		(0.8		)	—		(0.8		)


		Fair Value at September 30, 2019
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Debt securities collateralized by residential real estate	Other assets	$	—	$	—	$	3.9	$	3.9
Mortgage loans held for sale (a)	Mortgage loans held for sale	—		1,055.3		9.8		1,065.1
Derivatives not designated as hedging instruments (b):
Interest rate lock commitments	Other assets	—		19.2		—		19.2
Forward sales of mortgage-backed securities	Other liabilities	—		(4.1)		—		(4.1)
Best-efforts and mandatory commitments	Other liabilities	—		(1.0)		—		(1.0)



		Fair Value at September 30, 2018
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Debt securities collateralized by residential real estate	Other assets	$	—	$	—	$	3.9	$	3.9
Mortgage loans held for sale (a)	Mortgage loans held for sale	—		784.6		7.8		792.4
Derivatives not designated as hedging instruments (b):
Interest rate lock commitments	Other assets	—		10.5		—		10.5
Forward sales of mortgage-backed securities	Other assets	—		3.3		—		3.3
Best-efforts and mandatory commitments	Other assets	—		0.2		—		0.2


~~(b)~~	Fair value measurements of these derivatives represent changes in fair value, as calculated by reference to quoted prices for similar assets, and are reflected in the balance sheet as other assets or accrued expenses and other liabilities. Changes in the fair value of these derivatives are included in revenues in the consolidated statements of operations.


		Fair Value at March 31, 2019				Fair Value at September 30, 2018						Fair Value at March 31, 2020						Fair Value at September 30, 2019
	Balance Sheet Location	Level 2		Level 3		Level 2		Level 3			Balance Sheet Location	Level 2		Level 3		Level 2		Level 3
		(In millions)										(In millions)
Inventory held and used (a) (b)	Inventories	$	—	$	20.8	$	—	$	4.4	Inventory held and used (a) (b)	Inventories	$	—	$	—	$	—	$	4.5
Inventory available for sale (a) (c)	Inventories	—		—		—		1.4		Inventory available for sale (a) (c)	Inventories	—		12.3		—		—
Mortgage loans held for sale (a) (d)	Mortgage loans held for sale	—		0.8		—		2.9		Mortgage loans held for sale (a) (d)	Mortgage loans held for sale	—		1.3		—		2.7
Other mortgage loans (a) (e)	Other assets	—		1.8		—		1.0		Other mortgage loans (a) (e)	Other assets	—		1.1		—		1.8