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Item 7. Management’s Discussion and Analysis

2024-11-19 compared with 2023-11-17 · 183 added, 169 removed, 635 unchanged (36% of the section changed)

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Fiscal 2024 Operating Results

In fiscal 2023, our number of homes closed increased slightly compared to the prior year, and our consolidated revenues increased 6% to $35.5 billion compared to $33.5 billion in the prior year.

Our pre-tax income was $6.3 billion in fiscal 2023 compared to $7.6 billion in fiscal 2022, and our pre-tax operating margin was 17.8% compared to 22.8%.

Net income was $4.8 billion in fiscal 2023 compared to $5.9 billion in fiscal 2022, and our diluted earnings per share was $13.82 compared to $16.51.

Consolidated net cash provided by operating activities was $4.3 billion in fiscal 2023 and $561.8 million in fiscal 2022, and cash provided by our homebuilding operations was $3.1 billion in fiscal 2023 compared to $1.9 billion in fiscal 2022.

In fiscal 2023, our return on equity (ROE) was 22.7% compared to 34.5% in fiscal 2022, and our homebuilding return on inventory (ROI) was 29.7% compared to 42.8%.

In fiscal 2024, our number of homes closed and home sales revenues increased 8% and 7%, respectively, compared to the prior year, and our consolidated revenues increased 4% to $36.8 billion compared to $35.5 billion in the prior year.

Our pre-tax income was $6.3 billion in both fiscal 2024 and 2023, and our pre-tax operating margin was 17.1% compared to 17.8%.

Net income was $4.8 billion in both years, and our diluted earnings per share was $14.34 compared to $13.82.

Consolidated net cash provided by operating activities was $2.2 billion in fiscal 2024 and $4.3 billion in fiscal 2023, and cash provided by our homebuilding operations was $2.2 billion in fiscal 2024 compared to $3.1 billion in fiscal 2023.

In fiscal 2024, our return on equity (ROE) was 19.9% compared to 22.7% in fiscal 2023, our homebuilding pre-tax return on inventory (ROI) was 27.8% compared to 29.7%, and our return on assets (ROA) was 13.9% compared to 15.1%.

ROE is calculated as net income attributable to D.R.

Horton for the year divided by average stockholders’ equity, where average stockholders’ equity is the sum of ending stockholders’ equity balances of the trailing five quarters divided by five.

Horton for the year divided by average stockholders’ equity, where average stockholders’ equity is the sum of ending stockholders’ equity balances for the trailing five quarters divided by five.

Homebuilding ROI is calculated as homebuilding pre-tax income for the year divided by average inventory, where average inventory is the sum of ending homebuilding inventory balances for the trailing five quarters divided by five.

Demand for new homes remained solid during fiscal 2023 as our net sales orders increased 3% compared to fiscal 2022.

Although inflationary pressures and mortgage interest rates remain elevated, demand improved beginning in the second quarter of fiscal 2023 due to typical seasonal factors, coupled with our use of incentives and pricing adjustments to adapt to market conditions.

The disruptions in the supply chain for certain building materials and tightness in the labor market we experienced during the past two years have largely subsided, and our construction cycle times are improving.

Our homebuilding operating margins are lower than last year due to pricing adjustments, incentives and cost inflation, but margins improved in the second half of the year as home prices and incentives stabilized and some reductions in construction costs were realized.

Although higher interest rates and economic uncertainty may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable.

ROA is calculated as net income attributable to D.R.

Horton for the year divided by average consolidated assets, where average consolidated assets is the sum of total asset balances for the trailing five quarters divided by five.

Despite elevated mortgage interest rates and inflationary pressures during fiscal 2024, demand for new homes remained solid, and our net sales orders increased 10% compared to fiscal 2023.

The disruptions in the supply chain for certain building materials and tightness in the labor market we experienced in recent years have largely subsided, and our average construction cycle time has returned to historical norms.

The supply of both new and existing homes at affordable price points is still limited, and demographics supporting housing demand remain favorable;

however, we are continuing to use incentives and pricing adjustments to adapt to current market conditions.

We believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply and will manage our home pricing, sales incentives and number of homes in inventory based on the level of homebuyer demand.

We expect our incentive levels to remain elevated, assuming similar market conditions and no significant changes in mortgage interest rates.

We remain focused on our relationships with land developers across the country in order to maximize our returns and capital efficiency .

Within our homebuilding land and lot portfolio, our lots controlled through purchase contracts represent 76% of the lots owned and controlled at September 30, 2024 compared to 75% at September 30, 2023.

We remain focused on our relationships with Forestar and other land developers across the country and expect to continue to control a substantial majority of our lot pipeline through purchase contracts .

We believe our strong balance sheet and liquidity position provide us with the flexibility to operate effectively through changing economic conditions.

We plan to continue to generate strong cash flows from our homebuilding operations and manage our product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on our inventory investments in each of our communities based on local housing market conditions.

Our operating strategy focuses on consistently enhancing long-term value to our shareholders by leveraging our financial and competitive position to maximize the returns on our inventory investments and generate strong profitability and cash flows, while managing risk and maintaining financial flexibility to navigate changing economic conditions.

We are prioritizing the purchase of finished lots from Forestar and other land developers when possible.

During fiscal 2024, 63% of the homes we closed were on lots developed by either Forestar or a third party.

We believe our strong balance sheet and liquidity provide us with the flexibility to operate effectively through changing economic conditions.

We plan to generate strong cash flows from our operations and manage our product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on our inventory investments in each of our communities based on local housing market conditions.

Our operating strategy focuses on consistently enhancing long-term value to our shareholders by leveraging our financial and competitive position to maximize the returns on our inventory investments and generate consistent, sustainable profitability and cash flows, while managing risk and maintaining financial flexibility to navigate changing economic conditions.

Our strategy includes the following initiatives:

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• Investing in lots, land and land development in desirable markets, while controlling the level of land and lots we own in each market relative to the local new home demand.

• Controlling a significant portion of our land and finished lot position through purchase contracts with Forestar and other land developers.

• Controlling the cost of labor and goods provided by vendors and subcontractors.

• Controlling a significant portion of our land and finished lot position through purchase contracts and prioritizing the purchase of finished lots from Forestar and other land developers when possible.

• Controlling the cost of labor and goods provided by subcontractors and vendors.

• Improving the efficiency of our land development, construction, sales and other key operational activities.

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Key financial results as of and for our fiscal year ended September 30, 2024, as compared to fiscal 2023, were as follows:

Consolidated Results:

• Consolidated revenues increased 4% to $36.8 billion compared to $35.5 billion.

• Consolidated pre-tax income was $6.3 billion in both years.

• Consolidated pre-tax income was 17.1% of consolidated revenues compared to 17.8%.

• Income tax expense was $1.5 billion in both years, and our effective tax rate was 23.5% compared to 24.1%.

• Net income attributable to D.R.

Horton was $4.8 billion compared to $4.7 billion.

• Diluted net income per common share attributable to D.R.

Horton increased 4% to $14.34 compared to $13.82.

• Net cash provided by operations was $2.2 billion compared to $4.3 billion.

• Stockholders’ equity was $25.3 billion compared to $22.7 billion.

• Book value per common share increased to $78.12 compared to $67.78.

• Debt to total capital was 18.9% compared to 18.3%, and net debt to total capital was 5.2% compared to 5.1%.

Homebuilding:

• Homebuilding revenues decreased 1% to $31.7 billion compared to $31.9 billion.

• Homes closed increased slightly to 82,917 homes, and the average closing price of those homes decreased 1% to $381,600.

• Net sales orders increased 3% to 78,342 homes, while the value of net sales orders decreased 3% to $29.5 billion.

• Homebuilding revenues increased 7% to $34.0 billion compared to $31.7 billion.

• Homes closed increased 8% to 89,690 homes, while the average closing price of those homes decreased 1% to $378,000.

• Net sales orders increased 10% to 86,561 homes, and the value of net sales orders increased 11% to $32.7 billion.

• Sales order backlog decreased 20% to 12,180 homes, and the value of sales order backlog decreased 19% to $4.8 billion.

• Home sales gross margin was 23.5% compared to 28.7%.

• Home sales gross margin was 23.5% in both years.

• Homebuilding SG&A expense was 7.5% of homebuilding revenues compared to 7.1%.

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• Homebuilding pre-tax income was 16.1% of homebuilding revenues compared to 16.6%.

• Homebuilding return on inventory was 29.7% compared to 42.8%.

• Homebuilding pre-tax return on inventory was 27.8% compared to 29.7%.

• Net cash provided by homebuilding operations was $2.2 billion compared to $3.1 billion.

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• Homebuilding debt was $2.9 billion compared to $2.3 billion.

• Rental revenues were $2.6 billion compared to $510.2 million.

• Rental revenues were $1.7 billion compared to $2.6 billion.

• Rental pre-tax income was $228.7 million compared to $524.2 million.

• Rental inventory totaled $2.9 billion compared to $2.7 billion.

• Multi-family rental units closed totaled 2,112 compared to 775.

• Single-family rental homes closed totaled 3,970 compared to 6,175.

• Forestar’s revenues decreased 5% to $1.4 billion compared to $1.5 billion.

Revenues in both fiscal 2023 and 2022 included $1.2 billion of revenue from land and lot sales to our homebuilding segment.

• Forestar’s lots sold decreased 21% to 14,040 compared to 17,691.

• Multi-family rental units closed totaled 2,202 compared to 2,112.

• Forestar’s revenues increased 5% to $1.5 billion compared to $1.4 billion.

Revenues in fiscal 2024 and 2023 included $1.3 billion and $1.2 billion, respectively, of revenue from land and lot sales to our homebuilding segment.

• Forestar’s lots sold increased 7% to 15,068 compared to 14,040.

Lots sold to D.R.

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• Financial services revenues increased 10% to $882.5 million compared to $801.5 million.

• Financial services pre-tax income decreased 3% to $283.3 million compared to $290.6 million.

• Financial services pre-tax income was 35.3% of financial services revenues compared to 36.6%.

Consolidated Results:

• Consolidated revenues increased 6% to $35.5 billion compared to $33.5 billion.

• Consolidated pre-tax income decreased 17% to $6.3 billion compared to $7.6 billion.

• Consolidated pre-tax income was 17.8% of consolidated revenues compared to 22.8%.

• Income tax expense was $1.5 billion compared to $1.7 billion, and our effective tax rate was 24.1% compared to 22.7%.

• Net income attributable to D.R.

Horton decreased 19% to $4.7 billion compared to $5.9 billion.

• Diluted net income per common share attributable to D.R.

Horton decreased 16% to $13.82 compared to $16.51.

• Net cash provided by operations was $4.3 billion compared to $561.8 million.

• Stockholders’ equity was $22.7 billion compared to $19.4 billion.

• Book value per common share increased to $67.78 compared to $56.39.

• Debt to total capital was 18.3% compared to 23.8%, and net debt to total capital was 5.1% compared to 15.4%.

• Financial services pre-tax income increased 10% to $311.2 million compared to $283.3 million.

• Financial services pre-tax income was 35.3% of financial services revenues in both years.

Results of Operations — Homebuilding

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Georgia, North Carolina, South Carolina and Tennessee

Delaware, Illinois, Indiana, Iowa, Kentucky, Maryland, Minnesota, Nebraska,

New Jersey, Ohio, Pennsylvania, Virginia and West Virginia

Delaware, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia, West Virginia and Wisconsin

The following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting segment as of and for the fiscal years ended September 30, 2024 and 2023.

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Net Sales Orders

The number of net sales orders increased 3% during 2023 compared to 2022, while the value of net sales orders decreased 3% to $29.5 billion (78,342 homes) in 2023 from $30.4 billion (76,137 homes) in 2022 due to the decrease in our average selling price.

The average selling price of net sales orders during fiscal 2023 was $376,900, down 6% from the prior year.

The overall increase in sales order volume was primarily due to increases in the East and North where our Carolina (particularly Myrtle Beach) and Ohio markets, respectively, contributed the most.

In late fiscal 2022, we began to see a moderation in housing demand that persisted into early fiscal 2023 as mortgage interest rates increased substantially and inflationary pressures remained elevated.

Despite the continuation of those conditions, demand improved beginning in the second quarter of fiscal 2023 due to typical seasonal factors, coupled with an increased use of incentives and pricing adjustments to adapt to changing market conditions.

We believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply.

The number of net sales orders increased 10% during 2024 compared to 2023, and the value of net sales orders increased 11% to $32.7 billion (86,561 homes) in 2024 from $29.5 billion (78,342 homes) in 2023.

The average selling price of net sales orders during 2024 was $377,900, up slightly from the prior year.

During fiscal 2024, the markets contributing most to the increase in sales order volume were the Portland and Salt Lake City markets in the Northwest, the Nevada markets in the Southwest, the Dallas market in the South Central, the Tampa market in the Southeast, the North Carolina markets in the East and the suburban Washington, D.C.

market in the North.

Despite elevated mortgage interest rates and inflationary pressures during fiscal 2024, demand for new homes remained solid, and our net sales orders increased 10% compared to fiscal 2023.

The supply of both new and existing homes at affordable price points is still limited, and demographics supporting housing demand remain favorable;

however, we are continuing to use incentives and pricing adjustments to adapt to current market conditions.

We expect our incentive levels to remain elevated, assuming similar market conditions and no significant changes in mortgage interest rates.

Our sales order cancellation rate (cancelled sales orders divided by gross sales orders for the period) was 18% in 2024 compared to 20% in 2023.

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Home Sales Revenue

Revenues from home sales decreased 1% to $31.6 billion (82,917 homes closed) in 2023 from $31.9 billion (82,744 homes closed) in 2022.

The increase in closings volume in the Southeast was due to our Florida markets (particularly Tampa) and in the North was due to our Indianapolis and Maryland markets.

The decrease in closings volume in the Southwest was due to our California markets (particularly Southern California).

Revenues from home sales increased 7% to $33.9 billion (89,690 homes closed) in 2024 from $31.6 billion (82,917 homes closed) in 2023.

The number of homes closed increased 8% compared to the prior year.

The average selling price of homes closed during 2024 was $378,000, down 1% from the prior year.

The markets contributing most to the increase in closings volume were the Portland and Salt Lake City markets in the Northwest, the California and Nevada markets in the Southwest, the North Carolina markets in the East and the suburban Washington, D.C.

market in the North.

Homebuilding Operating Margin Analysis

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Home Sales Gross Profit

Gross profit from home sales decreased to $7.4 billion in 2023 from $9.1 billion in 2022 and decreased 520 basis points to 23.5% as a percentage of home sales revenues.

The percentage decrease resulted from a decrease of 530 basis points due to the average cost of our homes closed increasing while the average selling price of those homes decreased, partially offset by 10 basis points due to a reduction in warranty and construction defect costs.

Gross profit from home sales increased to $8.0 billion in 2024 from $7.4 billion in 2023 and was 23.5% of home sales revenues in both years.

We remain focused on managing the pricing, incentives and sales pace in each of our communities to optimize the returns on our inventory investments and adjust to local market conditions and new home demand.

To adjust to changing market conditions and higher mortgage interest rates during fiscal 2023, we increased our use of incentives and reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers.

Based on current market conditions, we expect to continue offering a higher level of incentives in fiscal 2024.

To adjust to changes in market conditions during fiscal 2023 and 2024, we have used a higher level of incentives and reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers.

We expect our incentive levels to remain elevated, assuming similar market conditions and no significant changes in mortgage interest rates.

Land/Lot Sales and Other Revenues

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As a result of this review, there were $8.3 million of impairments recorded in our homebuilding segment during the three months ended September 30, 2024.

During fiscal 2023, impairment charges related to our homebuilding segment totaled $7.7 million.

There were no impairment charges recorded in our homebuilding segment in fiscal 2022.

During fiscal 2024, impairment charges related to our homebuilding segment totaled $14.0 million compared to $7.7 million in fiscal 2023.

As we manage our inventory investments across our operating markets to optimize returns and cash flows, we may modify our pricing and incentives, construction and development plans or land sale strategies in individual active communities and land held for development, which could result in the affected communities being evaluated for potential impairment.

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Employee compensation and related costs were $2.1 billion and $1.9 billion in fiscal 2024 and 2023, respectively, representing 82% and 85% of SG&A costs in those years.

These costs increased 6% in fiscal 2023 from the prior year period.

These costs increased 10% in fiscal 2024 from the prior year.

Our homebuilding operations employed 10,071 and 9,190 people at September 30, 2024 and 2023, respectively.

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Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer.

Interest incurred by our homebuilding operations decreased 38% to $68.8 million in fiscal 2023 from $110.7 million in fiscal 2022, primarily due to a 25% decrease in our average homebuilding debt.

Interest charged to cost of sales was 0.4% and 0.5% of homebuilding cost of sales (excluding inventory and land option charges) in those years.

Interest incurred by our homebuilding operations decreased 27% to $50.5 million in fiscal 2024 from $68.8 million in fiscal 2023, primarily due to an 11% decrease in our average homebuilding debt.

Interest charged to cost of sales was 0.4% of homebuilding cost of sales (excluding inventory and land option charges) in both years.

Other income, net of other expenses, included in our homebuilding operations increased to $107.6 million in fiscal 2024 compared to $78.8 million in fiscal 2023, primarily due to an increase in interest income.

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The activities that result in this ancillary income are not significant, either individually or in the aggregate.

Business Acquisitions

In December 2022, we acquired the homebuilding operations of Riggins Custom Homes in Northwest Arkansas for approximately $107 million in cash.

The assets acquired included approximately 170 homes in inventory, 3,000 lots and a sales order backlog of 100 homes.

In June 2023, we acquired the homebuilding operations of Truland Homes for approximately $110 million in cash.

Truland Homes operates in Baldwin County, Alabama and Northwest Florida.

The assets acquired included approximately 155 homes in inventory, 620 lots and a sales order backlog of 55 homes.

We also acquired control of approximately 660 additional lots through land purchase contracts.

Homebuilding Results by Reporting Region

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The amortization of capitalized interest and property taxes is allocated to each segment based on the segment’s cost of sales, while expenses associated with the corporate office are allocated to each segment based on the segment’s inventory balances.

Northwest Region — Homebuilding revenues decreased 3% in fiscal 2023 compared to fiscal 2022, due to decreases in the average selling price of homes closed in most of our markets, partially offset by an increase in homes closed in our Salt Lake City and Seattle markets.

Northwest Region — Homebuilding revenues increased 7% in fiscal 2024 compared to fiscal 2023, due to increases in the number of homes closed in our Portland and Salt Lake City markets, partially offset by a decrease in the average selling price of homes closed in most of the region’s markets.

The region generated pre-tax income of $420.8 million in 2024 compared to $391.1 million in 2023.

Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) decreased by 600 basis points in 2023 compared to 2022, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased.

Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) increased by 50 basis points in 2024 compared to 2023 , primarily due to the average cost of homes closed decreasing by more than the average selling price of those homes .

As a percentage of homebuilding revenues, SG&A expenses increased by 60 basis points in 2024 compared to 2023 , primarily due to an increase in SG&A expenses.

Southwest Region — Homebuilding revenues decreased 12% in fiscal 2023 compared to fiscal 2022, primarily due to decreases in the number of homes closed in most markets and a decrease in the average selling price.

Southwest Region — Homebuilding revenues increased 15% in fiscal 2024 compared to fiscal 2023, primarily due to increases in the number of homes closed, particularly in our California and Nevada markets.

The region generated pre-tax income of $703.5 million in 2024 compared to $489.3 million in 2023.

Home sales gross profit percentage decreased by 820 basis points in 2023 compared to 2022, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased.

As a percentage of homebuilding revenues, SG&A expenses increased by 50 basis points in 2023 compared to 2022, primarily due to the decrease in homebuilding revenues.

South Central Region — Homebuilding revenues decreased 7% in fiscal 2023 compared to fiscal 2022, primarily due to decreases in the number of homes closed in our Dallas and Houston markets.

Home sales gross profit percentage increased by 270 basis points in 2024 compared to 2023, primarily due to the average selling price of homes closed increasing while the average cost of those homes decreased.

As a perc entage of homebuilding revenues, SG&A expenses decreased by 20 basis points in 2024 compared to 2023, primarily due to the increase in homebuilding revenues.

South Central Region — Homebuilding revenues increased 1% in fiscal 2024 compared to fiscal 2023.

The region generated pre-tax income of $1.3 billion in 2024 compared to $1.4 billion in 2023.

Home sales gross profit percentage decreased by 490 basis points in 2023 compared to 2022, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased.

As a percentage of homebuilding revenues, SG&A expenses increased by 40 basis points in 2023 compared to 2022, primarily due to the decrease in homebuilding revenues.

Southeast Region — Homebuilding revenues increased 10% in fiscal 2023 compared to fiscal 2022, primarily due to increases in the number of homes closed in our Jacksonville, Orlando and Tampa markets.

Home sales gross profit percentage decreased by 20 basis points in 2024 compared to 2023, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes .

As a percentage of homebuilding revenues, SG&A expenses increased by 70 basis points in 2024 compared to 2023, primarily due to an increase in SG&A expenses.

Southeast Region — Homebuilding revenues increased 1% in fiscal 2024 compared to fiscal 2023 .

The region generated pre-tax income of $1.4 billion in 2024 compared to $1.7 billion in 2023.

Home sales gross profit percentage decreased by 520 basis points in 2023 compared to 2022, primarily due to the average cost of homes closed increasing by more than the average selling price of those homes.

As a percentage of homebuilding revenues, SG&A expenses decreased by 40 basis points in 2023 compared to 2022, primarily due to the increase in homebuilding revenues.

East Region — Homebuilding revenues were essentially flat in fiscal 2023 compared to fiscal 2022.

The region generated pre-tax income of $935.7 million in 2023 compared to $1.1 billion in 2022.

Home sales gross profit percentage decreased by 350 basis points in 2023 compared to 2022, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased.

Home sales gross profit percentage decreased by 260 basis points in 2024 compared to 2023 , primarily due to the average selling price of homes closed decreasing while the average cost of those homes increased .

As a percentage of homebuilding revenues, SG&A expenses increased by 60 basis points in 2024 compared to 2023, primarily due to an increase in SG&A expenses.

North Region — Homebuilding revenues increased 7% in fiscal 2023 compared to fiscal 2022, due to increases in the number of homes closed in most of our markets.

The region generated pre-tax income of $350.8 million in 2023 compared to $456.3 million in 2022.

Home sales gross profit percentage decreased by 470 basis points in 2023 compared to 2022, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased.

East Region — Homebuilding revenues increased 14% in fiscal 2024 compared to fiscal 2023, due to increases in the number of homes closed, particularly in our North Carolina markets.

The region generated pre-tax income of $1.1 billion in 2024 compared to $935.7 million in 2023.

Home sales gross profit percentage increased by 30 basis points in 2024 compared to 2023 , primarily due to the average cost of homes closed decreasing by more than the average selling price of those homes .

As a percentage of homebuilding revenues, SG&A expenses increased by 50 basis points in 2024 compared to 2023, primarily due to an increase in SG&A expenses.

North Region — Homebuilding revenues increased 16% in fiscal 2024 compared to fiscal 2023 , due to increases in the number of homes closed, particularly in our suburban Washington, D.C.

The region generated pre-tax income of $498.4 million in 2024 compared to $350.8 million in 2023.

Home sales gross profit percentage increased by 290 basis points in 2024 compared to 2023, primarily due to the average cost of homes closed decreasing while the average selling price of those homes increased.

A s a percentage of homebuilding revenues, SG&A expenses increased by 10 basis points in 2024 compared to 2023 .

Homebuilding Inventories, Land and Lot Position and Homes in Inventory

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The total remaining purchase price of lots controlled through land and lot purchase contracts at September 30, 2024 and 2023 included $1.9 billion and $1.3 billion, respectively, related to lot purchase contracts with Forestar, secured by $193.3 million and $139.1 million, respectively, of earnest money.

(3) Lots controlled at September 30, 2023 included approximately 31,400 lots owned or controlled by Forestar, 14,400 of which our homebuilding divisions had under contract to purchase and 17,000 of which our homebuilding divisions had a right of first offer to purchase.

Of these, approximately 12,000 lots were in our Southeast region, 6,000 lots were in our East region, 4,700 lots were in our South Central region, 3,300 lots were in our Southwest region, 3,300 lots were in our North region and 2,100 lots were in our Northwest region.

Lots controlled at September 30, 2022 included approximately 36,700 lots owned or controlled by Forestar, 17,800 of which our homebuilding divisions had under contract to purchase and 18,900 of which our homebuilding divisions had a right of first offer to purchase.

(3) Lots controlled at September 30, 2024 included approximately 37,700 lots owned by Forestar, 20,500 of which our homebuilding divisions had under contract to purchase and 17,200 of which our homebuilding divisions had a right of first offer to purchase.

Of these, approximately 10,600 lots were in our Southeast region, 7,400 lots were in our East region, 7,000 lots were in our North region, 6,900 lots were in our South Central region, 3,600 lots were in our Southwest region and 2,200 lots were in our Northwest region.

Lots controlled at September 30, 2023 included approximately 31,400 lots owned by Forestar, 14,400 of which our homebuilding divisions had under contract to purchase and 17,000 of which our homebuilding divisions had a right of first offer to purchase.

(4) Approximately 25,700 and 27,000 of our homes in inventory were unsold at September 30, 2024 and 2023, respectively.

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Our rental segment consists of single-family and multi-family rental operations.

The single-family rental operations primarily construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes.

The single-family rental operations construct and lease single-family homes within a community and then generally market each community for a bulk sale of rental homes.

The multi-family rental operations develop, construct, lease and sell residential rental properties, with a primary focus on constructing garden style apartment communities in high growth suburban markets.

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The following tables provide further information regarding our rental operations as of and for the fiscal years ended September 30, 2024 and 2023.

Rental Homes/Units Closed

Rental Homes/Units Closed and Revenue

Year Ended September 30,

Single-family rental homes 6,175 774

Multi-family rental units 2,112 775

Results of Operations

Homes/Units Closed Rental Revenue (In millions) Average Selling Price

Change 2024 2023 %

Single-family 3,970 6,175 (36) % $ 1,177.4 $ 2,014.8 (42) % $ 296,600 $ 326,300 (9) %

Multi-family 2,202 2,112 4 % 499.7 590.7 (15) % 226,900 279,700 (19) %

6,172 8,287 (26) % $ 1,677.1 $ 2,605.5 (36) % $ 271,700 $ 314,400 (14) %

Year Ended September 30,

(In millions)

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Income before income taxes $ 228.7 $ 524.2

Revenues from our rental operations increased to $2.6 billion in fiscal 2023 from $510.2 million in fiscal 2022, and pre-tax income increased to $524.2 million from $202.0 million.

These increases reflect the significant growth of our rental operations resulting from our increased investment in this segment of our business during the past two years.

Rental Operating Margin Analysis

Percentages of Related Revenues

Year Ended September 30,

Gross profit — rental 21.6 % 27.3 %

Selling, general and administrative expense 14.0 % 11.1 %

Other (income) expense (6.0) % (3.9) %

Rental pre-tax income 13.6 % 20.1 %

Revenues from our rental operations decreased to $1.7 billion in fiscal 2024 from $2.6 billion in fiscal 2023, and pre-tax income decreased to $228.7 million from $524.2 million.

The decline in rental revenues and pre-tax income was primarily due to a decrease in the number of single-family homes closed and a decrease in the average selling price of multi-family units closed.

At September 30, 2024, our rental property inventory of $2.9 billion included $800.3 million of inventory related to our single-family rental operations and $2.1 billion of inventory related to our multi-family rental operations.

At September 30, 2023, our rental property inventory of $2.7 billion included $1.3 billion of inventory related to our single-family rental operations and $1.4 billion of inventory related to our multi-family rental operations.

At September 30, 2022, our rental property inventory of $2.6 billion included $1.7 billion of inventory related to our single-family rental operations and $897.2 million of inventory related to our multi-family rental operations.

Single-family rental homes and lots and multi-family rental units at September 30, 2024 and 2023 consisted of the following:

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(1) Single-family rental homes at September 30, 2023 consist of 1,260 homes under construction and 4,370 completed homes.

Single-family rental homes at September 30, 2022 consist of 3,870 homes under construction and 3,530 completed homes.

(2) Single-family rental lots at September 30, 2023 consist of 2,210 undeveloped lots and 1,170 finished lots.

Single-family rental lots at September 30, 2022 consist of 4,910 undeveloped lots and 1,770 finished lots.

(3) Multi-family rental units at September 30, 2023 consist of 7,200 units under construction and 1,950 units that were substantially complete and in the lease-up phase.

Multi-family rental units at September 30, 2022 consist of 5,810 units under construction and 300 units that were substantially complete and in the lease-up phase.

(1) Single-family rental homes at September 30, 2024 consist of 340 homes under construction and 2,800 completed homes compared to 1,260 homes under construction and 4,370 completed homes at September 30, 2023.

(2) Single-family rental lots at September 30, 2024 consist of 910 undeveloped lots and 1,000 finished lots compared to 2,210 undeveloped lots and 1,170 finished lots at September 30, 2023.

(3) Multi-family rental units at September 30, 2024 consist of 7,900 units under construction and 4,060 units that were substantially complete and in the lease-up phase compared to 7,200 units under construction and 1,950 units that were substantially complete at September 30, 2023.

Results of Operations — Forestar

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At September 30, 2024 and 2023, Forestar’s inventory, which includes land and lots developed, under development and held for development, totaled $2.3 billion and $1.8 billion, respectively.

Forestar’s inventory and land option charges during fiscal 2023 and 2022 included impairment charges of $19.4 million and $3.8 million, respectively.

Forestar’s inventory and land option charges consisted of $4.1 million of earnest money and pre-acquisition cost write-offs in fiscal 2024 and $19.4 million of impairment charges and $4.6 million of earnest money and pre-acquisition cost write-offs in fiscal 2023.

SG&A expense for fiscal 2024 and 2023 included charges of $5.6 million and $3.8 million, respectively, related to the shared services agreement between Forestar and D.R.

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Horton homes financed by DHI Mortgage 78 % 76 %

Number of total loans originated or brokered by DHI Mortgage for D.R.

Horton homebuyers 62,773 57,414 9 %

Total number of loans originated or brokered by DHI Mortgage 63,135 58,298 8 %

Captive business percentage 99 % 98 %

Loans sold by DHI Mortgage to third parties 70,877 62,350 14 %

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Mortgage Loan Activity

DHI Mortgage’s primary focus is to originate loans for our homebuilding operations and those loan originations account for the majority of its total loan volume.

In fiscal 2023, while the number of homes closed by our homebuilding operations increased only slightly, the percentage of the loans originated by DHI Mortgage related to those homes closed was 76%, up from 69% in fiscal 2022.

DHI Mortgage’s primary focus is to originate loans for our homebuilding operations, and those loan originations account for virtually all of its total loan volume.

In fiscal 2024, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers increased 12%, primarily due to the 8% increase in the number of homes closed by our homebuilding operations, as well as an increase in the percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing.

The percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing was 78% in fiscal 2024, up from 76% in fiscal 2023.

This increase reflects DHI Mortgage’s ongoing efforts to align their business with our homebuilding operations by offering competitive products and pricing.

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Financial Services Revenues and Expenses

Total loan origination volume increased 8% during fiscal 2023, while revenues from our mortgage operations decreased slightly to $616.3 million from $617.4 million in fiscal 2022, primarily due to competitive pricing pressure in the secondary market.

Total loan origination volume increased 12% during fiscal 2024, and revenues from our mortgage operations increased 11% to $681.6 million from $616.3 million in fiscal 2023.

Revenues from our title operations increased 8% to $200.9 million in fiscal 2024 from $185.2 million in fiscal 2023.

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

Other income increased 78% to $76.7 million in fiscal 2023 from $43.2 million in the prior year, primarily due to an increase in interest rates on our loan origination volume.

Other income increased 32% to $101.1 million in fiscal 2024 from $76.7 million in the prior year, primarily due to an increase in interest income on our loan origination volume.

Results of Operations — Other Businesses

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The pre-tax income of all of our subsidiaries engaged in other business activities was $73.4 million in fiscal 2024 compared to $32.4 million in fiscal 2023.

The pre-tax income in fiscal 2024 includes other income of $27.9 million related to a sale of mineral rights.

Results of Operations — Consolidated

Income before Income Taxes

Pre-tax income was $6.3 billion in fiscal 2023 compared to $7.6 billion in fiscal 2022.

The decrease was primarily due to a decrease in the pre-tax income of our homebuilding operations as a result of a decrease in home sales gross margin.

Pre-tax income was $6.3 billion in both fiscal 2024 and 2023.

In fiscal 2024, our homebuilding, rental, financial services and Forestar businesses generated pre-tax income of $5.5 billion, $228.7 million, $311.2 million and $270.1 million, respectively, compared to $5.3 billion, $524.2 million, $283.3 million and $221.6 million, respectively, in fiscal 2023.

Our income tax expense was $1.5 billion and $1.7 billion in fiscal 2023 and 2022, respectively, and our effective tax rate was 24.1% and 22.7% in those years.

Our income tax expense was $1.5 billion in both fiscal 2024 and 2023, and our effective tax rate was 23.5% and 24.1%, respectively, in those years.

The effective tax rates for both years include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient homes tax credits.

Our deferred tax assets, net of deferred tax liabilities, were $182.4 million at September 30, 2024 compared to $202.0 million at September 30, 2023.

We have a valuation allowance of $14.8 million and $17.9 million at September 30, 2023 and 2022, respectively, related to deferred tax assets for state net operating loss (NOL), state capital loss and tax credit carryforwards that are expected to expire before being realized.

We have a valuation allowance of $14.9 million and $14.8 million at September 30, 2024 and 2023, respectively, related to deferred tax assets for state net operating loss (NOL) and tax credit carryforwards that are expected 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 and tax credit carryforwards.

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Our current levels of cash, borrowing capacity and balance sheet leverage provide us with the operational flexibility to adjust to changes in economic and market conditions.

We have continued to increase our investments in our homebuilding and rental inventories to expand our operations.

We are also returning capital to our shareholders through dividend payments and repurchases of our common stock.

We are making investments in our homebuilding and rental inventories to expand our operations and consolidate market share.

We are also returning capital to our shareholders through repurchases of our common stock and dividend payments.

We are maintaining significant homebuilding cash balances and liquidity to support the increased scale and level of activity in our business and to provide flexibility to adjust to changing conditions and opportunities.

At September 30, 2023, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $5.1 billion, of which $1.9 billion is payable within 12 months and includes $1.7 billion outstanding under our mortgage repurchase facilities.

Future interest payments associated with the notes total $396.1 million, of which $224.4 million is payable within 12 months.

At September 30, 2024, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $5.9 billion.

$2.2 billion was payable within 12 months, including $1.5 billion which is outstanding under our mortgage repurchase facilities and $500 million principal amount of 2.5% homebuilding senior notes that were repaid at maturity in October 2024.

Future interest payments associated with the outstanding notes total $745.5 million, of which $251.7 million is payable within 12 months.

At September 30, 2024, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 18.9% compared to 18.3% at September 30, 2023.

Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 5.2% at September 30, 2024 compared to 5.1% at September 30, 2023.

Over the long term, we intend to maintain our ratio of debt to total capital below 25%, and we expect it to remain below 20% in fiscal 2024.

Over the long term, we intend to maintain our ratio of debt to total capital around or slightly below 20%.

At September 30, 2024, we had outstanding letters of credit of $242.9 million and surety bonds of $3.5 billion, issued by third parties to secure performance under various contracts.

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Horton 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 October 2021, registering $750 million of equity securities, of which $300 million was reserved for sales under its at-the-market equity offering (ATM) 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 ATM program.

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.

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At September 30, 2024, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility.

Public Unsecured Debt — In February 2023, we repaid $300 million principal amount of our 4.75% senior notes at maturity, and in July 2023, we redeemed $400 million principal amount of our 5.75% senior notes due August 2023.

The senior notes were redeemed at a price equal to 100% of the principal amount of the notes, together with accrued and unpaid interest.

At September 30, 2023, we had $2.1 billion principal amount of homebuilding senior notes outstanding that mature from October 2024 through October 2027.

The indentures governing our senior notes impose restrictions on the creation of secured debt and liens.

Public Unsecured Debt — At September 30, 2024, we had $2.8 billion principal amount of homebuilding senior notes outstanding that were scheduled to mature from October 2024 through October 2034.

In August 2024, we issued $700 million principal amount of 5.0% senior notes due October 15, 2034, 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 5.2%.

In October 2024, we repaid $500 million principal amount of our 2.5% senior notes at maturity.

The indenture governing our senior notes imposes restrictions on the creation of secured debt and liens.

At September 30, 2024, we were in compliance with all of the limitations and restrictions associated with our public debt obligations.

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

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

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

Debt and Stock Repurchase Authorizations — In July 2019, our Board of Directors authorized the repurchase of up to $500 million of debt securities.

In April 2023, our Board of Directors authorized the repurchase of up to $1.0 billion of our common stock, replacing the prior stock repurchase authorization.

During fiscal 2023, we repurchased 11.1 million shares at a total cost, including commissions and excise taxes, of $1.2 billion.

At September 30, 2023, the full amount of the debt repurchase authorization was remaining, and $234.0 million of the stock repurchase authorization was remaining.

In October 2023, our Board of Directors authorized the repurchase of up to $1.5 billion of our common stock, replacing the previous authorization, which at that time had only $32.8 million remaining due to repurchases made subsequent to year end.

Debt and Stock Repurchase Authorizations — In July 2024, our Board of Directors authorized the repurchase of up to $500 million of our debt securities.

Effective July 18, 2024, our Board authorized the repurchase of up to $4.0 billion of our common stock, replacing the previous authorization that was effective as of October 31, 2023.

During fiscal 2024, we repurchased 12.5 million shares at a total cost, including commissions and excise taxes, of $1.8 billion, of which $1.4 billion was repurchased under previous authorizations.

At September 30, 2024, the full amount of the debt repurchase authorization was remaining, and $3.6 billion of the stock repurchase authorization was remaining.

The debt and stock repurchase authorizations have no expiration date.

Capital Resources - Rental

During the past two years, we have made significant investments in our rental operations.

During the past few years, we have made significant investments in our rental operations.

The inventory in our rental segment totaled $2.9 billion and $2.7 billion at September 30, 2024 and 2023, respectively.

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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 total revolving credit commitments.

The maturity date of the facility is March 4, 2026.

Borrowings and repayments under the facility totaled $700 million and $1.1 billion, respectively, during fiscal 2023.

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

Borrowings and repayments under the facility totaled $1.4 billion and $1.1 billion, respectively, during fiscal 2024.

At September 30, 2024, there were $745 million of borrowings outstanding at a 6.9% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $305 million.

In October 2023, DRH Rental’s credit facility was amended to extend its maturity date to October 10, 2027 and to increase its accordion feature to allow for an increase in the size of the facility up to $2.0 billion, subject to certain conditions and availability of additional bank commitments.

The rental revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants.

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At September 30, 2024, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

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.

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At September 30, 2024, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries.

Forestar’s revolving credit facility and its senior unsecured notes are guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries.

They are not guaranteed by D.R.

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All of the $30 million authorization was remaining at September 30, 2024, and the authorization has no expiration date.

Issuance of Common Stock — During fiscal 2023, there were no shares of common stock issued under Forestar’s ATM program.

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 ATM program.

Issuance of Common Stock — During fiscal 2024, Forestar issued 546,174 shares of common stock under its at-the-market equity offering (ATM) program for proceeds of $19.7 million, net of commissions and other issuance costs totaling $0.4 million.

In September 2024, Forestar filed a new shelf registration statement, which became effective in October 2024, registering $750 million of equity securities.

At the time of filing the new registration statement, $728.1 million of equity securities remained available for issuance under Forestar’s prior shelf registration statement, which has since expired.

Forestar’s ATM program expired in October 2024, and Forestar anticipates entering into a new ATM program under its September 2024 shelf registration statement.

Capital Resources - Financial Services

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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 in accordance with the terms of the mortgage repurchase facilities.

The committed mortgage repurchase facility has a total capacity of $2.0 billion and a maturity date of February 16, 2024.

The capacity of the committed mortgage repurchase facility can be increased to $2.3 billion subject to the availability of additional commitments.

In August 2024, the committed mortgage repurchase facility was amended to extend its maturity date to May 9, 2025.

The facility has a total capacity of $1.6 billion, which can be increased to $2.0 billion subject to the availability of additional commitments.

At September 30, 2024, DHI Mortgage had an obligation of $1.2 billion under the committed mortgage repurchase facility at a 6.5% annual interest rate.

In April 2023, DHI Mortgage entered into a master repurchase agreement providing for an uncommitted mortgage repurchase facility.

At September 30, 2023, DHI Mortgage could borrow up to $300 million under the uncommitted mortgage repurchase facility and had an obligation of $296.3 million at a 6.6% annual interest rate.

As of September 30, 2023, $2.22 billion of mortgage loans held for sale with a collateral value of $2.18 billion were pledged under the committed mortgage repurchase facility, and $323.0 million of mortgage loans held for sale with a collateral value of $300.9 million were pledged under the uncommitted mortgage repurchase facility.

At September 30, 2024, the uncommitted mortgage repurchase facility had a borrowing capacity of $500 million, of which DHI Mortgage had an obligation of $304.5 million at a 6.1% annual interest rate.

At September 30, 2024, $2.09 billion of mortgage loans held for sale with a collateral value of $2.05 billion were pledged under the committed mortgage repurchase facility, and $322.3 million of mortgage loans held for sale with a collateral value of $310.8 million were pledged under the uncommitted mortgage repurchase facility.

The facilities contain financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity.

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Operating Cash Flow Activities

In fiscal 2023, net cash provided by operating activities was $4.3 billion compared to $561.8 million in fiscal 2022.

Cash provided by operating activities in the current year primarily consisted of $3.1 billion, $739.2 million, $364.1 million and $13.2 million of cash provided by our homebuilding, rental, Forestar and financial services segments, respectively.

In fiscal 2024, net cash provided by operating activities was $2.2 billion compared to $4.3 billion in fiscal 2023.

Cash provided by operating activities in the current year primarily consisted of cash provided by our homebuilding segment.

The most significant source of cash provided by operating activities in both years was net income.

Cash provided by a decrease in construction in progress and finished home inventory was $861.8 million in fiscal 2023 compared to cash used to increase construction in progress and finished home inventory of $2.1 billion in fiscal 2022, due to a decrease in our homes in inventory.

Cash provided by a decrease in construction in progress and finished home inventory was $141.3 million in fiscal 2024 compared to $861.8 million in fiscal 2023, due to a decrease in our homes in inventory.

Cash used to increase residential land and lots was $2.6 billion and $1.2 billion in fiscal 2024 and 2023, respectively.

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In fiscal 2024, net cash used in investing activities was $190.6 million compared to $310.2 million in fiscal 2023.

In fiscal 2023, uses of cash included the acquisitions of the homebuilding operations of Riggins Custom Homes for $107 million and Truland Homes for approximately $110 million and purchases of property and equipment totaling $148.6 million.

In fiscal 2022, uses of cash included the acquisition of Vidler Water Resources, Inc.

for $271.5 million and purchases of property and equipment totaling $148.2 million.

In fiscal 2024, uses of cash included purchases of property and equipment totaling $165.3 million.

In fiscal 2023, uses of cash included the acquisitions of the homebuilding operations of Riggins Custom Homes for $107 million and Truland Homes for $110 million and purchases of property and equipment totaling $148.6 million.

Financing Cash Flow Activities

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Long-term financing needs for our operations may be funded with the issuance of senior unsecured debt securities or equity securities through the capital markets.

In fiscal 2023, net cash used in financing activities was $2.7 billion, consisting primarily of repurchases of common stock of $1.2 billion, repayment of $300 million principal amount of our 4.75% homebuilding senior notes and $400 million principal amount of our 5.75% homebuilding senior notes, net payments on our rental revolving credit facility of $400 million and payment of cash dividends totaling $341.2 million.

These uses of cash were partially offset by net advances on our mortgage repurchase facility of $51.3 million.

In fiscal 2022, net cash used in financing activities was $811.2 million, consisting primarily of repurchases of common stock of $1.1 billion, repayment of $350 million principal amount of our 4.375% homebuilding senior notes and payment of cash dividends totaling $316.5 million.

These uses of cash were partially offset by net borrowings on our rental revolving credit facility of $800 million and net advances on our mortgage repurchase facility of $123.7 million.

Sources and uses of cash also included borrowings and repayments under our homebuilding revolving credit facility totaling $3.5 billion each.

Our Board of Directors approved and paid quarterly cash dividends of $0.25 per common share in fiscal 2023 and $0.225 per common share in fiscal 2022.

In October 2023, our Board of Directors approved a quarterly cash dividend of $0.30 per common share, payable on November 28, 2023, to stockholders of record on November 21, 2023.

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.

In fiscal 2024, net cash used in financing activities was $1.4 billion, consisting primarily of cash used to repurchase shares of our common stock of $1.8 billion, payment of cash dividends totaling $395.2 million and net payments on our mortgage repurchase facilities of $135.8 million.

These uses of cash were partially offset by note proceeds from our issuance of $700 million principal amount of 5.0% homebuilding senior notes and net borrowings on our rental revolving credit facility of $345 million.

In fiscal 2023, net cash used in financing activities was $2.7 billion, consisting primarily of cash used to repurchase shares of our common stock of $1.2 billion, repayment of $300 million principal amount of our 4.75% homebuilding senior notes and $400 million principal amount of our 5.75% homebuilding senior notes, net payments on our rental revolving credit facility of $400 million and payment of cash dividends totaling $341.2 million.

These uses of cash were partially offset by net advances on our mortgage repurchase facilities of $51.3 million.

Our Board of Directors approved and we paid quarterly cash dividends of $0.30 per common share in fiscal 2024 and $0.25 per common share in fiscal 2023.

In October 2024, our Board approved a quarterly cash dividend of $0.40 per common share, payable on November 19, 2024 to stockholders of record on November 12, 2024.

The declaration of future cash dividends is at the discretion of our Board and will depend upon, among other things, our future earnings, cash flows, capital requirements, financial condition and general business conditions.

Supplemental Guarantor Financial Information

As of September 30, 2024, D.R.

had $2.1 billion principal amount of homebuilding senior notes outstanding due through October 2027 and no amounts outstanding on its homebuilding revolving credit facility.

had $2.8 billion principal amount of homebuilding senior unsecured notes outstanding due through October 2034 and no amounts outstanding 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.

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In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of our guaranteed obligations.

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.

The indenture governing our homebuilding senior notes contains 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.

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

• adverse developments affecting the capital markets and financial institutions, which could limit our ability to access capital and increase our cost of capital and impact our liquidity and capital resources;

• adverse developments affecting the capital markets and financial institutions, which could limit our ability to access capital, increase our cost of capital and impact our liquidity and capital resources;

• reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs, a decrease in our ability to sell mortgage loans on attractive terms or an increase in mortgage interest rates;

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

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

• risks of acquiring land, building materials and skilled labor and challenges obtaining regulatory approvals;

• the effects of public health issues such as a major epidemic or pandemic on the economy and our businesses;

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• the effects of information technology failures, data security breaches, and the failure to satisfy privacy and data protection laws and regulations;

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

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

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

• competitive conditions within the industries in which we operate;

• the effects of competitive conditions within the industries in which we operate;

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

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• the effects of the loss of key personnel;

• actions by activist stockholders.

• the effects of actions by activist stockholders.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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We have established reserves for these contingencies based on the estimated costs of pending claims and the estimated costs of anticipated future claims related to previously closed homes.

Approximately 97% and 99% of these reserves related to construction defect matters at September 30, 2023 and 2022, respectively.

Approximately 97% of these reserves related to construction defect matters at both September 30, 2024 and 2023.

Our reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims.

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For additional information regarding our legal claims reserves, see Note L, “Commitments and Contingencies,” to our consolidated financial statements included elsewhere in this report.

Pending Accounting Standards

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, “Segment Reporting - Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosures.

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss.

It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment’s profit or loss and assets.

The standard is effective for our annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026 on a retrospective basis to all periods presented.

This standard will impact our disclosures but will not impact our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures.

The standard is effective for us beginning October 1, 2025, with early adoption permitted.

We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,” which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements.

The standard is effective for our annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029, with early adoption permitted.

We are currently evaluating the impact this standard will have on our disclosures.

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 7. Management’s Discussion and Analysis