What changed in this filing

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Item 1A. Risk Factors

2024-11-19 compared with 2023-11-17 · 43 added, 39 removed, 286 unchanged (22% of the section changed)

19 unchanged sentences

economy and the housing and rental markets and in turn, could adversely affect the operating results of our businesses.

In response to increased inflation, the Federal Reserve has raised interest rates significantly, which has resulted in higher mortgage interest rates.

In response to increased inflation, the Federal Reserve has raised interest rates significantly in recent years, which, notwithstanding the recent reduction, has resulted in higher mortgage interest rates.

The increase in mortgage interest rates has reduced the affordability of our homes and has required us to use pricing adjustments and incentives to adapt to current market conditions.

23 unchanged sentences

The maturity date of the facility is October 28, 2027.

Our homebuilding revolving credit facility and our homebuilding senior notes are guaranteed by D.R.

Our homebuilding revolving credit facility and our homebuilding senior unsecured notes are guaranteed by D.R.

Horton, Inc.’s significant wholly-owned homebuilding subsidiaries.

2 unchanged sentences

The maturity date of the facility is October 28, 2026.

The Forestar revolving credit facility is guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries.

The Forestar revolving credit facility is guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries.

The Forestar revolving credit facility is not guaranteed by D.R.

4 unchanged sentences

The maturity date of the facility is October 10, 2027.

The rental revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries.

The rental revolving credit facility is guaranteed by DRH Rental’s wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries.

The rental revolving credit facility is not guaranteed by D.R.

3 unchanged sentences

Such changes affecting our mortgage repurchase facility may also make it more difficult or costly to sell the mortgages that we originate.

The maturity date of the committed mortgage repurchase facility is February 16, 2024.

The maturity date of the committed mortgage repurchase facility is May 9, 2025.

DHI Mortgage also utilizes an uncommitted mortgage repurchase facility, which had a capacity of $500 million at September 30, 2024.

1 unchanged sentence

or any of the subsidiaries that guarantee the debt of our homebuilding, rental or Forestar operations.

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.

Horton has an automatically effective universal shelf registration statement filed with the SEC in July 2021, 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 October 2021, registering $750 million of equity securities, of which $300 million was reserved for sales under its at-the-market equity offering program that became effective in November 2021.

At September 30, 2023, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its at-the-market equity offering program.

We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations, pay dividends, repurchase our common stock under our $4.0 billion stock repurchase authorization and support other general corporate and operational needs, and we regularly evaluate our opportunities to raise additional capital.

has an automatically effective universal shelf registration statement filed with the SEC in July 2024, 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 2024, registering $750 million of equity securities.

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.

14 unchanged sentences

There can be no assurances that these programs or other programs will continue to be available in our homebuilding markets or that they will be as attractive to our customers as the programs currently offered, which could negatively affect our sales.

Mortgage interest rates have increased significantly during fiscal 2022 and 2023, and market conditions and government actions could cause mortgage rates to rise even further in the future.

Mortgage interest rates have increased significantly in recent years, and market conditions and government actions could cause mortgage rates to rise even further in the future.

When interest rates increase, the cost of owning a home increases, which reduces the number of potential homebuyers who can obtain mortgage financing and can result in a decline in the demand for our homes.

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Our business and financial results could be adversely affected by significant inflation, higher interest rates or deflation.

During the past two years, the economy has experienced significant inflationary pressures.

During the past three years, the economy has experienced significant inflationary pressures.

Inflation can adversely affect us by increasing costs of land, materials, labor and our cost of capital.

In an effort to lower the current rate of inflation, the Federal Reserve has raised interest rates significantly, which has resulted in higher mortgage interest rates.

The increase in mortgage interest rates has reduced the affordability of our homes and has required us to use pricing adjustments and incentives to adapt to current market conditions, which lowered our homebuilding gross margin in fiscal 2023 compared to fiscal 2022.

If inflation and mortgage interest rates remain high or continue to increase, housing affordability may be further impacted, which could reduce our profit margins and have an adverse impact on our business and financial results.

In an effort to lower the rate of inflation, the Federal Reserve raised interest rates significantly, which has resulted in higher mortgage interest rates.

If inflation and mortgage interest rates remain high or increase, housing affordability may be further impacted, which could reduce our profit margins and have an adverse impact on our business and financial results.

Alternatively, a significant period of deflation could cause a decrease in overall spending and borrowing levels.

12 unchanged sentences

This caused our construction cycle to lengthen and costs of building materials to increase.

We began to see improvements in our construction cycle time in fiscal 2023 and expect our cycle times to return to normalized levels during fiscal 2024;

We began to see improvements in our construction cycle time in fiscal 2023 and our cycle times have recently normalized;

however, if shortages and cost increases in building materials and tightness in the labor market increase, our construction cycle time and profit margins could be adversely impacted.

3 unchanged sentences

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 the event of a resurgence of COVID-19 or a widespread, prolonged, actual or perceived outbreak of any contagious disease, our operations could be negatively impacted.

In the event of a widespread, prolonged, actual or perceived outbreak of any contagious disease, such as COVID-19, our operations could be negatively impacted.

Such events have had, and could in the future have, an effect on our operations, including a reduction in customer traffic, a disruption in our supply chain, tightness in the labor market or other factors, all of which could reduce demand for our homes.

5 unchanged sentences

We have experienced temporary delays in production and short-term impacts on our sales and closings activity from weather events in recent years.

However, there have been no material lasting impacts on our business from these events or material permanent operational challenges resulting from these events, but they could adversely affect our business in the future.

There have been no material lasting impacts on our business from these events or material permanent operational challenges resulting from these events, but they could adversely affect our business in the future.

The climates and geology of many of the states in which we operate, including California, Florida, Texas and other coastal areas where we have some of our larger operations and which have experienced recent natural disasters, present increased risks of adverse weather or natural disasters.

29 unchanged sentences

Significant expenses of owning a home, including mortgage loan interest and state and local income and property taxes, have historically been deductible expenses for an individual’s federal income taxes, subject to various limitations.

The Tax Cuts and Jobs Act, which became effective January 1, 2018, established new limits on these federal tax deductions.

The Tax Cuts and Jobs Act of 2017 established new limits on these federal tax deductions.

Further changes in income tax laws by the federal or state government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes.

4 unchanged sentences

We use information technology and other computer resources to carry out important operational and marketing activities and to maintain our business records.

These information technology systems are dependent upon global communications providers, web browsers, third-party software and data storage providers and other aspects of the Internet infrastructure that have experienced security breaches, cyber-attacks, ransomware attacks, significant systems failures and service outages in the past.

Additionally, phishing attacks, whereby perpetrators attempt to fraudulently induce employees, customers, vendors or other users of a company’s systems to disclose sensitive information to gain access to its data, have become more prevalent in recent years.

The use of remote work environments and virtual platforms may increase our risk of cyber-attack or data security breaches.

Further, geopolitical tensions or conflicts may create a heightened risk of cyber-attacks or other data security breaches.

These information technology systems are dependent upon global communications providers, web browsers, third-party software and data storage providers and other aspects of the Internet infrastructure that have experienced security breaches, cyber incidents, ransomware attacks, significant systems failures and service outages in the past.

With the use of artificial intelligence, these phishing attacks may contain highly convincing language making them difficult to distinguish from legitimate messages.

The use of remote work environments and virtual platforms may increase our risk of cyber incidents or data security breaches.

Further, geopolitical tensions or conflicts may create a heightened risk of cyber incidents or other data security breaches.

Our normal business activities involve collecting and storing information specific to our homebuyers, renters, employees, vendors and suppliers and maintaining operational and financial information related to our business, both in an office setting and remote locations as needed.

A material breach in the security of our information technology systems or other data security controls could include the theft or release of this information.

A material breach in the security of our information technology systems or other data security controls, or those of the third parties we work with, could include the theft or release of this information.

The unintended or unauthorized disclosure of personal identifying and confidential information as a result of a security breach by any means could lead to litigation or other proceedings against us by the affected individuals or business partners, or by regulators.

4 unchanged sentences

We have incurred costs in an effort to comply with these requirements, but our costs may increase significantly if new requirements are enacted and based on how individuals exercise their rights.

Any noncompliance could result in substantial penalties, reputational damage or litigation.

Any loss of sensitive information and failure to comply with these requirements or other applicable laws and regulations in this area could result in substantial penalties, reputational damage or litigation.

We routinely utilize information technology security experts to assist us in our evaluations of the effectiveness of the security of our information technology systems, and we regularly enhance our security measures, which include multiple redundant safeguards, to protect our systems and data.

2 unchanged sentences

As such, we may be unable to anticipate these techniques, to implement adequate preventative measures or to identify and investigate cybersecurity incidents.

We may also incur costs to adapt our cybersecurity program to the evolving threat landscape and to investigate and remediate vulnerabilities or other identified risks.

Although past cybersecurity incidents have not had a material effect on our business or operations to date, in the future, a data security breach, a significant and extended disruption in the functioning of our information technology systems or a breach of any of our data security controls could disrupt our business operations, damage our reputation and cause us to lose customers.

We cannot provide assurances that a security breach, cyber-attack, data theft or other significant systems or security failures will not occur in the future, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position.

Governmental regulations and environmental matters could increase the cost and limit the availability of our land development and homebuilding projects and adversely affect our business and financial results.

Additionally, if a cybersecurity incident is determined to be material, we are subject to additional reporting requirements.

We cannot provide assurances that a security breach, cyber incident, data theft or other significant systems or security failures will not occur in the future, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position.

Governmental regulations and environmental matters could increase the cost and limit the availability of our land development and housing projects and adversely affect our business and financial results.

We are subject to extensive and complex regulations that affect land development and home construction, including zoning, density restrictions, building design and building standards.

15 unchanged sentences

Additionally, actual or perceived ESG and other sustainability matters and our response to these matters could harm our business.

Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change (as currently proposed by the SEC), human capital, labor, cybersecurity and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess and report.

These factors may alter the environment in which we do business and may increase the ongoing costs of compliance and adversely impact our results of operations and cash flows.

Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, human capital, labor, cybersecurity and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess and report.

In March 2024, the SEC adopted new rules regarding climate-related disclosures.

Though these rules are currently being challenged in legal proceedings and their effectiveness has been stayed by the SEC, these rules, if they become effective, would require public companies to make a wide range of climate-related disclosures.

Similarly, the State of California has recently enacted its own legislation requiring extensive climate-related disclosures for companies deemed to be doing business in California, and other states are considering similar laws.

Any of the above factors may alter the environment in which we do business and may increase the ongoing costs of compliance and adversely impact our results of operations and cash flows.

If we are unable to adequately address such ESG matters or fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.

1 unchanged sentence

If the subcontractors who construct our homes fail to comply with all applicable laws, we can suffer reputational damage, and may be exposed to possible liability.

We are also subject to an extensive number of laws and regulations because our common stock and debt securities and the common stock of our Forestar subsidiary are publicly traded in the capital markets.

We are also subject to an extensive number of laws and regulations because our common stock and debt securities and the common stock and debt securities of our Forestar subsidiary are publicly traded in the capital markets.

These regulations govern our communications with our shareholders and the capital markets, our financial statement disclosures and our legal processes, and they also impact the work required to be performed by our independent registered public accounting firm and our legal counsel.

18 unchanged sentences

We have significant amounts of debt and may incur additional debt, which could affect our financial health and our ability to raise additional capital to fund our operations or potential acquisitions.

As of September 30, 2023, our consolidated debt was $5.1 billion, which consisted of $2.3 billion related to our homebuilding segment, $1.7 billion related to our financial services segment, $695 million related to our Forestar segment and $400 million related to our rental segment.

The indentures governing our homebuilding senior notes do not restrict the incurrence of future unsecured debt by us or our homebuilding subsidiaries or the incurrence of secured or unsecured debt by our non-guarantor subsidiaries, and the agreement governing our homebuilding revolving credit facility allows us to incur a substantial amount of future unsecured debt.

Also, the indentures governing our homebuilding senior notes and the agreement governing our homebuilding revolving credit facility impose restrictions on our ability and on that of the guarantors under our homebuilding senior notes and our homebuilding revolving credit facility to incur debt secured by certain assets, but still permit us and our homebuilding subsidiaries to incur significant amounts of additional secured debt.

As of September 30, 2024, our consolidated debt was $5.9 billion, which consisted of $2.9 billion related to our homebuilding segment, $1.5 billion related to our financial services segment, $751 million related to our rental segment and $706 million related to our Forestar segment.

The indenture governing our homebuilding senior notes does not restrict the incurrence of future unsecured debt by us or our homebuilding subsidiaries or the incurrence of secured or unsecured debt by our non-guarantor subsidiaries, and the agreement governing our homebuilding revolving credit facility allows us to incur a substantial amount of future unsecured debt.

Also, the indenture governing our homebuilding senior notes and the agreement governing our homebuilding revolving credit facility impose restrictions on our ability and on that of the guarantors under our homebuilding senior notes and our homebuilding revolving credit facility to incur debt secured by certain assets, but still permit us and our homebuilding subsidiaries to incur significant amounts of additional secured debt.

The rental revolving credit facility imposes restrictions on the ability of DRH Rental and its restricted subsidiaries to incur secured and unsecured debt, but still permits DRH Rental and its restricted subsidiaries to incur a substantial amount of future secured and unsecured debt, and does not restrict the incurrence of future secured and unsecured debt by DRH Rental’s unrestricted subsidiaries.

10 unchanged sentences

Our revenues and earnings vary with the level of general economic activity in the markets we serve.

Our businesses are also affected by financial, political, business and other factors, many of which are beyond our control.

Our businesses are also affected by financial and political events and other factors, many of which are beyond our control.

The factors that affect our ability to generate cash can also affect our ability to raise additional funds for these purposes through the sale of debt or equity, the refinancing of debt or the sale of assets.

15 unchanged sentences

Any difficulty experienced in complying with these covenants could make the renewal of the facilities more difficult or costly.

In addition, although our financial services business is conducted through subsidiaries that are not restricted by the indentures governing our and Forestar’s senior notes or the agreements governing the homebuilding, rental and Forestar revolving credit facilities, the ability of our financial services subsidiaries to distribute funds to our homebuilding operations would be restricted in the event such distribution would cause an event of default under the mortgage repurchase facility or if an event of default had occurred under this facility.

In addition, although our financial services business is conducted through subsidiaries that are not restricted by the indentures governing our and Forestar’s senior unsecured notes or the agreements governing the homebuilding, rental and Forestar revolving credit facilities, the ability of our financial services subsidiaries to distribute funds to our homebuilding operations would be restricted in the event such distribution would cause an event of default under the mortgage repurchase facilities or if an event of default had occurred under these facilities.

Moreover, our right to receive assets from our financial services subsidiaries upon their liquidation or recapitalization is subject to the prior claims of the creditors of these subsidiaries.

7 unchanged sentences

Change of control purchase options under our homebuilding senior notes and change of control default under our homebuilding revolving credit facility.

Upon the occurrence of both a change of control and a ratings downgrade event, each as defined in the indentures governing our homebuilding senior notes, we will be required to offer to repurchase such notes at 101% of their principal amount, together with all accrued and unpaid interest, if any.

Upon the occurrence of both a change of control and a ratings downgrade event, each as defined in the indenture governing our homebuilding senior notes, we will be required to offer to repurchase such notes at 101% of their principal amount, together with all accrued and unpaid interest, if any.

Moreover, a change of control (as defined in our homebuilding revolving credit facility) would constitute an event of default under our homebuilding revolving credit facility, which could result in the acceleration of the repayment of any borrowings outstanding under the facility, a requirement to cash collateralize all letters of credit outstanding thereunder and the termination of the commitments thereunder.

If repayment of more than $50 million outstanding under our homebuilding revolving credit facility were accelerated and such acceleration were not rescinded or such indebtedness were not satisfied, in either case within 30 days, an event of default would result under the indentures governing our homebuilding senior notes, entitling the trustee for the notes or holders of at least 25% in principal amount of the relevant series of notes then outstanding to declare all such notes to be due and payable immediately.

If purchase offers were required under the indentures for our homebuilding senior notes, repayment of the borrowings under our homebuilding revolving credit facility were required, or if the senior notes were accelerated, we can give no assurance that we would have sufficient funds to pay the required amounts.

If repayment of more than $50 million outstanding under our homebuilding revolving credit facility were accelerated and such acceleration were not rescinded or such indebtedness were not satisfied, in either case within 30 days, an event of default would result under the indenture governing our homebuilding senior notes, entitling the trustee for the notes or holders of at least 25% in principal amount of the relevant series of notes then outstanding to declare all such notes to be due and payable immediately.

If purchase offers were required under the indenture for our homebuilding senior notes, repayment of the borrowings under our homebuilding revolving credit facility were required, or if the senior notes were accelerated, we can give no assurance that we would have sufficient funds to pay the required amounts.

Change of control purchase option under Forestar’s notes and change of control default under the Forestar revolving credit facility.

26 unchanged sentences

We may be subject to actions or proposals from activist stockholders or others that may not align with our business strategies or the interests of our other stockholders.

Responding to such actions could be costly and time-consuming, disrupt our business and operations and/or divert the attention of our Board of Directors and senior management from the pursuit of our business strategies.

Responding to such actions could be costly and time-consuming, disrupt our business and operations and/or divert the attention of our Board and senior management from the pursuit of our business strategies.

Activist stockholders may create perceived uncertainties as to the future direction of our business or strategy, including with respect to our ESG efforts, which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel, potential homebuyers and business partners and may affect our relationships with current homebuyers, subcontractors, investors and other third parties.

In addition, actions of activist stockholders may cause periods of fluctuation in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors