What changed in this filing

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Item 1. Financial Statements

2026-01-22 compared with 2025-07-23 · 164 added, 273 removed, 514 unchanged (46% of the section changed)

14 unchanged sentences

Mortgage loans held for sale 1,908.8 2,566.5

Deferred income taxes, net of valuation allowance of $ 14.8 million and $ 14.9 million

at June 30, 2025 and September 30, 2024, respectively

Deferred income taxes, net of valuation allowance of $ 14.6 million

at December 31, 2025 and September 30, 2025

Property and equipment, net 582.0 578.9

9 unchanged sentences

Common stock, $ .01 par value, 1,000,000,000 shares authorized, 404,464,668 shares issued

and 298,945,018 shares outstanding at June 30, 2025 and 402,848,342 shares issued

and 290,498,069 shares outstanding at December 31, 2025 and 404,031,443 shares issued

and 294,475,153 shares outstanding at September 30, 2025

1 unchanged sentence

Retained earnings 31,504.7 31,041.4

Treasury stock, 104,994,976 shares and 78,820,982 shares at June 30, 2025

Treasury stock, 113,966,599 shares and 109,556,290 shares at December 31, 2025

and September 30, 2025, respectively, at cost

8 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

(In millions, except per share data)

38 unchanged sentences

$ 4.0 $ 3,587.6 $ 31,504.7 $ ( 11,100.8 ) $ 559.9 $ 24,555.4

Net income — — 810.4 — 8.7 819.1

Stock issued under employee benefit plans ( 633,434 shares)

— 8.4 — — — 8.4

Cash paid for shares withheld for taxes — ( 35.8 ) — — — ( 35.8 )

Stock-based compensation expense — 32.2 — — — 32.2

Cash dividends declared ($ 0.40 per share)

— — ( 125.5 ) — — ( 125.5 )

Repurchases of common stock ( 9,656,574 shares)

— — — ( 1,303.1 ) — ( 1,303.1 )

Change of ownership interest in Forestar — ( 3.4 ) — — 3.9 0.5

Balances at March 31, 2025 ( 308,629,060 shares)

$ 4.0 $ 3,509.6 $ 29,352.3 $ ( 8,538.8 ) $ 531.6 $ 24,858.7

Net income — — 1,024.6 — 8.5 1,033.1

Stock issued under employee benefit plans ( 30,611 shares)

— 2.0 — — — 2.0

Cash paid for shares withheld for taxes — ( 0.8 ) — — — ( 0.8 )

Stock-based compensation expense — 25.9 — — — 25.9

Cash dividends declared ($ 0.40 per share)

— — ( 122.4 ) — — ( 122.4 )

Repurchases of common stock ( 9,714,653 shares)

— — — ( 1,203.5 ) — ( 1,203.5 )

Balances at June 30, 2025 ( 298,945,018 shares)

$ 4.0 $ 3,536.7 $ 30,254.5 $ ( 9,742.3 ) $ 540.1 $ 24,593.0

See accompanying notes to consolidated financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF TOTAL EQUITY (Continued)

Stock Additional

7 unchanged sentences

Net income — — 844.9 — 7.0 851.9

Exercise of stock options ( 68,095 shares)

— 1.6 — — — 1.6

Stock issued under employee benefit plans ( 427,607 shares)

9 unchanged sentences

$ 4.0 $ 3,508.2 $ 28,667.4 $ ( 7,235.7 ) $ 519.0 $ 25,462.9

Net income — — 1,172.1 — 11.6 1,183.7

Exercise of stock options ( 151,568 shares)

— 3.6 — — — 3.6

Stock issued under employee benefit plans ( 604,209 shares)

— 6.9 — — — 6.9

Cash paid for shares withheld for taxes — ( 44.1 ) — — — ( 44.1 )

Stock-based compensation expense — 25.0 — — — 25.0

Cash dividends declared ($ 0.30 per share)

— — ( 99.2 ) — — ( 99.2 )

Repurchases of common stock ( 2,749,810 shares)

— — — ( 402.2 ) — ( 402.2 )

Change of ownership in Forestar — — — — 19.2 19.2

Balances at March 31, 2024 ( 330,196,301 shares)

$ 4.0 $ 3,431.6 $ 25,510.2 $ ( 5,130.3 ) $ 480.9 $ 24,296.4

Net income — — 1,353.6 — 13.2 1,366.8

Stock issued under employee benefit plans ( 146,514 shares)

— 1.9 — — — 1.9

Cash paid for shares withheld for taxes — ( 1.3 ) — — — ( 1.3 )

Stock-based compensation expense — 26.8 — — — 26.8

Cash dividends declared ($ 0.30 per share)

— — ( 98.5 ) — — ( 98.5 )

Repurchases of common stock ( 2,969,378 shares)

— — — ( 441.4 ) — ( 441.4 )

Change of ownership interest in Forestar — ( 0.1 ) — — 0.1 —

Balances at June 30, 2024 ( 327,373,437 shares)

$ 4.0 $ 3,458.9 $ 26,765.3 $ ( 5,571.7 ) $ 494.2 $ 25,150.7

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended June 30,

Three Months Ended December 31,

(In millions)

7 unchanged sentences

Changes in operating assets and liabilities:

Increase in construction in progress and finished homes ( 146.1 ) ( 863.0 )

Decrease in construction in progress and finished homes 398.8 181.7

Increase in residential land and lots –

2 unchanged sentences

Increase in rental properties ( 180.6 ) ( 86.5 )

Increase in other assets ( 136.5 ) ( 154.4 )

Increase in mortgage loans held for sale ( 290.2 ) ( 58.9 )

Increase (decrease) in accounts payable, accrued expenses and other liabilities 152.7 ( 34.4 )

Decrease in other assets 20.1 65.2

Decrease in mortgage loans held for sale 657.7 683.1

(Decrease) increase in accounts payable, accrued expenses and other liabilities ( 254.1 ) 71.0

Net cash provided by operating activities 854.0 646.7

1 unchanged sentence

Expenditures for property and equipment ( 27.4 ) ( 13.3 )

Proceeds from sale of assets 18.4 14.9

Payments related to business acquisitions, net of cash acquired ( 82.1 ) ( 51.0 )

4 unchanged sentences

Repayment of notes payable ( 154.9 ) ( 755.4 )

Borrowings on mortgage repurchase facilities, net 170.4 21.8

Proceeds from stock associated with certain employee benefit plans 8.5 12.2

Repayment on mortgage repurchase facilities, net ( 579.3 ) ( 746.9 )

Cash paid for shares withheld for taxes ( 29.7 ) ( 27.6 )

2 unchanged sentences

( 649.2 ) ( 1,055.7 )

Net proceeds from issuance of Forestar common stock — 19.7

Net other financing activities 21.5 ( 10.5 )

4 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:

Notes payable issued for inventory $ 5.5 $ 43.4

Reduction of notes payable upon deconsolidation of variable interest entity $ — $ ( 127.8 )

Stock issued under employee incentive plans $ 64.3 $ 71.3

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2025

December 31, 2025

NOTE A – BASIS OF PRESENTATION

2 unchanged sentences

Noncontrolling interests represent the proportionate equity interests in consolidated entities that are not 100% owned by the Company.

As of June 30, 2025, the Company owned a 62 % controlling interest in Forestar Group Inc.

As of December 31, 2025, the Company owned a 62 % controlling interest in Forestar Group Inc.

(Forestar) and therefore is required to consolidate 100% of Forestar within its consolidated financial statements, and the 38 % interest the Company does not own is accounted for as noncontrolling interests.

9 unchanged sentences

Historically, the homebuilding industry has experienced seasonal fluctuations;

therefore, the operating results for the three and nine months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2025 or subsequent periods.

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 the Company’s 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 the Company’s disclosures but will not impact its 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 the Company beginning October 1, 2025, with early adoption permitted.

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

therefore, the operating results for the three months ended December 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2026 or subsequent periods.

Business Acquisition

In October 2025, the Company acquired the homebuilding operations of SK Builders for approximately $ 80 million in cash.

SK Builders operates in and around Greenville, South Carolina.

The assets acquired included approximately 160 homes in inventory, 260 lots and a sales order backlog of 110 homes.

Through the acquisition, the Company also obtained control of approximately 1,320 additional lots through land purchase contracts.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (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 became effective for the Company’s annual periods beginning in fiscal 2026.

The Company is currently evaluating the impact this standard will have on its 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.

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

December 31, 2025

NOTE B – SEGMENT INFORMATION

2 unchanged sentences

The Company’s reporting segments are its homebuilding reporting segments, its rental operations segment, its Forestar lot development segment and its financial services segment.

The accounting policies of the reporting segments are described throughout Note A in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2025.

The homebuilding operating segments are aggregated into six reporting segments.

12 unchanged sentences

The Company’s rental segment consists of single-family and multi-family rental operations.

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, the majority of which are apartment communities.

Single-family rental operations construct homes within single-family rental (build-to-rent) communities, and then either sell homes to an investor as they are completed or lease the homes and market the entire community for a bulk sale.

Multi-family rental operations develop, construct, lease and sell residential rental properties, the substantial majority of which are apartment communities.

The Forestar segment is a residential lot development company with operations in 64 markets across 23 states.

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

The accounting policies of the reporting segments are described throughout Note A included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2024.

Financial information relating to the Company’s reporting segments is as follows:

June 30, 2025

December 31, 2025

The Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer are its Chief Operating Decision Makers (CODMs).

The CODMs evaluate segment performance primarily based on revenues, pre-tax income and inventories for all reporting segments.

Revenues, pre-tax income and inventories at the segment level are compared to forecasted results to evaluate the performance of each segment and assist in decision making regarding capital allocation between segments.

The tables that follow present financial information pertaining to the Company’s reporting segments.

December 31, 2025

Homebuilding Rental Forestar Financial Services Eliminations and Other (1) Consolidated

22 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

December 31, 2025

September 30, 2025

23 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

Three Months Ended June 30, 2025

December 31, 2025

Three Months Ended December 31, 2025

Homebuilding Rental Forestar Financial Services Eliminations and Other (1) Consolidated

14 unchanged sentences

Income before income taxes $ 708.1 $ 0.2 $ 20.8 $ 58.0 $ 11.0 $ 798.1

Summary Cash Flow Information

Depreciation and amortization $ 25.6 $ 0.4 $ 0.9 $ 0.5 $ 0.3 $ 27.7

Cash provided by (used in) operating activities $ 497.7 $ ( 197.0 ) $ ( 157.0 ) $ 731.5 $ ( 21.2 ) $ 854.0

_______________

2 unchanged sentences

Intercompany profit is eliminated in the consolidated financial statements when Forestar sells lots to the homebuilding segment and is recognized in the consolidated financial statements when the homebuilding segment closes homes on the lots to homebuyers.

(3) Other (income) expense primarily includes interest income but also consists of various other types of ancillary income, gains, expenses and losses not directly associated with sales of homes, land and lots.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

Nine Months Ended June 30, 2025

December 31, 2025

Three Months Ended December 31, 2024

Homebuilding Rental Forestar Financial Services Eliminations and Other (1) Consolidated

21 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

Three Months Ended June 30, 2024

Homebuilding Rental Forestar Financial Services Eliminations and Other (1) Consolidated

December 31, 2025

Revenues, expenses and pre-tax income of the Company’s homebuilding segment are disaggregated into the individual homebuilding reporting segments in the tables below.

Expenses maintained at the corporate level consist primarily of homebuilding interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly, and the expenses related to operating the Company’s corporate office.

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

Homebuilding Results

by Reporting Segment

Three Months Ended December 31, 2025

Northwest Southwest South Central Southeast East North Total

(In millions)

1 unchanged sentence

Land/lot sales and other 0.3 4.8 0.2 5.7 0.2 5.0 16.2

Rental property sales — 413.7 — — — 413.7

Financial services — — — 242.3 — 242.3

546.7 894.7 1,389.5 1,458.0 1,250.5 989.5 6,528.9

2 unchanged sentences

Land/lot sales and other 0.3 3.9 — 4.8 — 4.4 13.4

Rental property sales — 319.3 — — ( 5.9 ) 313.4

Inventory and land option charges 0.1 0.7 1.7 1.9 4.8 1.0 10.2

3 unchanged sentences

Income before income taxes $ 59.3 $ 88.6 $ 173.4 $ 143.4 $ 123.5 $ 119.9 $ 708.1

______________

(1) Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.

(2) Amount in the Eliminations and Other column represents the recognition of profit on lots sold from Forestar to the homebuilding segment.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

Nine Months Ended June 30, 2024

Homebuilding Rental Forestar Financial Services Eliminations and Other (1) Consolidated

Homebuilding Results

by Reporting Segment

Three Months Ended December 31, 2024

Northwest Southwest South Central Southeast East North Total

(In millions)

1 unchanged sentence

Land/lot sales and other 0.1 0.1 0.5 10.6 6.0 3.9 21.2

Rental property sales — 980.2 — — — 980.2

Financial services — — — 660.5 — 660.5

533.2 1,140.1 1,486.9 1,749.8 1,314.5 942.7 7,167.2

2 unchanged sentences

Land/lot sales and other — — 0.1 6.3 4.7 2.7 13.8

Rental property sales — 763.4 — — ( 10.7 ) 752.7

Inventory and land option charges 0.4 0.4 1.2 5.6 2.7 1.5 11.8

3 unchanged sentences

Income before income taxes $ 76.2 $ 168.4 $ 221.3 $ 222.8 $ 194.4 $ 129.8 $ 1,012.9

Summary Cash Flow Information

Depreciation and amortization $ 57.6 $ 1.9 $ 2.3 $ 1.4 $ 0.3 $ 63.5

Cash provided by (used in) operating activities $ 971.9 $ ( 656.8 ) $ ( 277.6 ) $ 156.9 $ 33.8 $ 228.2

______________

(1) Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.

(2) Amount in the Eliminations and Other column represents the recognition of profit on lots sold from Forestar to the homebuilding segment.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

Homebuilding Inventories by Reporting Segment (1)

December 31, 2025

The Company’s total inventories are disaggregated into the individual reporting segments in the table below.

Inventories are the only assets included in the measure of segment assets used by the Company’s chief operating decision makers.

Inventories by Reporting Segment December 31,

2025 September 30,

7 unchanged sentences

Corporate and unallocated (1) 342.6 327.2

$ 21,098.2 $ 20,031.0

Total Homebuilding 20,239.4 20,316.5

Rental 2,892.4 2,710.4

Forestar 2,850.5 2,645.1

Eliminations and other (2) ( 376.3 ) ( 384.7 )

Consolidated inventories $ 25,606.0 $ 25,287.3

____________________________

(1) Homebuilding inventories are the only assets included in the measure of homebuilding segment assets used by the Company’s chief operating decision makers.

(1) Corporate and unallocated consists primarily of homebuilding capitalized interest and property taxes.

Homebuilding Results by Reporting Segment Three Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

(In millions)

Northwest $ 698.9 $ 725.0 $ 1,892.5 $ 2,045.0

Southwest 1,182.4 1,313.7 3,386.2 3,648.5

South Central 1,940.8 2,013.0 4,958.4 5,643.3

Southeast 1,923.5 2,417.2 5,287.1 6,602.6

East 1,668.5 1,709.6 4,343.1 4,419.7

North 1,166.7 1,063.0 3,083.7 2,652.7

$ 8,580.8 $ 9,241.5 $ 22,951.0 $ 25,011.8

Income before Income Taxes

Northwest $ 116.4 $ 121.2 $ 286.3 $ 300.0

Southwest 152.7 209.4 444.4 515.3

South Central 290.2 368.7 719.9 986.9

Southeast 224.6 404.1 658.7 1,095.0

East 230.4 314.9 596.6 774.0

North 172.0 153.9 428.3 354.7

$ 1,186.3 $ 1,572.2 $ 3,134.2 $ 4,025.9

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

(2) Amounts include the balances of the Company’s other businesses and the elimination of intercompany transactions.

NOTE C – INVENTORIES

At the end of each quarter, the Company reviews the performance and outlook for all of its communities and land inventories for indicators of potential impairment and performs detailed impairment evaluations and analyses when necessary.

As of June 30, 2025, the Company performed detailed impairment evaluations of communities and land inventories and determined that communities with a combined carrying value of $ 72.1 million were impaired on a non-recurring basis using Level 3 inputs.

As a result, impairment charges of $ 15.9 million were recorded during the three months ended June 30, 2025 to reduce the carrying value of the related inventories to fair value.

During the nine months ended June 30, 2025, impairment charges totaled $ 24.5 million.

There were no impairment charges recorded in the prior year quarter and $ 5.6 million of impairment charges recorded in the nine months ended June 30, 2024.

During the three and nine months ended June 30, 2025, earnest money and pre-acquisition cost write-offs related to land purchase contracts that the Company has terminated or expects to terminate were $ 38.3 million and $ 76.3 million, respectively, compared to $ 14.8 million and $ 28.8 million in the prior year periods.

As of December 31, 2025, the Company determined that no communities were impaired, and no impairment charges were recorded during the three months ended December 31, 2025.

There were $ 3.2 million of impairment charges recorded in the prior year quarter.

During the three months ended December 31, 2025, earnest money and pre-acquisition cost write-offs related to land purchase contracts that the Company has terminated or expects to terminate were $ 11.2 million compared to $ 13.4 million in the prior year quarter.

Inventory impairments and land option charges are included in cost of sales in the consolidated statements of operations.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

December 31, 2025

NOTE D – NOTES PAYABLE

8 unchanged sentences

5.5 % senior notes due 2035 (1)

5.0 % senior notes due 2034 (1)

5.5 % senior notes due 2035 (1)

Other notes 190.2 180.6

1 unchanged sentence

Revolving credit facility 760.0 600.0

Other notes — 5.7

1,020.0 750.7

Revolving credit facility — —

1 unchanged sentence

6.5 % senior notes due 2033 (2)

Other notes — 9.9

7 unchanged sentences

_____________

(1) Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $ 20.0 million and $ 11.7 million at June 30, 2025 and September 30, 2024, respectively.

(2) Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled $ 7.6 million and $ 3.5 million at June 30, 2025 and September 30, 2024, respectively.

(3) The fair value of notes payable at June 30, 2025 totaled $ 7.2 billion, of which $ 4.3 billion were measured using Level 2 inputs and $ 2.9 billion were measured using Level 3 inputs.

(1) Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $ 18.1 million and $ 18.9 million at December 31, 2025 and September 30, 2025, respectively.

(2) Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled $ 6.8 million and $ 7.2 million at December 31, 2025 and September 30, 2025, respectively.

(3) The fair value of notes payable at December 31, 2025 totaled $ 5.6 billion, of which $ 3.8 billion were measured using Level 2 inputs and $ 1.8 billion were measured using Level 3 inputs.

The fair value of notes payable at September 30, 2025 totaled $ 6.0 billion, of which $ 3.8 billion were measured using Level 2 inputs and $ 2.2 billion were measured using Level 3 inputs.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

The Company has a senior unsecured homebuilding revolving credit facility that was amended in December 2024 to increase its capacity from $ 2.19 billion to $ 2.23 billion.

The facility includes an uncommitted accordion feature that allows for an increase in its size to $ 3.0 billion, subject to certain conditions and availability of additional bank commitments.

In June 2025, the Company utilized this accordion feature, increasing the facility’s size to $ 2.305 billion through an additional commitment.

Of the total commitments, $ 2.04 billion mature on December 18, 2029 , and $ 265 million mature on October 28, 2027 .

December 31, 2025

The Company has a $ 2.305 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that allows for an increase in its size to $ 3.0 billion, subject to certain conditions and availability of additional bank commitments.

Of the total commitments, $ 2.04 billion matures on December 18, 2029 , and $ 265 million matures on October 28, 2027 .

The facility also provides for the issuance of letters of credit with a sublimit equal to 100 % of the total revolving credit commitments.

Letters of credit issued under the facility reduce the available borrowing capacity.

At June 30, 2025, there were no borrowings outstanding and $ 244.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $ 2.06 billion.

At December 31, 2025, there were no borrowings outstanding and $ 224.4 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $ 2.08 billion.

The Company’s homebuilding revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if the leverage ratio exceeds a certain level.

2 unchanged sentences

The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens.

Horton has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in July 2024, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.

In October 2024, the Company repaid $ 500 million principal amount of its 2.5 % senior notes at maturity.

In February 2025, the Company issued $ 700 million principal amount of 5.5 % senior notes due October 15, 2035 , 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 5.6 %.

In May 2025, the Company issued $ 500 million principal amount of 4.85 % senior notes due October 15, 2030 , 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 5.1 %.

At December 31, 2025, the Company had $ 3.0 billion principal amount of homebuilding senior notes outstanding that mature from October 2026 through October 2035.

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

At June 30, 2025, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding revolving credit facility and public debt obligations.

At December 31, 2025, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding revolving credit facility and public debt obligations.

The Company’s homebuilding revolving credit facility and homebuilding senior notes are guaranteed by D.R.

2 unchanged sentences

The authorization has no expiration date.

All of the $ 500 million authorization was remaining at June 30, 2025.

All of the $ 500 million authorization was remaining at December 31, 2025.

The Company’s rental subsidiary, DRH Rental, has a $ 1.05 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $ 2.0 billion, subject to certain conditions and availability of additional bank commitments.

2 unchanged sentences

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

At June 30, 2025, there were $ 1.02 billion of borrowings outstanding at a 6.4 % annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $ 30 million.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

At December 31, 2025, there were $ 760 million of borrowings outstanding at a 5.5 % annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $ 290 million.

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

2 unchanged sentences

A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.

At June 30, 2025, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

At December 31, 2025, 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 and have not been designated as unrestricted subsidiaries.

1 unchanged sentence

or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, Forestar or financial services operations.

Forestar has a senior unsecured revolving credit facility that was amended in December 2024 to increase its capacity from $ 410 million to $ 640 million and to raise the uncommitted accordion feature that could increase the size of the facility to $ 1.0 billion, subject to certain conditions and availability of additional bank commitments.

The amendment also extended the maturity date of the facility.

Of the total commitments, $ 575 million mature on December 18, 2029 , and $ 65 million mature on October 28, 2026 .

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

December 31, 2025

Forestar has a $ 665 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $ 1.0 billion, subject to certain conditions and availability of additional bank commitments.

Of the total commitments, $ 600 million matures on December 18, 2029 , and $ 65 million matures on October 28, 2026 .

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.

1 unchanged sentence

Letters of credit issued under the facility reduce the available borrowing capacity.

At June 30, 2025, there were no borrowings outstanding and $ 37.2 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $ 602.8 million.

At December 31, 2025, there were no borrowings outstanding and $ 57.4 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $ 607.6 million.

Forestar’s revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants.

2 unchanged sentences

In March 2025, Forestar issued $ 500 million principal amount of 6.5 % senior notes due March 15, 2033, with interest payable semi-annually.

The annual effective interest rate of these notes after giving effect to the amortization of financing costs is 6.7 %.

The net proceeds from this issuance were primarily used to fund Forestar’s tender offer to purchase any and all of its outstanding $ 400 million principal amount of 3.85 % senior notes due 2026 (of which $ 329.4 million aggregate principal amount was tendered).

The repurchase price of $ 333.4 million included accrued and unpaid interest of $ 4.2 million.

Forestar recognized a $ 1.1 million loss on extinguishment of debt upon repurchase of the notes.

At June 30, 2025, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

At December 31, 2025, 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 and have not been designated as unrestricted subsidiaries.

3 unchanged sentences

The authorization has no expiration date.

All of the $ 30 million authorization was remaining at June 30, 2025.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

All of the $ 30 million authorization was remaining at December 31, 2025.

Financial Services

1 unchanged sentence

DHI Mortgage then has the right and obligation to repurchase the 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.

In May 2025, the committed mortgage repurchase facility was amended to reduce its capacity to $ 1.4 billion and extend its maturity date to May 6, 2026 .

The committed mortgage repurchase facility has a total capacity of $ 1.4 billion and a maturity date of May 6, 2026 .

The capacity of the facility can be increased to $ 2.0 billion subject to the availability of additional commitments.

At June 30, 2025, DHI Mortgage had an obligation of $ 1.3 billion under the committed mortgage repurchase facility at a 6.0 % annual interest rate.

At June 30, 2025, the uncommitted mortgage repurchase facility had a borrowing capacity of $ 500 million, of which DHI Mortgage had an obligation of $ 451.7 million at a 5.6 % annual interest rate.

At June 30, 2025, $ 2.22 billion of mortgage loans held for sale with a collateral value of $ 2.17 billion were pledged under the committed mortgage repurchase facility, and $ 535.9 million of mortgage loans held for sale with a collateral value of $ 501.1 million were pledged under the uncommitted mortgage repurchase facility.

At December 31, 2025, DHI Mortgage had an obligation of $ 768.1 million under the committed mortgage repurchase facility at a 5.4 % annual interest rate.

At December 31, 2025, the uncommitted mortgage repurchase facility had a borrowing capacity of $ 500 million, of which DHI Mortgage had an obligation of $ 60.9 million at a 5.0 % annual interest rate.

At December 31, 2025, $ 1.87 billion of mortgage loans held for sale with a collateral value of $ 1.83 billion were pledged under the committed mortgage repurchase facility, and $ 75.6 million of mortgage loans held for sale with a collateral value of $ 73.0 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.

At June 30, 2025, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

These mortgage repurchase facilities are not guaranteed by D.R.

At December 31, 2025, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

The mortgage repurchase facilities are not guaranteed by D.R.

or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, rental or Forestar operations.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

December 31, 2025

NOTE E – CAPITALIZED INTEREST

2 unchanged sentences

During periods in which the Company’s active inventory is lower than its debt level, a portion of the interest incurred is reflected as interest expense in the period incurred.

During the first nine months of fiscal 2025 and fiscal 2024, the Company’s active inventory exceeded its debt level, and all interest incurred was capitalized to inventory.

The following table summarizes the Company’s interest costs incurred, capitalized and expensed during the three and nine months ended June 30, 2025 and 2024:

During the first three months of fiscal 2026 and fiscal 2025, the Company’s active inventory exceeded its debt level, and all interest incurred was capitalized to inventory.

The following table summarizes the Company’s interest costs incurred, capitalized and expensed during the three months ended December 31, 2025 and 2024:

Three Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

(In millions)

4 unchanged sentences

__________________

(1) Interest incurred includes (a) interest on the Company’s mortgage repurchase facilities of $ 10.3 million and $ 25.8 million in the three and nine months ended June 30, 2025, respectively, and $ 16.0 million and $ 44.3 million in the prior year periods;

(b) Forestar interest of $ 13.4 million and $ 32.3 million in the three and nine months ended June 30, 2025, respectively, and $ 8.2 million and $ 24.5 million in the prior year periods;

and (c) interest on the rental revolving credit facility of $ 16.6 million and $ 45.3 million in the three and nine months ended June 30, 2025, respectively, and $ 18.8 million and $ 44.6 million in the prior year periods.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

(1) Interest incurred in the three months ended December 31, 2025 and 2024 includes (a) interest on the Company’s mortgage repurchase facilities of $ 4.8 million and $ 8.1 million, respectively;

(b) Forestar interest of $ 12.5 million and $ 8.3 million, respectively;

and (c) interest on the rental revolving credit facility of $ 9.2 million and $ 12.4 million, respectively.

NOTE F – MORTGAGE LOANS

2 unchanged sentences

Servicing rights retained are typically sold within six months of loan origination.

At June 30, 2025, mortgage loans held for sale of $ 2.77 billion had an aggregate outstanding principal balance of $ 2.86 billion.

At December 31, 2025, mortgage loans held for sale of $ 1.9 billion had an aggregate outstanding principal balance of $ 2.0 billion.

At September 30, 2025, mortgage loans held for sale of $ 2.6 billion had an aggregate outstanding principal balance of $ 2.7 billion.

Mortgage loans held for sale at both dates were primarily composed of mortgage loans measured at fair value on a recurring basis using Level 2 inputs.

During the nine months ended June 30, 2025 and 2024, mortgage loans originated totaled $ 17.08 billion and $ 17.73 billion, respectively, and mortgage loans sold totaled $ 16.68 billion and $ 17.68 billion, respectively.

The Company had gains on sales of loans and servicing rights of $ 152.8 million and $ 423.9 million during the three and nine months ended June 30, 2025, respectively, compared to $ 162.6 million and $ 444.0 million in the prior year periods.

During the three months ended December 31, 2025 and 2024, mortgage loans originated totaled $ 4.87 billion and $ 5.15 billion, respectively, and mortgage loans sold totaled $ 5.53 billion and $ 5.74 billion, respectively.

The Company had gains on sales of loans and servicing rights of $ 124.1 million during the three months ended December 31, 2025 compared to $ 120.1 million in the prior year period.

Net gains on sales of loans and servicing rights are included in revenues in the consolidated statements of operations.

During the nine months ended June 30, 2025, approximately 72 % of the Company’s mortgage loans were sold directly to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or into securities backed by the Government National Mortgage Association (Ginnie Mae), and 26 % were sold to one other major financial entity.

During the three months ended December 31, 2025, approximately 68 % of the Company’s mortgage loans were sold directly to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or into securities backed by the Government National Mortgage Association (Ginnie Mae), and 22 % were sold to one other major financial entity.

The Company also uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers.

At June 30, 2025 and September 30, 2024, the Company had mortgage-backed securities (MBS) totaling $ 880.5 million and $ 637.9 million, respectively, that did not yet have interest rate lock commitments (IRLCs) or closed loans created or assigned.

The Company recorded a liability of $ 6.8 million and an asset of $ 2.4 million at June 30, 2025 and September 30, 2024, respectively, for the fair value of such MBS position, which is measured using Level 2 inputs.

At December 31, 2025 and September 30, 2025, the Company had mortgage-backed securities (MBS) totaling $ 793.5 million and $ 677.5 million, respectively, that did not yet have interest rate lock commitments (IRLCs) or closed loans created or assigned.

The Company recorded a liability of $ 0.1 million and an asset of $ 1.9 million at December 31, 2025 and September 30, 2025, respectively, for the fair value of such MBS position, which is measured using Level 2 inputs.

The Company is party to IRLCs, which are extended to borrowers who have applied for loan funding and meet defined credit and underwriting criteria.

At June 30, 2025 and September 30, 2024, the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value using Level 3 inputs, totaled $ 2.7 billion and $ 2.0 billion, respectively.

At both December 31, 2025 and September 30, 2025, the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value using Level 3 inputs, totaled $ 2.1 billion.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

December 31, 2025

NOTE G – INCOME TAXES

The Company’s income tax expense for the three and nine months ended June 30, 2025 was $ 325.0 million and $ 831.0 million, respectively, compared to $ 432.2 million and $ 1.1 billion in the prior year periods.

The effective tax rate was 23.9 % and 23.5 % for the three and nine months ended June 30, 2025, respectively, compared to 24.0 % and 23.4 % in the prior year periods.

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

The Company’s deferred tax assets, net of deferred tax liabilities, were $ 81.3 million at June 30, 2025 compared to $ 182.4 million at September 30, 2024.

The Company has a valuation allowance of $ 14.8 million and $ 14.9 million at June 30, 2025 and September 30, 2024, respectively, related to deferred tax assets for state net operating loss (NOL) and tax credit carryforwards that are expected to expire before being realized.

The Company’s income tax expense for the three months ended December 31, 2025 and 2024 was $ 196.7 million and $ 258.0 million, respectively.

The effective tax rate was 24.6 % for the three months ended December 31, 2025 compared to 23.2 % in the prior year period.

The effective tax rates for both periods include an expense for state income taxes and tax benefits related to federal energy efficient home tax credits.

The effective tax rate for the three months ended December 31, 2024 also includes a tax benefit related to stock-based compensation.

The Company’s deferred tax assets, net of deferred tax liabilities, were $ 39.6 million at December 31, 2025 compared to $ 59.1 million at September 30, 2025.

The Company has a valuation allowance of $ 14.6 million at December 31, 2025 and September 30, 2025 related to deferred tax assets for state net operating loss (NOL) and tax credit carryforwards that are expected to expire before being realized.

The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to the remaining state NOL and tax credit carryforwards.

Any reversal of the valuation allowance in future periods will impact the Company’s effective tax rate.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law (the new law).

The new law terminates the energy efficient home tax credit for homes closing after June 30, 2026 and enacts certain other tax provisions that will impact the Company’s financial statements.

The termination of the energy efficient home tax credit will result in a reduced tax benefit beginning in fiscal 2026.

The Company recognized a tax benefit related to the energy efficient home tax credit of $ 70.4 million in fiscal 2024 and $ 30.8 million in the nine months ended June 30, 2025.

The Company is evaluating the impact of other tax provisions within the new law;

however, none of the other tax provisions are expected to have a significant impact on the Company’s financial statements.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

NOTE H – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share.

For the three and nine months ended June 30, 2025, the Company excluded 1.2 million and 0.8 million employee stock awards, respectively, from the calculation of diluted earnings per share as the impact of these awards was anti-dilutive.

Three Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

(In millions)

(In millions, except per share data)

Net income attributable to D.R.

8 unchanged sentences

$ 2.03 $ 2.61

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

December 31, 2025

NOTE I – STOCKHOLDERS’ EQUITY

Horton has an automatically effective universal shelf registration statement, filed with the SEC in July 2024, registering debt and equity securities that it may issue from time to time in amounts to be determined.

In April 2025, the Board of Directors authorized the repurchase of up to $ 5.0 billion of the Company’s common stock, replacing the previous authorization.

In April 2025, the Board of Directors authorized the repurchase of up to $ 5.0 billion of the Company’s common stock.

The authorization has no expiration date.

During the nine months ended June 30, 2025, the Company repurchased 26.2 million shares of its common stock at a total cost, including commissions and excise taxes, of $ 3.6 billion, of which $ 2.6 billion was repurchased under the previous authorization.

At June 30, 2025, there was $ 4.0 billion remaining on the repurchase authorization.

During each of the first three quarters of fiscal 2025, the Board of Directors approved a quarterly cash dividend of $ 0.40 per common share, the most recent of which was paid on May 9, 2025 to stockholders of record on May 2, 2025.

Cash dividends declared and paid in the three and nine months ended June 30, 2025 totaled $ 122.4 million and $ 376.4 million, respectively.

In July 2025, the Board of Directors approved a quarterly cash dividend of $ 0.40 per common share, payable on August 14, 2025 to stockholders of record on August 7, 2025.

During the three months ended December 31, 2025, the Company repurchased 4.4 million shares of its common stock at a total cost including commissions and excise taxes of $ 669.7 million.

At December 31, 2025, there was $ 2.6 billion remaining on the repurchase authorization.

During the three months ended December 31, 2025, the Board of Directors approved a quarterly cash dividend of $ 0.45 per share totaling $ 131.5 million, which was paid on November 20, 2025 to stockholders of record on November 13, 2025.

In January 2026, the Board of Directors approved a quarterly cash dividend of $ 0.45 per share, payable on February 12, 2026 to stockholders of record on February 5, 2026.

Forestar has an effective shelf registration statement, filed with the SEC in September 2024, registering $ 750 million of equity securities, of which $ 300 million is reserved for sales under its at-the-market equity offering (ATM) program that was entered into in November 2024.

During the nine months ended June 30, 2025, there were no shares issued under the ATM program.

At June 30, 2025, the full $ 750 million remained available for issuance under Forestar’s shelf registration statement, with $ 300 million reserved for sales under the ATM program.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

During the three months ended December 31, 2025, there were no shares issued under the ATM program.

At December 31, 2025, the full $ 750 million remained available for issuance under Forestar’s shelf registration statement, with $ 300 million reserved for sales under the ATM program.

NOTE J – EMPLOYEE BENEFIT PLANS

8 unchanged sentences

The grant date fair value of these equity awards was $ 157.79 per unit.

Compensation expense related to this grant was $ 4.8 million and $ 14.5 million in the three and nine months ended June 30, 2025, respectively, based on an estimate of the Company’s performance against a market index or its peer group, the elapsed portion of the performance period and the grant date fair value of the award.

During the nine months ended June 30, 2025, the Company granted approximately 610,000 RSUs to approximately 1,600 recipients, including executive officers, other key employees and non-management directors.

Compensation expense related to this grant was $ 3.8 million in the three months ended December 31, 2025, based on an estimate of the Company’s performance against a market index or its peer group, the elapsed portion of the performance period and the grant date fair value of the award.

During the three months ended December 31, 2025, the Company granted approximately 670,000 RSUs to approximately 1,600 recipients, including executive officers, other key employees and non-management directors.

The weighted average grant date fair value of these equity awards was $ 143.05 per unit, and they vest annually in equal installments over periods of three to five years.

Compensation expense related to these grants was $ 4.6 million and $ 20.2 million in the three and nine months ended June 30, 2025, respectively.

Compensation expense in the nine month period included $ 8.3 million of expense recognized for employees that were retirement eligible on the date of grant.

Total stock-based compensation expense related to the Company’s equity awards was $ 23.4 million and $ 93.2 million during the three and nine months ended June 30, 2025, respectively, compared to $ 25.0 million and $ 84.4 million during the three and nine months ended June 30, 2024.

Compensation expense related to these grants was $ 11.8 million in the three months ended December 31, 2025, which included $ 8.1 million of expense recognized for employees that were retirement eligible on the date of grant.

Total stock-based compensation expense related to the Company’s equity awards was $ 37.6 million during the three months ended December 31, 2025 compared to $ 40.1 million during the three months ended December 31, 2024.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

December 31, 2025

NOTE K – COMMITMENTS AND CONTINGENCIES

Warranty Claims

The Company provides its homebuyers with a ten-year limited warranty for major defects in structural elements such as framing components and foundation systems, a two-year limited warranty on major mechanical systems and a one-year limited warranty on other construction components.

The Company typically provides its homebuyers with a ten-year limited warranty for major defects in structural elements such as framing components and foundation systems, a two-year limited warranty on major mechanical systems and a one-year limited warranty on other construction components of the home.

The Company’s warranty liability is based upon historical warranty cost experience in each market in which it operates.

Changes in the Company’s warranty liability during the three and nine months ended June 30, 2025 and 2024 were as follows:

Changes in the Company’s warranty liability during the three months ended December 31, 2025 and 2024 were as follows:

Three Months Ended

June 30, Nine Months Ended

2025 2024 2025 2024

(In millions)

8 unchanged sentences

The Company has 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.

The estimated liabilities for these contingencies were $ 1.0 billion and $ 949.6 million at June 30, 2025 and September 30, 2024, respectively, and are included in accrued expenses and other liabilities in the consolidated balance sheets.

Approximately 98 % and 97 % of these reserves related to construction defect matters at June 30, 2025 and September 30, 2024, respectively.

Expenses related to the Company’s legal contingencies were $ 142.5 million and $ 107.9 million in the nine months ended June 30, 2025 and 2024, respectively.

Changes in the Company’s legal claims reserves during the nine months ended June 30, 2025 and 2024 were as follows:

Nine Months Ended

The estimated liabilities for these contingencies were $ 1.1 billion at both December 31, 2025 and September 30, 2025 and are included in accrued expenses and other liabilities in the consolidated balance sheets.

Approximately 98 % of these reserves related to construction defect matters at both December 31, 2025 and September 30, 2025.

Expenses related to the Company’s legal contingencies were $ 27.7 million and $ 40.0 million in the three months ended December 31, 2025 and 2024, respectively.

Changes in the Company’s legal claims reserves during the three months ended December 31, 2025 and 2024 were as follows:

Three Months Ended

(In millions)

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

December 31, 2025

The Company estimates and records receivables under its applicable insurance policies related to its estimated contingencies for known claims and anticipated future construction defect claims on previously closed homes and other legal claims and lawsuits incurred in the ordinary course of business when recovery is probable.

1 unchanged sentence

Since June 1, 2021, except for contractual risk transfer, the Company is almost exclusively self-insured for construction defect exposures.

The Company’s estimated insurance receivables from estimated losses for pending legal claims and anticipated future claims related to previously closed homes totaled $ 138.5 million, $ 156.8 million and $ 158.6 million at June 30, 2025, September 30, 2024 and June 30, 2024, respectively, and are included in other assets in the consolidated balance sheets.

The Company’s estimated insurance receivables from estimated losses for pending legal claims and anticipated future claims related to previously closed homes totaled $ 159.3 million, $ 167.0 million and $ 120.0 million at December 31, 2025, September 30, 2025 and December 31, 2024, respectively, and are included in other assets in the consolidated balance sheets.

The Company also contractually requires major subcontractors in most markets to have general liability insurance, which includes construction defect coverage.

6 unchanged sentences

Land purchase contract deposits and capitalized pre-acquisition costs are expensed to inventory and land option charges when the Company believes it is probable that it will not acquire the property under contract and will not be able to recover these costs through other means.

At June 30, 2025, the Company had total deposits of $ 2.3 billion, consisting of cash deposits of $ 2.1 billion and promissory notes and surety bonds of $ 154.9 million, related to contracts to purchase land and lots with a total remaining purchase price of approximately $ 25.7 billion.

At December 31, 2025, the Company had total deposits of $ 2.4 billion, consisting of cash deposits of $ 2.2 billion and promissory notes and surety bonds of $ 167.4 million, related to contracts to purchase land and lots with a total remaining purchase price of approximately $ 26.7 billion.

Of these amounts, $ 203.8 million of the deposits related to contracts with Forestar to purchase land and lots with a remaining purchase price of $ 2.0 billion.

A limited number of the homebuilding land and lot purchase contracts at June 30, 2025, representing $ 206.7 million of remaining purchase price, were subject to specific performance provisions that may require the Company to purchase the land or lots upon the land sellers meeting their respective contractual obligations.

A limited number of the homebuilding land and lot purchase contracts at December 31, 2025, representing $ 79.4 million of remaining purchase price, were subject to specific performance provisions that may require the Company to purchase the land or lots upon the land sellers meeting their respective contractual obligations.

Of the $ 79.4 million remaining purchase price subject to specific performance provisions, $ 28.8 million related to contracts between the homebuilding segment and Forestar.

During the three and nine months ended June 30, 2025, Forestar reimbursed the homebuilding segment $ 4.2 million and $ 18.8 million, respectively, for previously paid earnest money and $ 9.5 million and $ 17.7 million, respectively, for pre-acquisition and other due diligence costs related to land purchase contracts whereby the homebuilding segment assigned its rights under contract to Forestar.

During the three and nine months ended June 30, 2024, Forestar reimbursed the homebuilding segment $ 4.0 million and $ 22.7 million, respectively, for previously paid earnest money and $ 4.4 million and $ 15.1 million, respectively, for such pre-acquisition and due diligence costs.

During the three months ended December 31, 2025 and 2024, Forestar reimbursed the homebuilding segment $ 1.7 million and $ 10.0 million, respectively, for previously paid earnest money and $ 7.8 million and $ 4.2 million, respectively, for pre-acquisition and other due diligence costs related to land purchase contracts whereby the homebuilding segment assigned its rights under contract to Forestar.

Other Commitments

At June 30, 2025, the Company had outstanding surety bonds of $ 3.4 billion and letters of credit of $ 281.5 million to secure performance under various contracts.

At December 31, 2025, the Company had outstanding surety bonds of $ 3.3 billion and letters of credit of $ 281.8 million to secure performance under various contracts.

Of the total letters of credit, $ 224.4 million were issued under the homebuilding revolving credit facility and $ 57.4 million were issued under Forestar’s revolving credit facility.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

June 30, 2025

December 31, 2025

NOTE L – OTHER ASSETS, ACCRUED EXPENSES AND OTHER LIABILITIES

The Company’s other assets at June 30, 2025 and September 30, 2024 were as follows:

The Company’s other assets at December 31, 2025 and September 30, 2025 were as follows:

2025 September 30,

2 unchanged sentences

Water rights and other water-related assets 332.1 333.0

Pledged reimbursements asset (1)

Insurance receivables 159.3 167.0

2 unchanged sentences

Contract assets - insurance agency commissions 130.9 127.9

Margin deposits related to hedging instruments 47.9 71.3

Lease right of use assets 66.2 63.0

Margin deposits related to hedging instruments 3.6 47.9

Interest rate lock commitments 22.6 42.7

3 unchanged sentences

$ 3,801.3 $ 3,797.2

The Company’s accrued expenses and other liabilities at June 30, 2025 and September 30, 2024 were as follows:

The Company’s accrued expenses and other liabilities at December 31, 2025 and September 30, 2025 were as follows:

2025 September 30,

4 unchanged sentences

Inventory related accruals 483.7 497.3

Customer deposits 106.6 99.7

Pledged reimbursements liability (1)

Accrued property taxes 51.8 82.7

Mortgage hedging instruments and commitments 60.6 63.0

Customer deposits 81.5 81.5

Lease liabilities 68.9 65.6

Accrued interest 39.1 60.5

Mortgage hedging instruments and commitments — 34.1

Broker deposits related to hedging instruments 2.2 —

Federal and state income tax liabilities 193.5 19.0

1 unchanged sentence

$ 3,510.9 $ 3,541.6

_______________

(1) In certain projects, the Company has entered into agreements to be reimbursed for eligible infrastructure costs from municipal districts as funds are available to the district.

The Company has pledged certain of these future reimbursements as collateral to a third party, and the third party issued bonds against this collateral.

The Company received the cash proceeds from the third-party bond issuance.

The Company has no future performance obligations related to the cash proceeds received, no obligations related to any future interest or principal payments to the third-party bondholders, and the third party has no recourse against the Company for the reimbursement of these funds.

However, under the applicable accounting rules, since the Company pledged only certain reimbursements and not the entire amount, the Company recorded a non-cash transaction to increase assets and a related liability for the amount of the unpaid balance of the third-party bonds.

The asset and liability will be reduced as the third-party bonds are repaid by the municipal district.

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-Q

Item 1. Financial Statements