FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2000 ------------------ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the Transition Period From ______________ To _______________ Commission file number 1-14122 --------- D.R. HORTON, INC. ------------------ (Exact name of registrant as specified in its charter) DELAWARE 75-2386963 --------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1901 Ascension Blvd., Suite 100, Arlington, Texas 76006 ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (817) 856-8200 --------------- (Registrant's telephone number, including area code) ------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $.01 par value -- 61,823,505 shares as of May 10, 2000 ------------- This Report contains 20 pages. ----
INDEX D.R. HORTON, INC. PART I. FINANCIAL INFORMATION. Page - ------------------------------ ---- ITEM 1. Financial Statements. Consolidated Balance Sheets--March 31, 2000 and September 30, 1999. 3 Consolidated Statements of Income--Three Months and Six Months Ended March 31, 2000 and 1999. 4 Consolidated Statement of Stockholders' Equity-- Six Months Ended March 31, 2000. 5 Consolidated Statements of Cash Flows--Six Months Ended March 31, 2000 and 1999. 6 Notes to Consolidated Financial Statements. 7-9 ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. 10-16 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 17 PART II. OTHER INFORMATION. - --------------------------- ITEM 2. Changes in Securities. 18 ITEM 4. Submission of Matters to a Vote of Security Holders. 18 ITEM 6. Exhibits and Reports on Form 8-K. 19 SIGNATURES. 20 - ----------
D.R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, September 30, 2000 1999 ---------------------------- (In thousands) (Unaudited) ASSETS Homebuilding: Cash $ 79,618 $ 122,208 Inventories: Finished homes and construction in progress 1,114,921 952,015 Residential lots - developed and under development 1,032,460 909,586 Land held for development 4,286 4,507 ---------- ---------- 2,151,667 1,866,108 Property and equipment (net) 40,335 36,972 Earnest money deposits and other assets 136,112 96,807 Excess of cost over net assets acquired (net) 113,120 112,456 ---------- ---------- 2,520,852 2,234,551 ---------- ---------- Financial Services: Cash 5,779 6,360 Mortgage loans held for sale 91,433 113,786 Other assets 7,039 7,111 ---------- ---------- 104,251 127,257 ---------- ---------- $2,625,103 $2,361,808 ========== ========== LIABILITIES Homebuilding: Accounts payable and other liabilities $ 342,070 $ 365,506 Notes payable: Unsecured: Revolving credit facility due 2002 500,000 395,000 8% senior notes due 2009, net 383,014 382,941 8 3/8% senior notes due 2004, net 148,348 148,150 10% senior notes due 2006, net 147,338 147,278 10 1/2% senior notes due 2005, net 149,415 - Other secured 8,617 12,904 ---------- ---------- 1,136,732 1,086,273 ---------- ---------- 1,678,802 1,451,779 ---------- ---------- Financial Services: Accounts payable and other liabilities 2,746 3,268 Notes payable to financial institutions 76,800 104,350 ---------- ---------- 79,546 107,618 ---------- ---------- 1,758,348 1,559,397 ---------- ---------- Minority interests 4,678 4,802 ---------- ---------- STOCKHOLDERS' EQUITY Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued - - Common stock, $.01 par value, 200,000,000 shares authorized, 64,396,305 at March 31, 2000 and 64,267,073 at September 30, 1999, issued and outstanding. 644 643 Additional capital 420,643 419,259 Retained earnings 477,737 400,111 Treasury stock, 2,589,200 shares at March 31, 1999 and 1,484,300 shares at September 30, 1999, at cost (36,947) (22,404) ---------- ---------- 862,077 797,609 ---------- ---------- $2,625,103 $2,361,808 ========== ========== See accompanying notes to consolidated financial statements. -3-
D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Six Months Ended March 31, Ended March 31, ------------------ ------------------- 2000 1999 2000 1999 ------- ------ ------ ------ (In thousands, except net income per share) (Unaudited) Homebuilding: Revenues Home sales................ $780,156 $683,174 $1,562,528 $1,294,875 Land/lot sales............ 7,958 7,426 23,150 48,553 -------- -------- ---------- ----------- 788,114 690,600 1,585,678 1,343,428 -------- -------- ---------- ----------- Cost of sales Home sales................ 636,990 562,138 1,272,822 1,056,141 Land/lot sales............ 7,332 6,154 18,137 42,931 -------- -------- ---------- ----------- 644,322 568,292 1,290,959 1,099,072 -------- -------- ---------- ----------- Gross profit Home sales................ 143,166 121,036 289,706 238,734 Land/lot sales............ 626 1,272 5,013 5,622 -------- -------- ---------- ----------- 143,792 122,308 294,719 244,356 Selling, general and administrative expense........ 82,133 68,648 164,830 137,591 Interest expense.............. 1,561 3,088 4,856 5,881 Other (income)................ (644) (734) (725) (1,724) -------- -------- ---------- ----------- 60,742 51,306 125,758 102,608 -------- -------- ---------- ----------- Financial Services: Revenues...................... 10,750 8,481 22,126 16,283 Selling, general and administrative expense........ 8,022 5,229 15,997 10,203 Interest expense.............. 1,157 669 2,706 1,412 Other (income)................ (1,290) (760) (3,023) (1,639) -------- -------- ---------- ----------- 2,861 3,343 6,446 6,307 -------- -------- ---------- ----------- INCOME BEFORE INCOME TAXES.. 63,603 54,649 132,204 108,915 Provision for income taxes.... 24,169 21,229 50,238 42,800 -------- -------- ---------- ----------- NET INCOME.................. $39,434 $33,420 $81,966 $66,115 ======== ======== ========== =========== Net income per share: Basic..................... $0.64 $0.53 $1.32 $1.08 Diluted................... $0.63 $0.52 $1.31 $1.05 ======== ======== ========== =========== Weighted average number of shares of stock outstanding: Basic..................... 61,839 63,334 62,247 61,367 Diluted................... 62,265 64,251 62,711 62,960 ======== ======== ========== =========== Cash dividends per share...... $0.04 $0.03 $0.07 $0.0525 ======== ======== ========== =========== See accompanying notes to consolidated financial statements. -4-
D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Total Common Additional Retained Treasury Stockholders' Stock Capital Earnings Stock Equity -------------------------------------------------- (In thousands) (Unaudited) Balances at October 1, 1999 $643 $419,259 $400,111 ($22,404) $797,609 Net income - - 81,966 - 81,966 Issuances under D.R. Horton, Inc. employee benefit plans (31,025 shares) - 329 - - 329 Exercise of stock options (98,207 shares) 1 1,055 - - 1,056 Purchase of treasury stock (1,104,900 shares) (14,543) (14,543) Dividends declared ($.07 per share) - - (4,340) - (4,340) -------------------------------------------------- Balances at March 31, 2000 $644 $420,643 $477,737 ($36,947) $862,077 ================================================== See accompanying notes to consolidated financial statements. -5-
D. R. HORTON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended March 31, -------------------- 2000 1999 --------- --------- (In thousands) (Unaudited) OPERATING ACTIVITIES Net income $ 81,966 $ 66,115 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 10,508 9,017 Changes in operating assets and liabilities: Increase in inventories (280,602) (238,421) Increase in earnest money deposits and other assets (25,259) (28,744) Decrease in mortgage loans held for sale 22,353 (6,638) Decrease in accounts payable, accrued expenses and customer deposits (24,082) 24,624 -------- -------- NET CASH USED IN OPERATING ACTIVITIES (215,116) (174,047) -------- -------- INVESTING ACTIVITIES Net purchase of property and equipment (8,848) (13,336) Net investment in venture capital entities (15,071) --- Net cash paid for acquisitions (4,800) (1,300) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (28,719) (14,636) -------- -------- FINANCING ACTIVITIES Proceeds from notes payable 355,000 366,825 Repayment of notes payable (285,302) (576,060) Issuance of Senior Notes payable 148,464 377,134 Repurchase of treasury stock (14,543) (536) Proceeds from common stock offerings and stock associated with certain employee benefit plans 1,385 2,497 Payment of cash dividends (4,340) (3,238) -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 200,664 166,622 -------- -------- INCREASE (DECREASE) IN CASH (43,171) (22,061) Cash at beginning of period 128,568 76,754 -------- -------- Cash at end of period $ 85,397 $ 54,693 ======== ======== Supplemental cash flow information: Interest paid $ 7,399 $ 6,868 ======== ======== Income taxes paid $ 68,009 $ 47,000 ======== ======== Supplemental disclosures of noncash activities: Notes payable assumed related to acquisitions $ 0 $103,384 ======== ======== Conversion of subordinated notes to common stock $ 0 $ 59,327 ======== ======== Issuance of common stock related to acquisition $ 0 $ 55,000 ======== ======== See accompanying notes to consolidated financial statements. -6-
D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 2000 NOTE A - BASIS OF PRESENTATION The accompanying unaudited, consolidated financial statements include the accounts of D.R. Horton, Inc. (the "Company") and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made in prior years' financial statements to conform to classifications used in the current year. Operating results for the three and six month periods ended March 31, 2000, are not necessarily indicative of the results that may be expected for the year ending September 30, 2000. Business - The Company is a national builder that is engaged primarily in the construction and sale of single-family housing in the United States. The Company designs, builds and sells single-family houses on lots developed by the Company and on finished lots which it purchases, ready for home construction. Periodically, the Company sells land or lots it has developed. The Company also provides title agency and mortgage brokerage services to its homebuyers. NOTE B - SEGMENT INFORMATION The Company's financial reporting segments consist of homebuilding and financial services. The Company's homebuilding operations comprise the most substantial part of its business, with approximately 99% of consolidated revenues for the three and six months ended March 31, 2000 and 1999. The homebuilding operations segment generates the majority of its revenues from the sale of completed homes with a lesser amount from the sale of land and lots. The financial services segment generates its revenues from originating and selling mortgages and collecting fees for title insurance agency and closing services. NOTE C - NET INCOME PER SHARE Basic net income per share for the three and six month periods ended March 31, 2000 and 1999, is based on the weighted average number of shares of common stock outstanding. Diluted net income per share is based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. The following table sets forth the computation of basic and diluted earnings per share (in thousands): Three months ended Six months ended March 31, March 31, ------------------- ------------------ 2000 1999 2000 1999 ------- ------- ------- ------- Denominator for basic earnings per share--- weighted average shares 61,839 63,334 62,247 61,367 Effect of dilutive securities: 6 7/8% convertible subordinated notes - - - 659 Employee stock options 426 917 464 934 ------- ------- ------- ------- Denominator for diluted earnings per share---adjusted weighted average shares and assumed conversions 62,265 64,251 62,711 62,960 ======= ======= ======= ======= Options to purchase 1,991,000 and 1,612,000 shares of common stock at various prices were outstanding during the six months ended March 31, 2000 and 1999, respectively, but were not included in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common shares and, therefore, their effect would be antidilutive. -7-
D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued) March 31, 2000 NOTE D - INTEREST The Company capitalizes interest during development and construction. Capitalized interest is charged to cost of sales as the related inventory is delivered to the homebuyer. Interest costs are (in thousands): Three months ended Six months ended March 31, March 31, ------------------------ --------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Capitalized interest, beginning of period $ 46,463 $ 32,759 $ 41,525 $ 35,153 Interest incurred -homebuilding 24,971 22,868 47,072 38,151 Interest expensed: Directly-homebuilding (1,561) (3,088) (4,856) (5,881) Amortized to cost of sales (14,725) (12,956) (28,593) (27,840) -------- -------- -------- -------- Capitalized interest, end of period $ 55,148 $ 39,583 $ 55,148 $ 39,583 ======== ======== ======== ======== NOTE E - SUMMARIZED FINANCIAL INFORMATION The 8%, 8 3/8%, 10% and 10 1/2% Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of the Company's direct and indirect subsidiaries other than certain inconsequential subsidiaries. Each of the Guarantors is a wholly-owned subsidiary. Separate financial statements and other disclosures concerning the guarantor subsidiaries are not presented because management has determined that they are not material to investors. Summarized financial information of the Company and its subsidiaries, including the non-guarantor subsidiaries, is presented below. Additional financial information relating to the non-guarantor financial services subsidiaries is included in the accompanying financial statements. As of and for the six months ended March 31, 2000 and 1999, and for the year ended September 30, 1999 (in thousands): <TABLE> <CAPTION> March 31, 2000 Nonguarantor Subsidiaries (Unaudited) D.R. ------------------------- Inter- Horton, Guarantor Financial company Inc. Subsidiaries Services Other Eliminations Total ---------- -------------- ----------- --------- ------------- ---------- <S> <C> <C> <C> <C> <C> <C> Total assets............. $2,301,199 $1,893,233 $105,109 $50,624 ($1,725,062) $2,625,103 Total liabilities........ 1,439,122 1,468,247 81,933 38,755 (1,265,031) 1,763,026 Total equity............. 862,077 424,986 23,176 11,869 (460,031) 862,077 Revenues................. 237,006 1,334,698 22,125 13,975 - 1,607,804 Gross profit............. 38,582 252,195 - 3,596 346 294,719 Net income............... 81,966 78,874 4,214 (75) (83,013) 81,966 <CAPTION> March 31, 1999 Nonguarantor Subsidiaries (Unaudited) D.R. ------------------------- Inter- Horton, Guarantor Financial company Inc. Subsidiaries Services Other Eliminations Total ---------- -------------- ----------- --------- ------------- ----------- <S> <C> <C> <C> <C> <C> <C> Total assets............. $1,809,736 $1,759,925 $87,213 $31,602 ($1,585,704) $2,102,772 Total liabilities........ 1,081,135 1,405,400 78,893 20,593 (1,211,850) 1,374,171 Total equity............. 728,601 354,525 8,320 11,009 (373,854) 728,601 Revenues................. 261,060 1,070,182 16,283 12,186 - 1,359,711 Gross profit............. 34,402 202,052 - 2,503 - 238,957 Net income............... 66,115 49,861 3,829 (258) (53,432) 66,115 <CAPTION> September 30, 1999 Nonguarantor Subsidiaries D.R. ------------------------- Inter- Horton, Guarantor Financial company Inc. Subsidiaries Services Other Eliminations Total ---------- -------------- ----------- --------- ------------- ----------- <S> <C> <C> <C> <C> <C> <C> Total assets............. $1,996,311 $1,865,148 $125,895 $31,302 ($1,656,848) $2,361,808 Total liabilities........ 1,198,702 1,465,596 108,476 19,663 (1,228,238) 1,564,199 Total equity............. 797,609 399,552 17,419 11,639 (428,610) 797,609 Revenues................. 551,696 2,540,077 37,251 27,187 - 3,156,211 Gross profit............. 95,509 456,302 - 6,069 334 558,214 Net income............... 159,827 144,575 7,929 78 (152,582) 159,827 </TABLE> -8-
D.R. HORTON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued) March 31, 2000 NOTE E - SUMMARIZED FINANCIAL INFORMATION - Continued Summarized cash flow information for the non-guarantor financial services subsidiaries is presented below: Six months ended March 31, 2000 1999 ---------- ---------- (In thousands) OPERATING ACTIVITIES Net income......................................... $ 3,999 $ 3,829 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................. 555 247 Changes in operating assets and liabilities: Decrease in other assets..................... 22 245 Decrease/(increase) in mortgage loans held for sale................................... 22,353 (6,637) Increase in accounts payable and other liabilities.......................... 1,930 772 ------- ------- NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 28,859 (1,544) ------- ------- INVESTING ACTIVITIES Purchase of property and equipment................. (505) (599) ------- ------- NET CASH USED IN INVESTING ACTIVITIES (505) (599) ------- ------- FINANCING ACTIVITIES Net (repayments of)/proceeds from notes payable.... (27,549) 35,717 Decrease in amounts payable to parent.............. (1,386) (42,986) ------- ------- NET CASH USED IN FINANCING ACTIVITIES (28,935) (7,269) ------- ------- DECREASE IN CASH (581) (9,412) Cash at beginning of period.......................... 6,360 13,017 ------- ------- Cash at end of period................................ $ 5,779 $ 3,605 ======= ======= Cash flows for the other non-guarantor subsidiaries are not significant in any period presented. -9-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - CONSOLIDATED D. R. Horton, Inc. and subsidiaries (the "Company") provide homebuilding activities in 23 states and 40 markets through its 47 homebuilding divisions. Through its financial services segment, the Company also provides mortgage banking and title agency services in many of these same markets. Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Consolidated revenues for the three months ended March 31, 2000, increased 14.3%, to $798.9 million, from $699.1 million for the comparable period of 1999, primarily due to increases in home sales revenues. Income before income taxes for the three months ended March 31, 2000, increased 16.4%, to $63.6 million, from $54.6 million for the comparable period of 1999. As a percentage of revenues, income before income taxes for the three months ended March 31, 2000, increased 0.2%, to 8.0%, from 7.8% for the comparable period of 1999, primarily due to the increase in gross margin percentage achieved by the homebuilding segment and a decrease in homebuilding interest expense. The consolidated provision for income taxes increased 13.8%, to $24.2 million for the three months ended March 31, 2000, from $21.2 million for the same period of 1999, due to the corresponding increase in income before income taxes. The effective income tax rate decreased 0.8%, to 38.0%, from 38.8% for the comparable period of 1999, primarily due to changes in the estimated overall effective state income tax rate. Six Months Ended March 31, 2000 Compared to Six Months Ended March 31, 1999 Consolidated revenues for the six months ended March 31, 2000, increased 18.2%, to $1,607.8 million, from $1,359.7 million for the comparable period of 1999, primarily due to increases in home sales revenues. Income before income taxes for the six months ended March 31, 2000, increased 21.4%, to $132.2 million, from $108.9 million for the comparable period of 1999. As a percentage of revenues, income before income taxes for the six months ended March 31, 2000, increased 0.2%, to 8.2%, from 8.0% for the comparable period of 1999, primarily due to the increase in gross margin percentage achieved by the homebuilding segment. The consolidated provision for income taxes increased 17.4%, to $50.2 million for the six months ended March 31, 2000, from $42.8 million for the same period of 1999, primarily due to the corresponding increase in income before income taxes. The effective income tax rate decreased 1.3%, to 38.0%, from 39.3% for the comparable period of 1999, primarily due to changes in the estimated overall effective state income tax rate. -10-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - HOMEBUILDING The following tables set forth certain operating and financial data for the Company's homebuilding activities: <TABLE> <CAPTION> Percentages of Homebuilding Revenues Three Months Ended Six Months Ended March 31, March 31, 2000 1999 2000 1999 Costs and expenses: ------ ------ ------ ------ <S> <C> <C> <C> <C> Cost of sales........................ 81.8% 82.3% 81.4% 81.8% Selling, general and administrative expense.............................. 10.4% 9.9% 10.4% 10.2% Interest expense..................... 0.2% 0.5% 0.3% 0.5% ------ ------ ------ ------ Total costs and expenses..................... 92.4% 92.7% 92.1% 92.5% Other (income)............................... (0.1%) (0.1%) 0.0% (0.1%) ------ ------ ------ ------ Income before income taxes................... 7.7% 7.4% 7.9% 7.6% ====== ====== ====== ====== <CAPTION> Homes Closed Three Months Ended March 31, Six Months Ended March 31, 2000 1999 2000 1999 ---- ---- ---- ---- Homes Homes Homes Homes Closed Revenues Closed Revenues Closed Revenues Closed Revemues -------- -------- -------- -------- -------- -------- -------- -------- ($'s in millions) ($'s in millions) <S> <C> <C> <C> <C> <C> <C> <C> <C> Mid-Atlantic......... 680 $133.7 707 $130.0 1,327 $ 257.6 1,339 $ 243.4 Midwest.............. 443 95.9 375 71.3 954 200.9 621 117.5 Southeast............ 656 109.4 589 94.5 1,248 207.5 1,184 188.3 Southwest............ 1,825 270.1 1,795 244.7 3,715 545.2 3,440 463.5 West................. 760 171.1 697 142.7 1,612 351.3 1,425 282.2 -------- -------- -------- -------- -------- --------- -------- --------- 4,364 $780.2 4,163 $683.2 8,856 $1,562.5 8,009 $1,294.9 ======== ======== ======== ======== ======== ========= ======== ========= <CAPTION> New Sales Contracts (net of cancellations) Three Months Ended March 31, Six Months Ended March 31, 2000 1999 2000 1999 ---- ---- ---- ---- Homes Homes Homes Homes Sold $ Sold $ Sold $ Sold $ -------- -------- -------- -------- -------- -------- -------- -------- ($'s in millions) ($'s in millions) <S> <C> <C> <C> <C> <C> <C> <C> <C> Mid-Atlantic......... 761 $153.2 930 $170.8 1,330 $ 275.3 1,501 $ 282.4 Midwest.............. 476 110.0 566 111.6 841 208.0 794 157.1 Southeast............ 824 142.5 813 131.3 1,442 243.3 1,358 216.3 Southwest............ 2,360 363.2 2,289 324.4 3,994 616.4 3,934 553.9 West................. 1,013 226.1 1,033 200.0 1,678 374.4 1,581 309.1 -------- -------- -------- -------- -------- --------- -------- --------- 5,434 $995.0 5,631 $938.1 9,285 $1,717.4 9,168 $1,518.8 ======== ======== ======== ======== ======== ========= ======== ========= <CAPTION> Sales Backlog March 31, 2000 1999 ---- ---- Homes $ Homes $ -------- --------- -------- --------- ($'s in millions) <S> <C> <C> <C> <C> Mid-Atlantic................................. 1,094 $ 260.5 1,094 $ 219.9 Midwest...................................... 1,021 254.3 1,044 212.5 Southeast.................................... 1,030 176.4 907 144.3 Southwest.................................... 3,360 544.1 3,537 514.3 West......................................... 1,233 276.1 1,370 278.3 -------- --------- -------- -------- 7,738 $1,511.4 7,952 $1,369.3 ======== ========= ======== ======== <FN> The Company's market regions consist of the following markets: Mid-Atlantic Charleston, Charlotte, Columbia, Greensboro, Greenville, Hilton Head, Myrtle Beach, New Jersey, Newport News, Raleigh/Durham, Richmond, Suburban Washington D.C. and Wilmington Midwest Chicago, Cincinnati, Louisville, Minneapolis/St. Paul and St. Louis Southeast Atlanta, Birmingham, Jacksonville, Nashville, Orlando, Pensacola and South Florida Southwest Albuquerque, Austin, Dallas/Fort Worth, Houston, Killeen, Phoenix, San Antonio and Tucson West Denver, Las Vegas, Los Angeles, Portland, Sacramento, Salt Lake City and San Diego </FN> </TABLE> -11-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Revenues from homebuilding activities increased 14.1%, to $788.1 million (4,364 homes closed) for the three months ended March 31, 2000, from $690.6 million (4,163 homes closed) for the comparable period of 1999. Revenues from homebuilding activities increased in all of the Company's market regions, with percentage increases ranging from 2.8% in the Mid-Atlantic region to 34.4% in the Midwest region. The increases in both revenues and homes closed were due to strong housing demand throughout the majority of the Company's markets. The average selling price of homes closed during the three months ended March 31, 2000 was $178,800, up 9.0% from $164,100 for the same period in 1999. The increase in average selling price was due to changes in the mix of homes closed and, with the strong housing demand, the Company's ability to sell more custom features with its homes and to raise prices to cover increased costs. The value of new net sales contracts increased 6.1%, to $995.0 million (5,434 homes) for the three months ended March 31, 2000, from $938.1 million (5,631 homes) for the same period of 1999. The value of new net sales contracts increased in three of the Company's five market regions, with percentage increases ranging from 8.5% in the Southeast to 13.0% in the West. The value of new net sales contracts declined 1.4% and 10.3% in the Midwest and Mid-Atlantic regions, respectively. The average price of a new net sales contract in the three months ended March 31, 2000 was $183,100, up 9.9% over the $166,600 average in the three months ended March 31, 1999. The increase in average selling price was due to changes in the mix of homes closed and, with the strong housing demand, the Company's ability to sell more custom features with its homes and to raise prices to cover increased costs. At March 31, 2000, the Company's backlog of sales contracts was $1,511.4 million (7,738 homes), up 10.4% from the comparable amount at March 31, 1999. The average sales price of homes in sales backlog was $195,300 at March 31, 2000, up 13.4% from the $172,200 average at March 31, 1999. The average sales price of homes in backlog typically is higher than the sales price of closed homes because it takes longer to construct more expensive homes. Cost of sales increased by 13.4%, to $644.3 million for the three months ended March 31, 2000, from $568.3 million for the comparable quarter in 1999. The increase in cost of sales was primarily attributable to the increase in revenues. Cost of home sales as a percentage of home sales revenues was down 0.7%, to 81.6% for the three months ended March 31, 2000, from 82.3% for the comparable period of 1999, primarily due to the application of purchase accounting in 1999 causing a $7.4 million inventory write-up associated with homes acquired with Cambridge and closed subsequent to the acquisition. Cost of land/lot sales increased to 92.1% of land/lot sales revenues for the three months ended March 31, 2000, from 82.9% for the comparable period of 1999. Total homebuilding cost of sales was 81.8% of total homebuilding revenues, down 0.5% from 82.3% for the comparable period of 1999. Selling, general and administrative (SG&A) expenses from homebuilding activities increased by 19.6%, to $82.1 million in the three months ended March 31, 2000, from $68.6 million in the comparable period of 1999. As a percentage of revenues, SG&A expenses increased to 10.4% for the three months ended March 31, 2000, from 9.9% for the comparable period of 1999. The increase in SG&A expenses as a percentage of revenue is primarily due to higher costs incurred in order to ensure that the Company is properly positioned for its peak home-closing season, which normally occurs during the second half of the fiscal year. Interest expense associated with homebuilding activities decreased to $1.6 million in the three months ended March 31, 2000, from $3.1 million in the comparable period of 1999. As a percentage of homebuilding revenues, homebuilding interest expense decreased to 0.2% for the three months ended March 31, 2000, from 0.5% in the comparable period of 1999. In anticipation of the spring selling season, the Company rapidly increased its inventory during the three months ended March 31, 2000. As a result, inventory under construction or development grew at a more rapid pace than interest-bearing debt. Therefore, compared to 1999, a larger proportion of total incurred interest was capitalized to inventory in the second quarter of fiscal 2000. The -12-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Company follows a policy of capitalizing interest only on inventory under construction or development. During both periods, the Company expensed the portion of incurred interest and other financing costs which could not be charged to inventory. Capitalized interest and other financing costs are included in cost of sales at the time of home closings. Six Months Ended March 31, 2000 Compared to Six Months Ended March 31, 1999 Revenues from homebuilding activities increased 18.0%, to $1,585.7 million (8,856 homes closed) for the six months ended March 31, 2000, from $1,343.4 million (8,009 homes closed) for the comparable period of 1999. Revenues from homebuilding activities increased in all of the Company's market regions, with percentage increases ranging from 5.8% in the Mid-Atlantic region to 71.0% in the Midwest region. The increases in both revenues and homes closed were due to strong housing demand and the increases attributable to the acquisition of Cambridge Homes in January, 1999. In markets where the Company operated throughout both six-month periods, home sales revenues increased by 15.6%, to $1,493.0 million (8,538 homes closed). The average selling price of homes closed during the six months ended March 31, 2000 was $176,400, up 9.1% from $161,700 for the same period in 1999. The increase in average selling price was due to changes in the mix of homes closed and, with the strong housing demand, the Company's ability to sell more custom features with its homes and to raise prices to cover increased costs. The value of new net sales contracts increased 13.1%, to $1,717.4 million (9,285 homes) for the six months ended March 31, 2000, from $1,518.8 million (9,168 homes) for the same period of 1999. The value of new net sales contracts increased in four of the Company's five market regions, with percentage increases ranging from 11.3% in the Southwest to 32.4% in the Midwest. The value of new net sales contracts declined 2.5% in the Mid-Atlantic region. The overall increase in the value of new net sales contracts was due in part to sales achieved by Cambridge Homes, acquired in January, 1999. In markets where the Company operated throughout both six-month periods, the value of new net sales contracts increased 8.9%, to $1,648.7 million, and the number of new net sales contracts decreased 1.2%, to 9,038 homes. The average price of a new net sales contract in the six months ended March 31, 2000 was $185,000, up 11.6% over the $165,700 average in the six months ended March 31, 1999. The increase in average selling price was due to changes in the mix of homes closed and, with the strong housing demand, the Company's ability to sell more custom features with its homes and to raise prices to cover increased costs. Cost of sales increased by 17.5%, to $1,291.0 million for the six months ended March 31, 2000, from $1,099.1 million for the comparable period of 1999. The increase in cost of sales was primarily attributable to the increase in revenues. Cost of home sales as a percentage of home sales revenues was down 0.1%, to 81.5% for the six months ended March 31, 2000, from 81.6% for the comparable period of 1999. Cost of land/lot sales decreased to 78.3% of land/lot sales revenues for the six months ended March 31, 2000, from 88.4% for the comparable period of 1999. Total homebuilding cost of sales was 81.4% of total homebuilding revenues, down 0.4% from 81.8% for the comparable period of 1999. Selling, general and administrative (SG&A) expenses from homebuilding activities increased by 19.8%, to $164.8 million in the six months ended March 31, 2000, from $137.6 million in the comparable period of 1999. As a percentage of revenues, SG&A expenses increased to 10.4% for the six months ended March 31, 2000, from 10.2% for the comparable period of 1999. The increase in SG&A expenses as a percentage of revenue is primarily due to higher costs incurred in order to ensure that the Company is properly positioned for its peak home- closing season, which normally occurs during the second half of the fiscal year. Interest expense associated with homebuilding activities decreased to $4.9 million in the six months ended March 31, 2000, from $5.9 million in the comparable period of 1999. As a percentage of homebuilding revenues, homebuilding interest expense decreased to 0.3% for the six months ended March 31, 2000, from 0.5% for the comparable period of 1999. In anticipation of the spring selling season, the Company rapidly increased its inventory during the second quarter. As a result, inventory under construction or development grew at a more rapid pace than interest-bearing debt. Therefore, in both the three and six months -13-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ended March 31, 2000, a larger proportion of total incurred interest was capitalized to inventory than in the comparable periods of fiscal 1999. The Company follows a policy of capitalizing interest only on inventory under construction or development. During both periods, the Company expensed the portion of incurred interest and other financing costs which could not be charged to inventory. Capitalized interest and other financing costs are included in cost of sales at the time of home closings. RESULTS OF OPERATIONS - FINANCIAL SERVICES The following table summarizes financial and other information for the Company's financial services operations: Three months ended Six months ended March 31, March 31, --------------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- ($'s in thousands) Number of loans originated....... 1,831 1,911 3,773 3,668 ------ ------ ------ ------- Loan origination fees............ $2,146 $2,030 $4,345 $3,772 Sale of servicing rights and gains from sale of mortgages... 4,514 4,025 9,267 7,964 Other revenues................... 994 918 2,202 1,723 ------ ------ ------ ------- Total mortgage banking revenues.. 7,654 6,973 15,814 13,459 Title policy premiums, net....... 3,096 1,508 6,312 2,824 ------ ------ ------ ------- Total revenues.................. 10,750 8,481 22,126 16,283 General and administrative expenses........................ 8,022 5,229 15,997 10,203 Interest expense................. 1,157 669 2,706 1,412 Interest/other (income).......... (1,290) (760) (3,023) (1,639) ------ ------ ------ ------- Income before income taxes....... $2,861 $3,343 $6,446 $6,307 ====== ====== ====== ======= Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Revenues from the financial services segment increased 26.8%, to $10.8 million in the three months ended March 31, 2000, from $8.5 million in the comparable period of 1999. The increase in financial services revenues was due to the rapid expansion of the Company's mortgage loan and title services provided to customers of the Company's homebuilding segment. These activities are being expanded to additional markets served by the homebuilding segment. SG&A expenses associated with financial services increased 53.4%, to $8.0 million in the three months ended March 31, 2000, from $5.2 million in the comparable period of 1999. As a percentage of financial services revenues, SG&A expenses increased by 12.9%, to 74.6% in the three months ended December 31, 1999, from 61.7% in the comparable period in 1999, due primarily to 2000 startup expenses in new markets with limited revenues. Six months Ended March 31, 2000 Compared to Six months Ended March 31, 1999 Revenues from the financial services segment increased 35.9%, to $22.1 million in the six months ended March 31, 2000, from $16.3 million in the comparable period of 1999. The increase in financial services revenues was due to the rapid expansion of the Company's mortgage loan and title services provided to customers of the Company's homebuilding segment. These activities are being expanded to additional markets served by the homebuilding segment. SG&A expenses associated with financial services increased 56.8%, to $16.0 million in the six months ended March 31, 2000, from $10.2 million in the comparable period of 1999. As a percentage of financial services revenues, SG&A expenses increased by 9.6%, to 72.3% in the six months ended December 31, 1999, from 62.7% in the comparable period in 1999, due primarily to 2000 startup expenses in new markets with limited revenues. -14-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, the Company had available cash and cash equivalents of $85.4 million. Inventories (including finished homes, construction in progress, and developed residential lots and other land) at March 31, 2000, had increased by $285.6 million since September 30, 1999, due to a general increase in business activity and the expansion of operations in the Company's market areas. The inventory increase was financed largely by issuing $150 million in senior notes, borrowing an additional $105.0 million under the revolving credit facility and by retaining earnings. As a result, the Company's ratio of homebuilding notes payable to total capital at March 31, 2000, increased 3.1% to 60.8%, from 57.7% at September 30, 1999. The stockholders' equity to total assets ratio decreased 1.0%, to 32.8% at March 31, 2000, from 33.8% at September 30, 1999. The Company has an $825 million, unsecured revolving credit facility, consisting of a $775 million four-year revolving loan and a $50 million four-year letter of credit facility that matures in 2002. Additionally, the Company has another $25 million standby letter of credit agreement and a $16.8 million non-renewable letter of credit facility acquired with the Cambridge acquisition. At March 31, 2000, the Company had outstanding homebuilding debt of $1,336.7 million, of which $500 million represented advances under the revolving credit facility. Under the debt covenants associated with the revolving credit facility, at March 31, 2000, the Company had additional homebuilding borrowing capacity of $275 million. The Company has entered into multi-year interest rate swap agreements, aggregating $200 million, that fix the interest rate on a portion of the variable rate revolving credit facility. An additional interest rate swap agreement, with a notional amount of $148.5 million, was entered into in December, 1999. The new agreement has the effect of converting part of the Company's fixed rate debt to a variable rate which is currently less than the related fixed rate. The new agreement helps re-establish the Company's balance of fixed and variable rate debt at historical levels. On March 21, 2000, under an existing shelf registration statement, the Company issued $150 million aggregate principal amount of 10 1/2% Senior Notes, due 2005. The proceeds of the notes were used to repay outstanding debt under our revolving credit facility and for general corporate purposes. The Company has $450 million remaining on its currently effective universal shelf registration statement, which facilitates access to the capital markets. At March 31, 2000, the financial services segment has mortgage loans held for sale of $91.4 million and loan commitments for $107.6 million at fixed rates. The Company hedges the interest rate market risk on these mortgage loans held for sale and loan commitments through the use of best-efforts whole loan delivery commitments, mandatory forward commitments to sell mortgage-backed securities and the purchase of options on financial instruments. The financial services segment has a $175 million, one-year bank warehouse facility that is secured by mortgage loans held for sale. The warehouse facility is not guaranteed by the parent company. As of March 31, 2000, $76.8 million had been drawn under this facility. In the future, it is anticipated that all mortgage company activities will be financed under the warehouse facility. The Company's rapid growth and acquisition strategy require significant amounts of cash. It is anticipated that future home construction, lot and land purchases and acquisitions will be funded through internally generated funds and existing credit facilities. Additionally, an effective shelf registration contains about 7.4 million shares of common stock issuable to effect, in whole or in part, possible future acquisitions. In the future, the Company intends to maintain effective shelf registration statements that would facilitate access to the capital markets. During the six months ended March 31, 2000, the Company's Board of Directors declared one quarterly cash dividend of $0.03 per common share and one quarterly cash dividend of $0.04 per common share, the last of which was paid on February 7, 2000. In November, 1998, the Company's Board of Directors approved stock and debt repurchase programs for up to $100 million each. These programs are intended to allow the Company to repurchase securities at attractive prices should favorable market conditions occur. During the six months ended March 31, 2000, the Company repurchased in the open market $14.5 million of its common stock, or 1,104,900 shares at an average cost of $13.16. -15-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In July 1999, the Company formed GP-Encore, Inc. and Encore II, Inc., which have since entered into three separate limited partnership agreements with the purpose of investing in start-up and emerging growth companies whose technology and business plans will permit the Company to leverage its size, expertise and customer base in the homebuilding industry. The Company has agreed to invest up to $125 million through these limited partnerships over the next four years. These investments will be concentrated primarily in e-commerce businesses that serve the homebuilding, real estate and financial services industries, as well as in strategic opportunities that allow for diversification of the Company's operations. As of March 31, 2000, the Company had made such investments totaling $15.3 million, which are reported in homebuilding other assets. Except for ordinary expenditures for the construction of homes, the acquisition of land and lots for development and sale of homes, at March 31, 2000, the Company had no material commitments for capital expenditures. SAFE HARBOR STATEMENT Certain statements contained herein, as well as statements made by the Company in periodic press releases and oral statements made by the Company's officials to analysts and stockholders in the course of presentations about the Company may be construed as "Forward-Looking Statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements may involve unstated risks, uncertainties and other factors that may cause actual results to differ materially from those initially anticipated. Such risks, uncertainties and other factors include, but are not limited to: o The Company's substantial leverage o Changes in general economic and business conditions o Changes in interest rates and the availability of mortgage financing o Governmental regulations and environmental matters o Changes in costs and availability of material, supplies and labor o Competitive conditions within the homebuilding industry o The availability of capital o The Company's ability to effect its growth strategies successfully o The success of the Company's diversification efforts -16-
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk The Company is subject to interest rate risk on its long term debt. The Company manages its exposure to changes in interest rates by optimizing the use of variable and fixed rate debt. In addition, the Company has hedged its exposure to changes in interest rates on its variable rate bank debt by entering into interest rate swap agreements to obtain a fixed interest rate for a portion of those borrowings. Finally, in order to maintain a more appropriate balance of variable and fixed rate debt, the Company entered into an interest rate swap agreement exchanging a variable rate interest payment for a fixed rate payment on a notional amount equal to the $148.5 million principal amount of the 10% Senior Notes due 2006. The variable payment for which the Company is obligated is fixed through the 10% Senior Notes' first call date, April 15, 2001, and will ensure that the Company will have received a net amount of $2.3 million as of that date. Thereafter, the variable payment will be made through the 10% Senior Notes' maturity, April 15, 2006, and will be based upon the 90-day LIBOR rate, plus 2.745%. The following table shows, as of March 31, 2000, the Company's long term debt obligations, principal cash flows by scheduled maturity, weighted average interest rates and estimated fair market value. In addition, the table shows the notional amounts and weighted average interest rates of the Company's interest rate swaps. <TABLE> <CAPTION> Six Months Ended Sept. 30, Year ended September 30, ---------- -------------------------------------------------------------------------------- ($ in millions) FMV @ 2000 2001 2002 2003 2004 Thereafter Total 3/31/00 ----- ----- ----- ----- ----- ---------- -------- --------- Debt: <S> <C> <C> <C> <C> <C> <C> <C> <C> Fixed rate.............. $4.7 $0 $2.0 $0 $149.4 $680.6 $836.7 $754.2 Average interest rate... 8.63% --- 6.00% --- 8.46% 9.32% 8.92% --- Variable rate........... $76.8 $0 $500.0 $0 $0 $0 $576.8 $576.8 Average interest rate... 7.13% --- 7.03% --- --- --- 7.04% --- Interest Rate Swaps: Variable to fixed....... $200.0 $200.0 $200.0 $200.0 $200.0 $200.0 --- $3.4 Average pay rate........ 5.10% 5.10% 5.10% 5.10% 5.10% 5.08% --- --- Average receive rate.... 90-day LIBOR Fixed to variable....... $148.5 $148.5 $148.5 $148.5 $148.5 $148.5 --- ($1.8) Average pay rate........ 8.745% * 90-day LIBOR + 2.745% --- --- Average receive rate.... 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% --- --- * - 8.745% until April 15, 2001; 90-day LIBOR + 2.745% thereafter. </TABLE> -17-
PART II. OTHER INFORMATION ITEM 2. Changes in Securities. On March 21, 2000 the Company issued $150 million principal amount of its 10-1/2 % Senior Notes, due 2005 (the "Notes"). As part of that issuance, the Company executed an Eighth Supplemental Indenture, dated as of March 21, 2000, among the Company, the Guarantors named therein and American Stock Transfer & Trust Company, as Trustee, authorizing the Notes. The Supplemental Indenture, and the Indenture to which it relates (dated June 9, 1997, as supplemented), impose limitations on the ability of the Company and its subsidiaries guaranteeing the Notes to, among other things, incur indebtedness, make "Restricted Payments" (as defined, which includes payments of dividends or other distributions on the Common Stock of the Company), effect certain "Asset Dispositions" (as defined), enter into certain transactions with affiliates, merge or consolidate with any person, or transfer all or substantially all of their properties and assets. These limitations are substantially similar to the limitations already existing with respect to the Company's 8% Senior Notes, due 2009, and related Indentures and Supplemental Indentures. Other information concerning the offering and issuance of the Notes has previously been reported in, and is described in, the Company's Registration Statement on Form S-3 (Registration Number 333-76175) dated April 13, 1999, the Company's Prospectus Supplement, dated March 16, 2000 and filed with the Securities Exchange Commission (the "Commission") on March 17, 2000 pursuant to Rule 424(b), and the Company's current report on Form 8-K, dated March 17, 2000 and filed with the Commission on March 17, 2000, each of which is incorporated herein by reference. ITEM 4. Submission of Matters to a Vote of Security Holders. (a) On January 20, 2000, the Company held its Annual Meeting of Stockholders (the "Meeting"). At the Meeting, the stockholders re-elected nine members of the Board of Directors of the Company to serve until the Company's next annual meeting of stockholders and until their respective successors are elected and qualified. The names of the nine directors, the votes cast for and the number of votes withheld were as follows: Name Votes For Votes Withheld ---- --------- -------------- Bradley S. Anderson 54,678,867 972,456 Richard Beckwitt 54,335,593 1,315,730 Richard I. Galland 54,671,515 979,808 Donald R. Horton 54,546,766 1,104,557 Richard L. Horton 54,533,394 1,117,929 Terrill J. Horton 54,533,944 1,117,379 Francine I. Neff 54,661,522 989,801 Scott J. Stone 54,336,504 1,314,819 Donald J. Tomnitz 54,532,323 1,119,000 (b) At the Meeting, a vote was taken for the approval and adoption of a proposal to adopt the D.R. Horton, Inc. 2000 Incentive Bonus Plan. The following votes were cast upon this proposal: For: 54,273,615 Against: 1,306,503 Abstain: 71,204 -18-
ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 4.1 Indenture, dated as of June 9, 1997, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to Senior Debt Securities, is incorporated herein by reference from Exhibit 4.1(a) to the Company's Registration Statement on Form S-3 (Registration No. 333-27521), filed with the Commission on May 21, 1997. 4.2 Sixth Supplemental Indenture, dated as of February 4, 1999, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to the 8% Senior Notes due 2009, including the form of the Company's 8% Senior Notes due 2009, is incorporated herein by reference from Exhibit 4.1 to the Company's Form 8-K, filed with the Commission on February 2, 1999. 4.3 Seventh Supplemental Indenture, dated as of August 31, 1999, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, is incorporated herein by reference from Exhibit 4.9 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1999, filed with the Commission on December 10, 1999. 4.4 Eighth Supplemental Indenture, dated as of March 21, 2000, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, relating to the 10- 1/2% Senior Notes due 2005, is incorporated herein by reference from Exhibit 4.1 to the Company's Form 8-K, filed with the Commission on March 17, 2000. 4.5 Ninth Supplemental Indenture, dated as of March 31, 2000, among the Company, the guarantors named therein and American Stock Transfer & Trust Company, as Trustee, is filed herewith. 10.1 The D.R. Horton, Inc. 2000 Incentive Bonus Plan is incorporated by reference from Exhibit A to the Company's Proxy Statement, filed with the Commission on December 10, 1999. 10.2 First Amendment to Non-Qualified Stock Option Agreements, dated as of March 15, 2000, between the Company and Richard Beckwitt is filed herewith. 10.3 Letter Agreement concerning partial bonus under Incentive Bonus Plan, dated March 15, 2000, between the Company and Richard Beckwitt is filed herewith. 10.4 Limited Partnership Agreement of Encore Venture Partners II (Texas), L.P., dated as of March 21, 2000, among GP-Encore, Inc. (formerly, Encore I, Inc.), Encore II, Inc., EVP Capital, L.P. (formerly, Encore Capital (Texas), L.P.) and Richard Beckwitt is filed herewith. 27 Financial Data Schedule for the six months ended March 31, 2000 is filed herewith. (b) Reports on Form 8-K. On March 17, 2000, the Company filed a Current Report on Form 8-K (Items 5 and 7), which filed an underwriting agreement, a supplemental indenture and a statement of computation of ratio of earnings to fixed changes, all relating to the offering and issuance of $150 million principal amount of the Company's 10 1/2% Senior Notes, due 2005. -19-
SIGNATURES 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: May 12, 2000 By: /s/ Samuel R. Fuller ----------------------- Samuel R. Fuller, on behalf of D.R. Horton, Inc. and as Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) -20-