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Segment Information
 12 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Segment Information
SEGMENT INFORMATION

The Company’s operating segments are its 46 homebuilding divisions, its majority-owned Forestar residential lot development operations, its financial services operations and its other business activities. The Company’s reporting segments are its homebuilding reporting segments, its Forestar land development segment and its financial services segment. The homebuilding operating segments are aggregated into the following six reporting segments: East, Midwest, Southeast, South Central, Southwest and West. These reporting segments have homebuilding operations located in the following states:
 
East:
 
Delaware, Georgia (Savannah only), Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina and Virginia
 
Midwest:
 
Colorado, Illinois, Indiana and Minnesota
 
Southeast:
 
Alabama, Florida, Georgia, Mississippi and Tennessee
 
South Central:
 
Louisiana, Oklahoma and Texas
 
Southwest:
 
Arizona and New Mexico
 
West:
 
California, Hawaii, Nevada, Oregon, Utah and Washington

Homebuilding is the Company’s core business, generating 97% of consolidated revenues in fiscal 2018 and 98% of consolidated revenues in fiscal 2017 and 2016. The Company’s homebuilding segments are primarily engaged in the acquisition and development of land and the construction and sale of residential homes, with operations in 81 markets in 27 states across the United States. The homebuilding segments generate most of their revenues from the sale of completed homes and to a lesser extent from the sale of land and lots.

The Forestar segment is a residential lot development company with operations in 24 markets and 14 states. The Company’s homebuilding divisions and Forestar are identifying land development opportunities to expand Forestar’s platform, and the homebuilding divisions are acquiring finished lots from Forestar in accordance with the master supply agreement between the two companies. Forestar’s segment results are presented on their historical cost basis, consistent with the manner in which management evaluates segment performance.

The Company’s financial services segment provides mortgage financing and title agency services to homebuyers in many of the Company’s homebuilding markets. The segment generates the substantial majority of its revenues from originating and selling mortgages and collecting fees for title insurance agency and closing services. The Company sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers.

In addition to its homebuilding, Forestar and financial services operations, the Company has subsidiaries that engage in other business activities. These subsidiaries conduct insurance-related operations, construct and own income-producing rental properties, own non-residential real estate including ranch land and improvements and own and operate oil and gas related assets. One of these subsidiaries, DHI Communities, is developing and constructing multi-family rental properties on land parcels the Company already owned and currently has four projects under active construction and two projects that are substantially complete. At September 30, 2018 and 2017, property and equipment in the consolidated balance sheets included $171.4 million and $93.7 million, respectively, of assets owned by DHI Communities. The operating results of these subsidiaries are immaterial for separate reporting and therefore are grouped together and presented as other.


The accounting policies of the reporting segments are described throughout Note A. Financial information relating to the Company’s reporting segments is as follows:
 
 
September 30, 2018
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,111.8

 
$
318.8

 
$
33.7

 
$
8.8

 
$
—

 
$
—

 
$
1,473.1

Restricted cash
 
8.6

 
16.2

 
8.1

 
—

 
—

 
—

 
32.9

Inventories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Construction in progress and finished homes
 
5,084.4

 
—

 
—

 
—

 
1.9

 
—

 
5,086.3

     Residential land and lots — developed and under development
 
4,689.3

 
463.1

 
—

 
—

 
(7.2
)
 
27.2

 
5,172.4

     Land held for development
 
61.2

 
34.9

 
—

 
—

 
—

 
—

 
96.1

     Land held for sale
 
40.2

 
—

 
—

 
—

 
—

 
—

 
40.2

 
 
9,875.1

 
498.0

 
—

 
—

 
(5.3
)
 
27.2

 
10,395.0

Investment in unconsolidated entities
 
—

 
11.7

 
—

 
—

 
—

 
(0.7
)
 
11.0

Mortgage loans held for sale
 
—

 
—

 
796.4

 
—

 
—

 
—

 
796.4

Deferred income taxes, net
 
176.5

 
26.9

 
—

 
—

 
1.1

 
(10.5
)
 
194.0

Property and equipment, net
 
207.1

 
1.8

 
3.0

 
189.2

 
—

 
—

 
401.1

Other assets
 
673.7

 
19.7

 
43.6

 
0.9

 
(48.6
)
 
12.6

 
701.9

Goodwill
 
80.0

 
—

 
—

 
—

 
—

 
29.2

 
109.2

 
 
$
12,132.8

 
$
893.1

 
$
884.8

 
$
198.9

 
$
(52.8
)
 
$
57.8

 
$
14,114.6

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
612.4

 
$
11.2

 
$
0.2

 
$
4.2

 
$
(3.3
)
 
$
—

 
$
624.7

Accrued expenses and other liabilities
 
1,041.3

 
95.7

 
41.9

 
9.9

 
(46.1
)
 
(15.2
)
 
1,127.5

Notes payable
 
2,445.9

 
111.7

 
637.7

 
—

 
—

 
8.2

 
3,203.5

 
 
$
4,099.6

 
$
218.6

 
$
679.8

 
$
14.1

 
$
(49.4
)
 
$
(7.0
)
 
$
4,955.7

_____________
(1)
Amounts are presented on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate balances of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions and the reclassification of $5.8 million of Forestar interest expense to inventory.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.


 
 
September 30, 2017
 
 
Homebuilding
 
Financial Services
 
Other (1)
 
Consolidated
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
973.0

 
$
24.1

 
$
10.7

 
$
1,007.8

Restricted cash
 
9.3

 
7.2

 
—

 
16.5

Inventories:
 
 
 
 
 
 
 
 
     Construction in progress and finished homes
 
4,606.0

 
—

 
—

 
4,606.0

     Residential land and lots — developed and under development
 
4,519.7

 
—

 
—

 
4,519.7

     Land held for development
 
101.0

 
—

 
—

 
101.0

     Land held for sale
 
10.4

 
—

 
—

 
10.4

 
 
9,237.1

 
—

 
—

 
9,237.1

Mortgage loans held for sale
 
—

 
587.3

 
—

 
587.3

Deferred income taxes, net
 
365.0

 
—

 
—

 
365.0

Property and equipment, net
 
194.4

 
3.0

 
127.6

 
325.0

Other assets
 
518.7

 
42.2

 
5.0

 
565.9

Goodwill
 
80.0

 
—

 
—

 
80.0

 
 
$
11,377.5

 
$
663.8

 
$
143.3

 
$
12,184.6

Liabilities
 
 
 
 
 
 
 
 
Accounts payable
 
$
575.6

 
$
1.5

 
$
3.3

 
$
580.4

Accrued expenses and other liabilities
 
933.1

 
35.6

 
16.3

 
985.0

Notes payable
 
2,451.6

 
420.0

 
—

 
2,871.6

 
 
$
3,960.3

 
$
457.1

 
$
19.6

 
$
4,437.0

_____________
(1)
Amounts represent the aggregate balances of certain subsidiaries that are immaterial for separate reporting.


 
 
Year Ended September 30, 2018
 
 
Homebuilding
 
Forestar (1)
 
Financial Services
 
Other (2)
 
Eliminations (3)
 
Other Adjustments (4)
 
Consolidated
 
 
(In millions)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales
 
$
15,502.0

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
15,502.0

Land/lot sales and other
 
121.8

 
109.2

 
—

 
—

 
(39.1
)
 
(1.2
)
 
190.7

Financial services
 
—

 
—

 
375.3

 
—

 
—

 
—

 
375.3

 
 
15,623.8

 
109.2

 
375.3

 
—

 
(39.1
)
 
(1.2
)
 
16,068.0

Cost of sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales (5)
 
12,195.5

 
—

 
—

 
—

 
(1.2
)
 
—

 
12,194.3

Land/lot sales and other
 
99.1

 
68.0

 
—

 
—

 
(30.1
)
 
16.4

 
153.4

Inventory and land option charges
 
48.8

 
1.0

 
—

 
—

 
—

 
0.6

 
50.4

 
 
12,343.4

 
69.0

 
—

 
—

 
(31.3
)
 
17.0

 
12,398.1

Selling, general and administrative expense
 
1,346.2

 
32.8

 
272.6

 
24.7

 
—

 
0.5

 
1,676.8

Equity in earnings of unconsolidated entities
 
—

 
(12.4
)
 
—

 
—

 
2.5

 
7.1

 
(2.8
)
Gain on sale of assets
 
(15.8
)
 
(27.7
)
 
—

 
—

 
—

 
24.7

 
(18.8
)
Interest expense
 
—

 
5.8

 
—

 
—

 
(5.8
)
 
—

 
—

Other (income) expense
 
(7.2
)
 
(7.0
)
 
(15.1
)
 
(17.0
)
 
—

 
1.0

 
(45.3
)
Income (loss) before income taxes
 
$
1,957.2

 
$
48.7

 
$
117.8

 
$
(7.7
)
 
$
(4.5
)
 
$
(51.5
)
 
$
2,060.0

Summary Cash Flow Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
53.4

 
$
0.3

 
$
1.4

 
$
6.8

 
$
—

 
$
0.5

 
$
62.4

Cash provided by (used in) operating activities (6)
 
$
1,001.7

 
$
(320.3
)
 
$
(116.6
)
 
$
0.8

 
$
(10.5
)
 
$
(9.9
)
 
$
545.2

_____________
(1)
Results are presented from the date of acquisition and on Forestar’s historical cost basis, consistent with the manner in which management evaluates segment performance. All purchase accounting adjustments are included in the Other Adjustments column.
(2)
Amounts represent the aggregate results of certain subsidiaries that are immaterial for separate reporting.
(3)
Amounts represent the elimination of intercompany transactions and the reclassification of Forestar interest expense to inventory.
(4)
Amounts represent purchase accounting adjustments related to the Forestar acquisition.
(5)
Amount in the Eliminations column represents the profit on lots sold from Forestar to the homebuilding segment. Intercompany profit is eliminated in the consolidated financial statements when Forestar sells lots to the homebuilding segment and is not recognized in the consolidated financial statements until the homebuilding segment closes homes on the lots to homebuyers.
(6)
Amount in the Eliminations column represents cash flow related to land sales from the Homebuilding segment to the Other segment.



 
 
Year Ended September 30, 2017
 
 
Homebuilding
 
Financial Services
 
Other (1)
 
Consolidated
 
 
(In millions)
Revenues:
 
 
 
 
 
 
 
 
Home sales
 
$
13,653.2

 
$
—

 
$
—

 
$
13,653.2

Land/lot sales and other
 
88.3

 
—

 
—

 
88.3

Financial services
 
—

 
349.5

 
—

 
349.5

 
 
13,741.5

 
349.5

 
—

 
14,091.0

Cost of sales:
 
 
 
 
 
 
 
 
Home sales
 
10,927.8

 
—

 
—

 
10,927.8

Land/lot sales and other
 
74.8

 
—

 
—

 
74.8

Inventory and land option charges
 
40.2

 
—

 
—

 
40.2

 
 
11,042.8

 
—

 
—

 
11,042.8

Selling, general and administrative expense
 
1,220.4

 
239.3

 
11.9

 
1,471.6

Other (income) expense
 
(11.0
)
 
(14.3
)
 
(0.2
)
 
(25.5
)
Income (loss) before income taxes
 
$
1,489.3

 
$
124.5

 
$
(11.7
)
 
$
1,602.1

Summary Cash Flow Information:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
49.5

 
$
1.5

 
$
3.7

 
$
54.7

Cash provided by (used in) operating activities
 
$
303.7

 
$
139.1

 
$
(2.6
)
 
$
440.2

_____________
(1)
Amounts represent the aggregate results of certain subsidiaries that are immaterial for separate reporting.

 
 
Year Ended September 30, 2016
 
 
Homebuilding
 
Financial Services
 
Other (1)
 
Consolidated
 
 
(In millions)
Revenues:
 
 
 
 
 
 
 
 
Home sales
 
$
11,783.1

 
$
—

 
$
—

 
$
11,783.1

Land/lot sales and other
 
78.7

 
—

 
—

 
78.7

Financial services
 
—

 
295.6

 
—

 
295.6

 
 
11,861.8

 
295.6

 
—

 
12,157.4

Cost of sales:
 
 
 
 
 
 
 
 
Home sales
 
9,403.0

 
—

 
—

 
9,403.0

Land/lot sales and other
 
68.2

 
—

 
—

 
68.2

Inventory and land option charges
 
31.4

 
—

 
—

 
31.4

 
 
9,502.6

 
—

 
—

 
9,502.6

Selling, general and administrative expense
 
1,100.3

 
211.2

 
8.8

 
1,320.3

Goodwill impairment
 
7.2

 
—

 
—

 
7.2

Gain on sale of assets
 
(4.5
)
 
—

 
—

 
(4.5
)
Other (income) expense
 
(8.2
)
 
(13.7
)
 
0.2

 
(21.7
)
Income (loss) before income taxes
 
$
1,264.4

 
$
98.1

 
$
(9.0
)
 
$
1,353.5

Summary Cash Flow Information:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
$
58.2

 
$
1.2

 
$
1.6

 
$
61.0

Cash provided by (used in) operating activities
 
$
580.5

 
$
44.7

 
$
(1.3
)
 
$
623.9

_____________
(1)
Amounts represent the aggregate results of certain subsidiaries that are immaterial for separate reporting.

Homebuilding Inventories by Reporting Segment (1)
September 30,
2018
 
2017
 
(In millions)
East
$
1,192.0

 
$
1,068.9

Midwest
583.1

 
492.6

Southeast
2,668.7

 
2,392.3

South Central
2,439.4

 
2,199.4

Southwest
499.7

 
506.1

West
2,268.5

 
2,352.5

Corporate and unallocated (2)
223.7

 
225.3

 
$
9,875.1

 
$
9,237.1

_________________________
(1)
Homebuilding inventories are the only assets included in the measure of homebuilding segment assets used by the Company’s chief operating decision makers.
(2)
Corporate and unallocated consists primarily of capitalized interest and property taxes.

Homebuilding Results by Reporting Segment
Year Ended September 30,
2018
 
2017
 
2016
 
(In millions)
Revenues
 

 
 

 
 

East
$
1,893.4

 
$
1,640.1

 
$
1,446.5

Midwest
858.9

 
736.5

 
651.7

Southeast
4,578.6

 
4,087.6

 
3,463.5

South Central
3,769.9

 
3,383.1

 
2,995.1

Southwest
768.7

 
597.5

 
388.1

West
3,754.3

 
3,296.7

 
2,916.9

 
$
15,623.8

 
$
13,741.5

 
$
11,861.8

Inventory and Land Option Charges
 

 
 

 
 

East
$
2.3

 
$
13.6

 
$
13.4

Midwest
5.1

 
1.8

 
1.1

Southeast
28.8

 
8.7

 
4.5

South Central
4.6

 
4.1

 
3.1

Southwest
0.9

 
1.6

 
6.2

West
7.1

 
10.4

 
3.1

 
$
48.8

 
$
40.2

 
$
31.4

Income Before Income Taxes (1)
 

 
 

 
 

East
$
217.3

 
$
153.9

 
$
138.7

Midwest
77.5

 
49.1

 
44.3

Southeast
536.0

 
450.3

 
388.4

South Central
506.1

 
439.1

 
374.8

Southwest
97.4

 
39.6

 
7.3

West
522.9

 
357.3

 
310.9

 
$
1,957.2

 
$
1,489.3

 
$
1,264.4

_________________________
(1)
Expenses maintained at the corporate level consist primarily of 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.