UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended September 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From              To             

Commission file number 1-14122

D.R. Horton, Inc.

(Exact name of registrant as specified in its charter)

Delaware	75-2386963
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1341 Horton Circle, Arlington, Texas 76011

(Address of principal executive offices) (Zip code)

(817) 390-8200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share	DHI	New York Stock Exchange
5.750% Senior Notes due 2023	DHI 23A	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý     No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐     No ý

As of March 31, 2022, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $26.1 billion based on the closing price as reported on the New York Stock Exchange.

As of November 10, 2022, there were 344,341,227 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2023 Annual Meeting of Stockholders are incorporated herein by reference (to the extent indicated) in Part III.

D.R. HORTON, INC. AND SUBSIDIARIES

2022 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	Business	1
ITEM 1A.	Risk Factors	13
ITEM 1B.	Unresolved Staff Comments	26
ITEM 2.	Properties	26
ITEM 3.	Legal Proceedings	26
ITEM 4.	Mine Safety Disclosures	26
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters      and Issuer Purchases of Equity Securities	27
ITEM 6.	[Reserved]	28
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	59
ITEM 8.	Financial Statements and Supplementary Data	60
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	106
ITEM 9A.	Controls and Procedures	106
ITEM 9B.	Other Information	106
ITEM 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	106
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	107
ITEM 11.	Executive Compensation	107
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management      and Related Stockholder Matters	107
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	108
ITEM 14.	Principal Accountant Fees and Services	108
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	109
ITEM 16.	10-K Summary	115
SIGNATURES		116

PART I

ITEM 1.    BUSINESS

D.R. Horton, Inc. is the largest homebuilding company in the United States as measured by number of homes closed. We construct and sell homes through our operating divisions in 106 markets across 33 states, primarily under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes and Freedom Homes. Our common stock is included in the S&P 500 Index and listed on the New York Stock Exchange (NYSE) under the ticker symbol “DHI.” Unless the context otherwise requires, the terms “D.R. Horton,” the “Company,” “we” and “our” used herein refer to D.R. Horton, Inc., a Delaware corporation, and its predecessors and subsidiaries.

Our homebuilding business began in 1978 in Fort Worth, Texas, and our common stock has been publicly traded since 1992. We have expanded and diversified our homebuilding operations geographically over the years by investing available capital into our existing markets, start-up operations in new markets and acquisitions of other homebuilding companies. Our position as the most geographically diverse and largest volume homebuilder in the United States provides a strong platform for us to compete for new home sales. Our product offerings include a broad range of homes for entry-level, move-up, active adult and luxury buyers. Our homes generally range in size from 1,000 to more than 4,000 square feet and in price from $200,000 to more than $1,000,000. For the year ended September 30, 2022, our homebuilding operations closed 82,744 homes with an average closing price of $385,100.

Our business operations consist of homebuilding, a majority-owned residential lot development company, financial services, rental and other activities. Our homebuilding operations are our core business, generating 95% of our consolidated revenues of $33.5 billion in fiscal 2022, 96% of consolidated revenues of $27.8 billion in fiscal 2021 and 97% of consolidated revenues of $20.3 billion in fiscal 2020. Our homebuilding operations generate most of their revenues from the sale of completed homes and to a lesser extent from the sale of land and lots. Approximately 91% of our home sales revenue in fiscal 2022 was generated from the sale of single-family detached homes, with the remainder from the sale of attached homes, such as townhomes, duplexes and triplexes.

During fiscal 2018, we acquired 75% of the outstanding shares of Forestar Group Inc. (Forestar), a publicly traded residential lot development company listed on the NYSE under the ticker symbol “FOR.” Forestar is a component of our homebuilding strategy to enhance operational and capital efficiency and returns by expanding relationships with land developers and increasing the portion of our land and lot position controlled through land purchase contracts. At September 30, 2022, we owned 63% of Forestar’s outstanding common stock.

Our financial services operations provide mortgage financing and title agency services to homebuyers in many of our homebuilding markets. DHI Mortgage, our wholly-owned subsidiary, provides mortgage financing services primarily to our homebuyers and sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers after origination. Our wholly-owned subsidiary title companies serve as title insurance agents by providing title insurance policies, examination, underwriting and closing services, primarily to our homebuyers.

Our rental segment consists of multi-family and single-family rental operations. The multi-family rental operations develop, construct, lease and sell residential rental properties. 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.

In addition to our homebuilding, Forestar, financial services and rental operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own water rights and other water-related assets, own non-residential real estate including ranch land and improvements and own and operate energy-related assets. The results of these operations are immaterial for separate reporting and therefore are grouped together and presented as other.

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Available Information

We make available, as soon as reasonably practicable, on our website, www.drhorton.com, all of our reports required to be filed with the Securities and Exchange Commission (SEC). These reports can be found on the “Investor Relations” section of our website under “Financial Information” and include our annual and quarterly reports on Form 10-K and 10-Q, current reports on Form 8-K, beneficial ownership reports on Forms 3, 4, and 5, proxy statements and amendments to such reports. Our SEC filings are also available to the public on the SEC’s website at www.sec.gov. In addition to our SEC filings, our corporate governance documents, including our Code of Ethical Conduct for the Chief Executive Officer, Chief Financial Officer and senior financial officers, are available on the “Investor Relations” section of our website under “ESG.” Our stockholders may also obtain these documents in paper format free of charge upon request made to our Investor Relations department.

Our principal executive offices are located at 1341 Horton Circle, Arlington, Texas 76011, and our telephone number is (817) 390-8200. Information on or linked to our website is not incorporated by reference into this annual report on Form 10-K unless expressly noted.

OPERATING STRUCTURE AND PROCESSES

Following is an overview of our company’s operating structure and the significant processes that support our business controls, strategies and performance.

Homebuilding Markets

Our homebuilding business operates in 106 markets across 33 states, which provides us with geographic diversification in our homebuilding inventory investments and our sources of revenues and earnings. We believe our geographic diversification lowers our operational risks by mitigating the effects of local and regional economic cycles, and it also enhances our earnings potential by providing more diverse opportunities to invest in our business.

We conduct our homebuilding operations in the geographic regions, states and markets listed below. Our homebuilding operating divisions are aggregated into six reporting segments, also referred to as reporting regions, which comprise the markets below. Our financial statements and the notes thereto contain additional information regarding segment performance.

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State	Reporting Region/Market	State	Reporting Region/Market
	Northwest Region		Southeast Region (Continued)
Colorado	Colorado Springs	Florida	Ocala
	Denver		Orlando
	Fort Collins		Pensacola/Panama City
Oregon	Bend		Port St. Lucie
	Eugene/Springfield		Tallahassee
	Portland/Salem		Tampa/Sarasota
Utah	Salt Lake City		Volusia County
	St. George		West Palm Beach
Washington	Central Washington	Louisiana	Baton Rouge
	Seattle/Tacoma/Everett/Olympia		Lake Charles/Lafayette
	Spokane	Mississippi	Gulf Coast
	Vancouver
			East Region
	Southwest Region	Georgia	Atlanta
Arizona	Phoenix		Augusta
	Tucson		Central Georgia
California	Bakersfield		Savannah
	Bay Area	North Carolina	Asheville
	Fresno/Tulare		Charlotte
	Los Angeles County		Greensboro/Winston-Salem
	Modesto/Merced/Stockton		New Bern/Greenville
	Riverside County		Raleigh/Durham
	Sacramento		Wilmington
	San Bernardino County	South Carolina	Charleston
Hawaii	Oahu		Columbia
Nevada	Las Vegas		Greenville/Spartanburg
	Reno		Hilton Head
New Mexico	Albuquerque		Myrtle Beach
		Tennessee	Chattanooga
	South Central Region		Knoxville
Arkansas	Northwest Arkansas		Memphis
Oklahoma	Oklahoma City		Nashville
	Tulsa
Texas	Austin		North Region
	Beaumont	Delaware	Central Delaware
	Bryan/College Station		Northern Delaware
	Corpus Christi	Illinois	Chicago
	Dallas	Indiana	Fort Wayne
	Fort Worth		Indianapolis
	Houston		Northwest Indiana
	Killeen/Temple/Waco	Iowa	Des Moines
	Lubbock		Iowa City/Cedar Rapids
	Midland/Odessa	Kentucky	Louisville
	New Braunfels/San Marcos	Maryland	Baltimore
	San Antonio		Suburban Washington, D.C.
			Western Maryland
	Southeast Region	Minnesota	Minneapolis/St. Paul
Alabama	Birmingham	Nebraska	Omaha
	Huntsville	New Jersey	Northern New Jersey
	Mobile/Baldwin County		Southern New Jersey
	Montgomery	Ohio	Cincinnati
	Tuscaloosa		Columbus
Florida	Fort Myers/Naples	Pennsylvania	Central Pennsylvania
	Gainesville		Philadelphia
	Jacksonville	Virginia	Northern Virginia
	Lakeland		Richmond
	Melbourne/Vero Beach		Virginia Beach/Williamsburg
	Miami/Fort Lauderdale	West Virginia	Eastern West Virginia

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When evaluating new or existing homebuilding markets for purposes of capital allocation, we consider local, market-specific factors, including among others:

•Economic conditions;

•Employment levels and job growth;

•Income level of potential homebuyers;

•Local housing affordability and typical mortgage products utilized;

•Market for homes at our targeted price points;

•Availability of land and lots in desirable locations on acceptable terms;

•Land entitlement and development processes;

•Availability of qualified subcontractors;

•New and secondary home sales activity;

•Competition;

•Prevailing housing products, features, cost and pricing; and

•Performance capabilities of our local management team.

Economies of Scale

We are the largest homebuilding company in the United States in fiscal 2022 as measured by number of homes closed, and we are also one of the largest builders in most of the markets in which we operate. We believe that our national, regional and local scale of operations provides us with benefits that may not be available to the same degree to some other smaller homebuilders, such as:

•Greater access to and lower cost of capital due to our balance sheet strength and our lending and capital markets relationships;

•Volume discounts and rebates from national, regional and local materials suppliers and lower labor rates from certain subcontractors; and

•Enhanced leverage of our general and administrative activities, which allows us flexibility to adjust to changes in market conditions and compete effectively across our markets.

Decentralized Homebuilding Operations

We view homebuilding as a local business; therefore, most of our direct homebuilding activities are decentralized to provide flexibility to our local managers in making operational decisions. We believe that our local management teams, who are familiar with local market conditions, have the best information to make many decisions regarding their operations. At September 30, 2022, we had 78 separate homebuilding operating divisions, many of which operate in more than one market area. Generally, each operating division consists of a division president; a controller and accounting personnel; land entitlement, acquisition and development personnel; a sales manager and sales and marketing personnel; a construction manager and construction superintendents; customer service personnel; a purchasing manager and office staff. Our division presidents receive performance-based compensation if they achieve targeted financial and operating metrics related to their operating divisions. Following is a summary of our homebuilding activities that are decentralized in our local operating divisions and the control and oversight functions that are centralized in our regional and corporate offices.

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Operating Division Responsibilities

Each homebuilding operating division is responsible for:

•Site selection, which involves

— A feasibility study;

— Soil and environmental reviews;

— Review of existing zoning and other governmental requirements;

— Review of the need for and extent of offsite work required to obtain project entitlements; and

— Financial analysis of the potential project;

•Negotiating lot purchase, land acquisition and related contracts;

•Obtaining all necessary land development and home construction approvals;

•Selecting land development subcontractors and ensuring their work meets our contracted scopes;

•Selecting building and architectural plans;

•Selecting home construction subcontractors and ensuring their work meets our contracted scopes;

•Planning and managing home construction schedules;

•Determining the pricing for each house plan and options in a given community;

•Developing and implementing local marketing and sales plans;

•Coordinating all interactions with customers and real estate brokers during the sales, construction and home closing processes; and

•Ensuring the quality and timeliness of post-closing service and warranty repairs provided to customers.

Centralized Controls

We centralize many important risk elements of our homebuilding business through our regional and corporate offices. We have separate homebuilding regional offices, which generally consist of a region president, a chief financial officer, legal counsel and other operational and office support staff. Each of our region presidents and their management teams are responsible for oversight of the operations of a number of homebuilding operating divisions, including:

•Review and approval of division business plans and budgets;

•Review and approval of all land and lot acquisition contracts;

•Review of all business and financial analysis for potential land and lot inventory investments;

•Oversight of land and home inventory levels;

•Monitoring division financial and operating performance; and

•Review of major personnel decisions and division incentive compensation plans.

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Our corporate executives and corporate office departments are responsible for establishing our operational policies and internal control standards and for monitoring compliance with established policies and controls throughout our operations. The corporate office also has primary responsibility for direct management of certain key risk elements and initiatives through the following centralized functions:

•Financing;

•Cash management;

•Allocation of capital;

•Issuance and monitoring of inventory investment guidelines;

•Approval and funding of land and lot acquisitions;

•Monitoring and analysis of profitability, returns, costs and inventory levels;

•Risk and litigation management;

•Environmental assessments of land and lot acquisitions;

•Technology systems to support management of operations, marketing and financial information;

•Accounting and management reporting;

•Income taxes;

•Internal audit;

•Public reporting and investor and media relations;

•Administration of payroll and employee benefits;

•Negotiation of national purchasing contracts;

•Administration, reporting and monitoring of customer satisfaction surveys and resolutions of issues; and

•Approval of major personnel decisions and management incentive compensation plans.

Land/Lot Acquisition and Inventory Management

We acquire land for use in our homebuilding and rental operations after we have completed due diligence and generally after we have obtained the rights (known as entitlements) to begin development or construction work resulting in an acceptable number of residential lots. Before we acquire lots or tracts of land, we complete a feasibility study, which includes soil tests, independent environmental studies, other engineering work and financial analysis. We also evaluate the status of necessary zoning and other governmental entitlements required to develop and use the property for home construction. Although we purchase and develop land primarily to support our homebuilding activities, we may sell land and lots to other developers and homebuilders where we have excess land and lot positions or for other strategic reasons.

We also enter into land/lot contracts, in which we obtain the right, but generally not the obligation, to buy land or lots at predetermined prices on a defined schedule commensurate with anticipated home closings or planned development. These contracts generally are non-recourse, which limits our financial exposure to our earnest money deposited into escrow under the terms of the contract and any pre-acquisition due diligence costs we incur. This enables us to control land and lot positions with limited capital investment, which substantially reduces the risks associated with land ownership.

We directly acquire almost all of our land and lot positions. We are a party to a small number of joint ventures. Joint ventures are consolidated if we have a controlling interest, or accounted for under the equity method of accounting if we have a significant influence, but not control.

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We attempt to mitigate our exposure to real estate inventory risks by:

•Controlling our level of inventory investment and managing our supply of land/lots owned and controlled through purchase contracts to match the expected housing demand in each of our operating markets;

•Monitoring local market and demographic trends, housing preferences and related economic developments, including the identification of desirable housing submarkets based on the quality of local schools, new job opportunities, local growth initiatives and personal income trends;

•Utilizing land/lot purchase contracts and seeking to acquire developed lots which are substantially ready for home construction, where possible; and

•Monitoring and managing the number of speculative homes (homes under construction without an executed sales contract) built in each subdivision.

Land Development and Home Construction

Substantially all of our land development and home construction work is performed by subcontractors. Subcontractors typically are selected after a competitive bidding process and are retained for a specific subdivision or series of house plans pursuant to a contract that obligates the subcontractor to complete the scope of work at an agreed-upon price. We employ land development managers and construction superintendents to monitor land development and home construction activities, participate in major building decisions, coordinate the activities of subcontractors and suppliers, review the work of subcontractors for quality and cost controls and monitor compliance with zoning and building codes. In addition, our construction superintendents interact with our homebuyers during the construction process and instruct buyers on post-closing home maintenance.

Our home designs are selected or prepared in each of our markets to appeal to local homebuyers’ expectations for affordability, home size and features, and our local management teams adjust product offerings to meet buyer demand as necessary. In many communities, we offer optional interior and exterior features to homebuyers for an additional charge. Construction time for our homes depends on the availability of labor, materials and supplies, the weather, the size of the home and other factors. We completed the construction of most homes in four to nine months during fiscal 2022, which is longer than prior years, as construction times have been impacted by the labor and materials shortages discussed below.

We typically do not maintain significant inventories of land development or construction materials, except for work in progress materials for active development projects and homes under construction. Generally, the construction materials used in our operations have been readily available from numerous sources, and we have contracts exceeding one year with certain suppliers of building materials that are cancelable at our option. In fiscal 2021, our construction cycle time lengthened primarily due to the COVID-19 pandemic and its effects on our supply chain, which resulted in shortages of certain building materials and tightness in the construction labor market. Continuing supply chain delays and disruptions during fiscal 2022 lengthened our construction cycle time further.

We are subject to governmental regulations that affect our land development and construction operations. In fiscal 2021 and 2022, we frequently experienced delays in receiving the proper approvals from municipalities or other government agencies, which delayed our anticipated development and construction activities in certain communities.

Cost Controls

We control construction costs by designing our homes efficiently and by obtaining competitive bids for construction materials and labor. We also competitively bid and negotiate pricing from our subcontractors and suppliers based on the volume of services and products we purchase on a local, regional and national basis. We monitor our land development expenditures and construction costs versus budgets for each house and community, and we review our inventory levels, margins, expenses, profitability and returns for each operating market compared to both its business plan and our performance expectations.

We control overhead costs by centralizing certain accounting and administrative functions, monitoring staffing and compensation levels and by applying technology to business processes to improve productivity where practical. We review other general and administrative costs to identify efficiencies and savings opportunities in our operating divisions and our regional and corporate offices. We also direct many of our promotional activities toward local real estate brokers and digital marketing initiatives, which we believe are efficient uses of our marketing expenditures.

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Marketing and Sales

We primarily use the D.R. Horton, Emerald Homes, Express Homes and Freedom Homes brand names to market and sell our homes. Our D.R. Horton branded communities are the core of our business and account for the majority of our home closings, focusing primarily on the first time and first time move-up homebuyer. Our Emerald branded communities appeal to buyers in search of higher-end move-up and luxury homes. Our Express branded communities primarily accommodate entry-level buyers who are focused on affordability. Our Freedom Homes brand offers homes at affordable price points to active adult buyers seeking a low-maintenance lifestyle.

We market and sell our homes primarily through commissioned employees, and the majority of our home closings also involve an independent real estate broker. We typically conduct home sales from sales offices located in furnished model homes in each subdivision, and we generally do not offer our model homes for sale until the completion of a subdivision. Our sales personnel assist prospective homebuyers by providing floor plans and price information, demonstrating the features and layouts of our homes and assisting with the selection of options, when available. We train and inform our sales personnel regarding construction schedules and marketing and advertising plans. As market conditions warrant, we may provide potential homebuyers with incentives, such as discounts or included upgrades, to be competitive in a particular market or to attain our targeted sales pace.

We market our homes and communities to prospective homebuyers and real estate brokers digitally, through email, search engine marketing, social media and our company website and other real estate websites, in addition to print media and advertisement. We also use billboards, radio, television and print advertising locally as necessary. We attempt to position our subdivisions in locations that are desirable to potential homebuyers and convenient to or visible from local traffic patterns, which helps to reduce advertising costs. Model homes play an important role in our marketing efforts, and we expend significant effort and resources to create an attractive atmosphere in our model homes.

We also build speculative homes in most of our communities, which allow us to compete effectively with existing homes available in the market and improve our returns. These homes enhance our marketing and sales efforts to prospective homebuyers who are renters or who are relocating to these markets and require a home within a short time frame, as well as to independent brokers who represent these homebuyers. We determine our speculative homes strategy in each market based on local market factors, such as new job growth and relocations, housing demand and supply, seasonality, current sales contract cancellation trends and our past experience in the market. We attempt to maintain a level of speculative home inventory in each community based on our current and planned sales pace, and we monitor and adjust speculative home inventory on an ongoing basis.

Sales Contracts and Backlog

Our sales contracts require an earnest money deposit which varies in amount across our markets and communities. Additionally, customers are generally required to pay additional deposits when they select options or upgrade features for their homes. Our sales contracts include a financing contingency which permits customers to cancel and receive a refund of their deposit if they cannot obtain mortgage financing at prevailing or specified interest rates within a defined period. Our contracts may include other contingencies, such as the sale of an existing home. We either retain or refund customer deposits on cancelled sales contracts, depending upon the applicable provisions of the contract or other circumstances.

Sales order backlog represents homes under contract but not yet closed at the end of the period. At September 30, 2022, the value of our backlog of sales orders was $8.0 billion (19,614 homes), a decrease of 16% from $9.5 billion (26,221 homes) at September 30, 2021. The average sales price of homes in backlog was $406,600 at September 30, 2022, up from the $360,900 average at September 30, 2021. Many of the contracts in our sales order backlog are subject to contingencies, such as those described above, which can result in cancellations. As a percentage of gross sales orders, cancellations of sales contracts were 21% in fiscal 2022 compared to 17% in fiscal 2021.

The length of time between the signing of a sales contract for a home and delivery of the home to the buyer (closing) is generally from two to seven months; therefore, substantially all of the homes in our sales backlog at September 30, 2022 are scheduled to close in fiscal 2023.

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Customer Service and Quality Control

Our homebuilding operating divisions are responsible for pre-closing quality control inspections and responding to customers’ post-closing needs. We believe that a prompt and courteous response to homebuyers’ needs during and after construction reduces post-closing repair costs, enhances our reputation for quality and service and ultimately leads to repeat and referral business from the real estate community and homebuyers. We typically provide our 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 subcontractors who perform the actual construction also provide us with warranties on workmanship and are expected to respond to us and the homeowner in a timely manner. In addition, some of our suppliers provide manufacturer’s warranties on specified products installed in the home.

Rental Properties

Our multi-family rental operations develop, construct, lease and sell residential properties that produce rental income. We primarily focus on constructing garden style multi-family rental communities, typically accommodating 200 to 400 dwelling units in high growth suburban markets. We sold 775 multi-family rental units in fiscal 2022 compared to 959 units in fiscal 2021. Our single-family rental operations construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes. We sold 774 single-family rental homes in fiscal 2022 compared to 257 homes in fiscal 2021.

Forestar Residential Lot Development Operations

During fiscal 2018, we acquired 75% of the outstanding shares of Forestar. Forestar is a residential lot development company with operations in 53 markets across 21 states as of September 30, 2022. We owned approximately 63% of Forestar’s outstanding common stock at September 30, 2022. Forestar is a component of our homebuilding strategy to enhance operational efficiency and returns by expanding relationships with land developers and increasing the portion of our land and lot position controlled through land purchase contracts. Forestar is investing in land acquisition and development to expand its residential lot development business across a geographically diversified national platform and consolidate market share in the fragmented U.S. lot development industry. Our homebuilding operations acquire finished lots from Forestar in accordance with the master supply agreement between the two companies. A shared services agreement is in place whereby we provide Forestar certain administrative, compliance, operational and procurement services. As the controlling shareholder, we have significant influence in guiding the strategic direction and operations of Forestar.

Customer Mortgage Financing

We provide mortgage financing services principally to purchasers of our homes in the majority of our homebuilding markets through DHI Mortgage, our wholly-owned subsidiary. DHI Mortgage assists in the sales transaction by coordinating the mortgage application, mortgage commitment and home closing processes to facilitate a timely and efficient experience for our homebuyers. During the year ended September 30, 2022, DHI Mortgage provided mortgage financing services for approximately 69% of our total homes closed, and approximately 98% of DHI Mortgage’s loan volume related to homes closed by our homebuilding operations. Most of our homebuilding divisions also work with additional mortgage lenders that offer a range of mortgage financing programs to our homebuyers.

To limit the risks associated with our mortgage operations, DHI Mortgage originates loan products that we believe can be sold to third-party purchasers of mortgage loans, the majority of which are eligible for sale to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Government National Mortgage Association (Ginnie Mae). DHI Mortgage sells substantially all of the loans and the related servicing rights to third-party purchasers after origination with limited recourse provisions. DHI Mortgage centralizes most of its control and oversight functions, including those related to loan underwriting, quality control, regulatory compliance, secondary marketing of loans, hedging activities, accounting and financial reporting.

Title Services

Through our subsidiary title companies, we serve as a title insurance agent in selected markets by providing title insurance policies, examination, underwriting and closing services primarily to our homebuilding customers.

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Human Capital Resources

People and Culture

For the past three fiscal years, despite the COVID-19 pandemic, we increased the number of employees in all of our operating segments and made no reductions to our employee compensation plans or employee benefit plans. As of September 30, 2022, we employed 13,237 people, of whom 8,967 work in our homebuilding operations, 3,024 in our financial services segment, 532 at our corporate office, 364 in our rental operations, 291 at our Forestar subsidiary and 59 in our other businesses. Of our homebuilding employees, 3,893 are involved in construction, 2,054 are sales and marketing personnel and 3,020 are office personnel.

We believe the people who work for our company are our most important resources and are critical to our continued success. We focus significant attention toward attracting and retaining talented and experienced individuals to manage and support our operations. Our people are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of our employees must certify to their understanding of and adhere to a code of conduct that sets standards for appropriate behavior and includes required internal training on preventing, identifying, reporting and stopping any type of discrimination.

Recruitment, Development and Retention

We are committed to hiring, developing and supporting an energetic, diverse workforce and maintaining a productive, positive and inclusive workplace. We believe diversity in the workplace produces unique perspectives and fresh ideas and helps us better serve our customers. We have an active recruiting team that partners with college campuses and external organizations to identify strong new hires and experienced professionals. Our paid internship program provides college students and recent graduates an opportunity to work alongside some of the most experienced professionals in the homebuilding industry. Our management team also supports a culture of developing future leaders from our existing workforce, enabling us to promote from within for many leadership positions. We believe this provides long-term focus and continuity to our operations while also providing opportunities for the growth and advancement of our employees. During fiscal 2022, we held specialized trainings for employees within key business functions of our homebuilding operations, such as purchasing, construction and sales, and we held our inaugural Leadership Development Program, which provides internal training for up and coming leaders within our homebuilding operations. Additionally, during the fiscal year, 25 employees were placed into a new homebuilding market leadership position, and of those 100% were promoted from within the organization.

The long-term retention of our employees provides us with an experienced, cohesive workforce, which has been vital to achieving our goals. Our focus on retention is evident in the length of service of our executive, regional and divisional management teams. The average tenure of our executive team is 29 years, our homebuilding region presidents is 20 years, our homebuilding division presidents is 14 years and our city managers is greater than 10 years. Our Board of Directors is actively involved in the Company’s executive leadership succession planning and is equally committed to our culture of promoting rising talent from within.

Compensation and Benefits

We believe our compensation package and benefits are competitive with others in our industry. In addition to base pay, eligible employees may participate in our incentive bonus and stock compensation plans, which align their compensation to the interests of our shareholders. A substantial portion of our executive and senior operating leadership’s total compensation is variable, at-risk pay based on the Company’s performance. We also offer our employees a broad range of benefits, including paid vacation, holidays, sick time and parental leave; medical, dental and vision healthcare insurance and life insurance and disability coverage. The Company is committed to supporting its employees in their health, wellness and financial planning goals. Additional benefits offered include a 401(k) savings plan, employee stock purchase plan and access to professional resources to support employees with their mental and physical health, financial planning, identity theft protection and legal needs. Additional information about our compensation and employee benefit plans is included in Note K to the accompanying financial statements.

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Workplace Safety and Wellness

The safety and well-being of our employees is our first priority. We take workplace safety seriously at our construction sites and in our offices. We provide third-party training for our field personnel to become certified by the Occupational Safety and Health Administration; we provide our teams with many safety resources, including safety checklists, policies, procedures and best practices; and we communicate with all of our employees through a monthly safety newsletter to inform and reinforce our commitment to and concern for their well-being. Additionally, because substantially all of our land development and home construction work is performed by subcontractors, we require that our subcontractors maintain safety programs as well.

We implemented safety protocols to protect our employees and our homebuyers during the COVID-19 pandemic. These protocols include complying with health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities. Our experienced teams adapted to the changes in our work environment and managed our business successfully during this challenging time. To support our employees throughout the pandemic, employee access to remote work and virtual meetings was expanded. Once available, COVID-19 vaccinations were provided at no charge through Company sponsored health insurance plans. We also have had no workforce or salary reductions related to the pandemic.

Additional information regarding human capital is available in the “ESG” section of our Investor Relations website at investor.drhorton.com, and we anticipate including more details regarding human capital and associated initiatives in our upcoming inaugural ESG report.

Environmental, Social & Governance (ESG)

During fiscal 2022, we made significant progress on our ESG initiatives, which included conducting an ESG materiality survey and assessment to understand, confirm and prioritize the topics our stakeholders believe are important to our company. The key topics that we plan to address in our upcoming inaugural ESG report include, but are not limited to:

•Board oversight, ethics, diversity and independence

•Home affordability and community impact

•Home energy efficiency, quality and safety

•Workplace health and safety

•Talent retention and employee well-being

•Diversity, equity and inclusion

•Responsible land development

•Greenhouse gas emissions

We plan to publish our inaugural ESG report during the first quarter of fiscal 2023.

Business Acquisitions

We routinely evaluate opportunities to profitably expand our operations, including potential acquisitions of other homebuilding or related businesses. Acquisitions of homebuilding and related businesses usually provide us with immediate land and home inventories and control of additional land and lot positions through purchase contracts. Also, employees of acquired businesses generally have specialized knowledge of local market conditions, including existing relationships with municipalities, land owners, developers, subcontractors and suppliers. These inventory positions and local market knowledge and relationships could take us several years to develop through our own efforts. We seek to limit the risks associated with acquiring other companies by conducting extensive operational, financial and legal due diligence on each acquisition and by performing financial analysis to determine that each acquisition is expected to have a positive impact on our earnings within an acceptable period of time.

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Competition

The homebuilding, lot development and rental housing industries are highly competitive. We compete not only for homebuyers and renters, but also for desirable properties, raw materials, skilled labor and financing. We compete with local, regional and national companies in these industries and also with existing home sales, foreclosures and rental properties. We compete on the basis of price, location, quality and design of our homes and on mortgage financing terms.

The competitors to our financial services businesses include other mortgage lenders and title companies, including national, regional and local mortgage banks and other financial institutions. Some of these competitors are subject to fewer governmental regulations and have greater access to capital than we do, may operate with different lending criteria and/or may offer a broader or more attractive array of financing and other products and services to potential customers. We strive to provide flexible, fairly priced financing alternatives subject to applicable regulations.

Our businesses compete with other companies across all industries to attract and retain highly skilled and experienced employees, managers and executives. Competition for the services of these individuals increases as business conditions improve in the homebuilding, lot development, financial services and rental housing industries and in the general economy.

Governmental Regulations and Environmental Matters

The homebuilding, lot development and rental housing industries are subject to extensive and complex regulations. We and the subcontractors we use must comply with many federal, state and local laws and regulations. These include zoning, density and development requirements and building, environmental, advertising, labor and real estate sales rules and regulations. These regulations and requirements affect substantially all aspects of our land development and home design, construction and sales processes in varying degrees across our markets. Our homes are inspected by local authorities where required, and homes eligible for insurance or guarantees provided by the Federal Housing Administration (FHA) and the U.S. Department of Veteran Affairs (VA) are subject to inspection by them. These regulations often provide broad discretion to the administering governmental authorities. In addition, our new housing developments may be subject to various assessments for schools, parks, streets, utilities and other public improvements.

Our construction and land development activities are also subject to an extensive array of local, state and federal statutes, ordinances, rules and regulations concerning protection of health, safety and the environment. The particular compliance requirements for each site vary greatly according to location, environmental condition and the present and former uses of the site and adjoining properties. We believe that we are in compliance in all material respects with existing environmental regulations applicable to our business. Additionally, our compliance with such regulations has not had, nor is expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, changes in regulations could increase our costs to comply with such regulations, as discussed in “Item 1A. Risk Factors.”

Our mortgage company must comply with extensive state and federal laws and regulations, which are administered by numerous agencies, including the Consumer Financial Protection Bureau, Federal Housing Finance Agency, U.S. Department of Housing and Urban Development, FHA, VA, United States Department of Agriculture (USDA), Fannie Mae, Freddie Mac and Ginnie Mae. These laws and regulations include many compliance requirements, including licensing, consumer disclosures, fair lending and real estate settlement procedures. As a result, our operations are subject to regular, extensive examinations by the applicable agencies.

Seasonality

Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again in the future, we generally close more homes and generate greater revenues and pre-tax income in the third and fourth quarters of our fiscal year. The seasonal nature of our business can also cause significant variations in the working capital requirements for our homebuilding, lot development, financial services and rental operations. As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular fiscal quarter are not necessarily representative of the balance of our fiscal year.

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ITEM 1A.    RISK FACTORS

Discussion of our business and operations included in this annual report on Form 10-K should be read together with the risk factors set forth below. They describe various risks and uncertainties we are or may become subject to, many of which are difficult to predict or beyond our control. Although the risks are organized and described separately, many of the risks are interrelated. These risks and uncertainties, together with other factors described elsewhere in this report, have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.

Risks Related to our Business and our Industry

The homebuilding, lot development and rental housing industries are cyclical and affected by changes in economic, real estate or other conditions that could adversely affect our business or financial results.

The homebuilding, lot development and rental housing industries are cyclical and are significantly affected by changes in general and local economic and real estate conditions, such as:

•employment levels;

•consumer confidence and spending;

•housing demand;

•availability of financing for homebuyers;

•availability of financing for companies that purchase our rental properties;

•interest rates;

•inflation;

•availability and prices of new homes and existing homes for sale and availability and market values of rental properties; and

•demographic trends.

Adverse changes in these general and local economic conditions or deterioration in the broader economy may negatively impact our business and financial results and increase the risk for asset impairments and write-offs. Changes in these economic conditions may affect some of our regions or markets more than others. If adverse conditions affect our larger markets, they could have a proportionately greater impact on us than on some other companies.

The federal government’s fiscal policies and the Federal Reserve’s monetary policies may negatively impact the financial markets and consumer confidence and could hurt the U.S. economy and the housing and rental markets and in turn, could adversely affect the operating results of our businesses. During fiscal 2022, in response to increased inflation, the Federal Reserve raised interest rates significantly and has signaled it expects additional future interest rate increases. As a result, mortgage interest rates increased significantly, and we began to see a moderation in housing demand. Increases in mortgage interest rates reduce the affordability of our homes and can have an adverse impact on our business or financial results.

Deployments of U.S. military personnel to foreign regions, terrorist attacks, other acts of violence or threats to national security and any corresponding response by the United States or others, domestic or international instability or social or political unrest may cause an economic slowdown in the markets where we operate, which could adversely affect our business.

If we experience any of the foregoing, potential customers may be less willing or able to buy our homes or our rental properties. Additionally, cancellations of home sales contracts in backlog may increase if homebuyers do not honor their contracts due to any of the factors discussed above. Our pricing and product strategies may also be limited by market conditions. We may be unable to change the mix of our home or rental offerings, reduce the costs of the homes or properties we build, offer more affordable homes or rental properties or satisfactorily address changing market conditions in other ways without adversely affecting our profits and returns.

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Our financial services business is closely related to our homebuilding business, as it originates mortgage loans principally to purchasers of the homes we build. A decrease in the demand for our homes because of the foregoing matters will also adversely affect the financial results of this segment of our business. An increase in the default rate on the mortgages we originate may adversely affect our ability to sell the mortgages or the pricing we receive upon the sale of mortgages or may increase our recourse obligations for previous originations. We may be responsible for losses associated with mortgage loans originated and sold to third-party purchasers in the event of errors or omissions relating to certain representations and warranties that the loans sold meet certain requirements, including representations as to underwriting standards, the type of collateral, the existence of primary mortgage insurance, and the validity of certain borrower representations in the connection with the loan, and we may be required to repurchase certain of those mortgage loans or provide indemnification. Repurchased mortgage loans and/or the settlement of claims associated with such loans could adversely affect our business or financial results. We establish reserves for estimated losses and future repurchase obligations for mortgage loans we have sold; however, actual future obligations related to these mortgages could differ significantly from our current estimated amounts. Additionally, we may retain mortgage servicing rights on our originations. As servicer for these loans, we may incur losses by having to advance payments to the mortgage-backed securities (MBS) bondholders to the extent there are insufficient collections to satisfy the required principal and interest remittances of the underlying MBS.

Constriction of the credit and public capital markets could limit our ability to access capital and increase our costs of capital.

During past economic and housing downturns, the credit markets constricted and reduced some sources of liquidity that were previously available to us. Consequently, we relied principally on our cash on hand to meet our working capital needs and repay outstanding indebtedness during those times. There likely will be periods in the future when financial market upheaval will increase our cost of capital or limit our ability to access the public debt markets or obtain bank financing.

Our homebuilding operations utilize a $2.19 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $3.0 billion, subject to certain conditions and availability of additional bank commitments. Our homebuilding revolving credit facility also provides for the issuance of letters of credit with a sublimit equal to 100% of the total revolving credit commitments. The maturity date of the facility is October 28, 2027. Our homebuilding revolving credit facility and our homebuilding senior notes are guaranteed by D.R. Horton, Inc.’s significant wholly-owned homebuilding subsidiaries.

Forestar has a $410 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $600 million, subject to certain conditions and availability of additional bank commitments. The Forestar revolving credit 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 October 28, 2026. The Forestar revolving credit facility is guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries. The Forestar revolving credit facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, financial services or rental operations.

DRH Rental has a $1.025 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.25 billion, subject to certain conditions and availability of additional bank commitments. Availability under the rental revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental’s real estate assets and unrestricted cash. At September 30, 2022, the borrowing base limited the available capacity under the facility to $811.9 million. The rental revolving credit 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. 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 not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or financial services operations.

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Our mortgage subsidiary utilizes a $1.6 billion mortgage repurchase facility to finance the majority of the loans it originates. The capacity of the facility automatically increases during certain higher volume periods and can be further increased through additional commitments. The total capacity of the facility at September 30, 2022 was $2.2 billion, and its maturity date is February 17, 2023. Adverse changes in market conditions could make the renewal of these facilities more difficult or could result in an increase in the cost of these facilities or a decrease in the committed amounts. Such changes affecting our mortgage repurchase facility may also make it more difficult or costly to sell the mortgages that we originate. The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or rental operations.

We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations, pay dividends, repurchase our common stock and support other general corporate and operational needs, and we regularly evaluate our opportunities to raise additional capital. D.R. Horton has an automatically effective universal shelf registration statement filed with the SEC in July 2021, registering debt and equity securities that may be issued from time to time in amounts to be determined. Forestar also has an effective shelf registration statement filed with the SEC in October 2021, registering $750 million of equity securities, of which $300 million was reserved for sales under its at-the-market equity offering program that became effective in November 2021. At September 30, 2022, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its at-the-market equity offering program. 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. We believe that our existing cash resources, together with the homebuilding, Forestar and rental revolving credit facilities, mortgage repurchase facility and ability to access the capital markets or obtain additional financing will provide sufficient liquidity to fund our near-term working capital needs and debt obligations. Adverse changes in economic, homebuilding or capital market conditions could negatively affect our business, liquidity and financial results, restrict our ability to obtain additional capital or increase our costs of capital.

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 could decrease our buyers’ ability to obtain financing and adversely affect our business or financial results.

The mortgage loans originated by our financial services operations are primarily eligible for sale to Fannie Mae, Freddie Mac or Ginnie Mae and are typically sold to third-party purchasers. The secondary market for mortgage loans continues to primarily desire securities backed by Fannie Mae, Freddie Mac or Ginnie Mae, and we believe the liquidity these agencies provide to the mortgage industry is important to the housing market. Any significant change regarding the long-term structure and viability of Fannie Mae and Freddie Mac could result in adjustments to the size of their loan portfolios and to guidelines for their loan products. Additionally, a reduction in the availability of financing provided by these institutions could adversely affect interest rates, mortgage availability and sales of new homes and mortgage loans. During fiscal 2022, approximately 62% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 30% were sold to one other major financial entity. On an ongoing basis, we seek to establish loan purchase arrangements with additional financial entities. If we are unable to sell mortgage loans to purchasers on attractive terms, our ability to originate and sell mortgage loans at competitive prices could be limited, which would negatively affect our profitability.

The FHA insures mortgage loans that generally have lower credit requirements and is an important source for financing the sale of our homes. Changes, restrictions or significant premium increases in FHA programs in the future may negatively affect the availability or affordability of FHA financing, which could adversely affect our ability to sell homes.

Some of our customers may qualify for 100% financing through programs offered by the VA and the USDA and certain other housing finance agencies. These programs are subject to changes in regulations, lending standards and government funding levels. There can be no assurances that these programs or other programs will continue to be available in our homebuilding markets or that they will be as attractive to our customers as the programs currently offered, which could negatively affect our sales.

Mortgage interest rates have increased significantly during fiscal 2022, and market conditions and government actions could cause mortgage rates to rise even further in the future. When interest rates increase, the cost of owning a home increases, which reduces the number of potential homebuyers who can obtain mortgage financing and can result in a decline in the demand for our homes.

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The risks associated with our land, lot and rental inventory could adversely affect our business or financial results.

Inventory risks are substantial for our homebuilding, Forestar and rental businesses. There are risks inherent in controlling, owning and developing land. If housing demand declines, we may not be able to sell homes or rental properties profitably in some of our communities, and we may not be able to fully recover the costs of some of the land and lots we own. Also, the values of our owned undeveloped land, lots and inventories may fluctuate significantly due to changes in market conditions. As a result, our deposits for lots controlled through purchase contracts may be put at risk, we may have to sell homes, rental properties or land for a lower profit margin or record inventory impairment charges on our land and lots. A significant deterioration in economic or homebuilding industry conditions may result in substantial inventory impairment charges.

We cannot make any assurances that our growth strategies, acquisitions or investments will be successful or will not expose us to additional risks or other negative consequences.

In recent years, we have primarily grown our business by increasing our investments in land, lot and home inventories in our existing homebuilding markets. We have also expanded through investments in new product offerings, new geographic markets and the growth of our rental property operations. Investments in land, lots, home inventories and rental properties can expose us to risks of economic loss and asset impairments if housing conditions weaken or if we are unsuccessful in implementing our growth strategies.

We have acquired the homebuilding operations of several homebuilding companies in recent years, and in May 2022, we acquired Vidler Water Resources, Inc. (Vidler) for a total purchase price of $290.5 million. The assets acquired through the Vidler transaction consisted primarily of water rights and other water-related assets.

We may make strategic acquisitions of or investments in other companies, operations or assets in the future. Such acquisitions and investments may have risks similar to those related to land, lots and home inventories, but they may also expose us to additional risks or other negative consequences. These transactions may not advance our business strategy, provide a satisfactory return on our investment or provide other benefits we anticipate. Also, the integration of these transactions may not be successful and may require significant time and resources, which may divert management’s attention from other operations. Acquisitions and investments could also raise new compliance-related obligations or expose us to material liabilities not discovered in the due diligence process that may lead to litigation. If these transactions under-perform our expectations or are unsuccessful, we may incur significant expenses or write-offs of inventory, other assets or intangible assets such as goodwill. Acquisitions and investments can result in dilution to existing stockholders if we issue our common stock as consideration and can increase our debt levels or reduce our liquidity if we purchase them with cash. The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including our ability to identify suitable additional markets or acquisition candidates, the negotiation of acceptable terms, our financial position and general economic and business conditions. We also may seek to divest an investment or a business and may have difficulty selling such investment or business on acceptable terms in a timely manner.

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

Inflation can adversely affect us by increasing costs of land, materials and labor. In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on housing affordability. During fiscal 2022, we began to see a moderation in housing demand as inflationary pressures and mortgage interest rates increased. In an inflationary environment, depending on industry and other economic conditions, we may be precluded from raising home prices enough to keep up with the rate of inflation, which could reduce our profit margins. Moreover, in an inflationary environment, our cost of capital, labor and materials can increase and the purchasing power of our cash resources can decline, which can have an adverse impact on our business or financial results.

Alternatively, a significant period of deflation could cause a decrease in overall spending and borrowing levels. This could lead to deterioration in economic conditions, including an increase in the rate of unemployment. Deflation could also cause the value of our inventories to decline or reduce the value of existing homes below the related mortgage loan balance, which could potentially increase the supply of existing homes. These or other factors related to deflation could have a negative impact on our business or financial results.

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Supply shortages and other risks related to acquiring land, building materials and skilled labor could increase our costs and delay deliveries.

The homebuilding and lot development industries have from time to time experienced significant difficulties that can affect the cost or timing of construction, including:

•difficulty in acquiring land suitable for residential building at affordable prices in locations where our potential customers want to live;

•shortages of qualified subcontractors;

•reliance on local subcontractors, manufacturers, distributors and land developers who may be inadequately capitalized;

•shortages of materials; and

•significant increases in the cost of materials, particularly increases in the price of lumber, drywall and cement, which are significant components of home construction costs.

During fiscal 2021 and 2022, we have experienced multiple disruptions in our supply chain, which have resulted in shortages of certain building materials and tightness in the labor market. This has caused our construction cycle to lengthen and costs of building materials to increase. If shortages and cost increases in building materials and tightness in the labor market persist for a prolonged period of time, our profit margins could be adversely impacted if we are unable to offset cost increases by increasing the selling price of our homes.

In addition, tariffs, duties and/or trade restrictions imposed or increased on imported materials and goods that are used in connection with the construction and delivery of our homes, including steel, aluminum and lumber, may raise our costs for these items or for the products made with them. These factors may cause construction delays or cause us to incur more costs building our homes.

Public health issues such as a major epidemic or pandemic could adversely affect our business or financial results.

The U.S. and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk. The ongoing COVID-19 pandemic continues to affect the global economy. The effects of the pandemic contributed to disrupting our supply chain, which has resulted in shortages of certain building materials and tightness in the labor market.

There is uncertainty regarding the extent to which and how long COVID-19 and its variant strains will continue to impact the global economy and our supply chain, and the effect of the pandemic on our operational and financial performance will depend on future developments, including its impact on our customers, trade partners and employees, all of which are highly uncertain and cannot be predicted. If COVID-19 and its variant strains continue to have a negative impact on economic conditions, our results of operations and financial condition could be adversely impacted.

Our business and financial results could be adversely affected by weather conditions and natural disasters.

Physical risks, including weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, volcanic activity, droughts, floods, hailstorms, heavy or prolonged precipitation, wildfires and others, can harm our business. Additionally, the physical impacts of climate change may cause these occurrences to increase in frequency, severity and duration. Any such events can temporarily delay our development work, home construction and home closings, unfavorably affect the cost or availability of materials or labor, damage homes under construction, lead to changing consumer preferences and/or negatively impact demand for new homes in affected areas. We have experienced temporary delays in production and short-term impacts on our sales and closings activity from weather events in recent years. However, there have been no material lasting impacts on our business from these events or material permanent operational challenges resulting from these events, but they could adversely affect our business in the future. The climates and geology of many of the states in which we operate, including California, Florida, Texas and other coastal areas where we have some of our larger operations and which have experienced recent natural disasters, present increased risks of adverse weather or natural disasters.

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Homebuilding is subject to home warranty and construction defect claims in the ordinary course of business that can be significant.

We are subject to home warranty and construction defect claims arising in the ordinary course of our homebuilding business. We rely on subcontractors to perform the actual construction of our homes, and in many cases, to select and obtain construction materials. Despite our detailed specifications and monitoring of the construction process, our subcontractors occasionally do not meet adequate quality standards in the construction of our homes. When we find these issues, we repair them in accordance with our warranty obligations. We spend significant resources to repair items in homes we have sold to fulfill the warranties we issued to our homebuyers. Additionally, we are subject to construction defect claims which can be costly to defend and resolve in the legal system. Warranty and construction defect matters can also result in negative publicity in the media and on the internet, which can damage our reputation and adversely affect our ability to sell homes.

Based on the large number of homes we have sold over the years, our potential liabilities related to warranty and construction defect claims are significant. Consequently, we have generally maintained product liability insurance each year, and we seek to obtain indemnities and certificates of insurance from subcontractors covering claims related to their workmanship and materials. We establish warranty and other reserves for the homes we sell based on historical experience in our markets and our judgment of the qualitative risks associated with the types of homes built. Because of the uncertainties inherent to these matters, we cannot provide assurance that our insurance coverage, our subcontractor arrangements and our reserves will be adequate to address all of our future warranty and construction defect claims. Contractual indemnities can be difficult to enforce, we may be responsible for applicable self-insured retentions and some types of claims may not be covered by insurance or may exceed applicable coverage limits. Additionally, the coverage offered by and the availability of product liability insurance for construction defects is limited and costly. We have responded to increases in insurance costs and coverage limitations by self-insuring our risk for certain years and by increasing our self-insured retentions and claim reserves. There can be no assurance that coverage will not be further restricted or become more costly. If costs to resolve our future warranty and construction defect claims exceed our estimates, our financial results and liquidity could be adversely affected.

A health and safety incident relating to our operations could be costly in terms of potential liability and reputational damage.

Building and land development sites are inherently dangerous, and operating in this industry poses certain inherent health and safety risks. Due to health and safety regulatory requirements and the number of homes we construct, health and safety performance is critical to the success of our business. Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements, and a failure that results in a major or significant health and safety incident is likely to be costly and could expose us to liability that could be costly. Such an incident could generate significant negative publicity and have a corresponding impact on our reputation, our relationships with relevant regulatory agencies or governmental authorities, and our ability to attract customers and employees, which in turn could have a material adverse effect on our financial results and liquidity.

We are required to obtain performance bonds, the unavailability of which could adversely affect our results of operations and cash flows.

We often are required to provide surety bonds to secure our performance or obligations under construction contracts, development agreements and other arrangements. At September 30, 2022, we had $2.8 billion of outstanding surety bonds. Our ability to obtain surety bonds primarily depends upon our credit rating, financial condition, past performance and other factors, including the capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue performance bonds for construction and development activities. If we are unable to obtain surety bonds when required, our results of operations and cash flows could be adversely affected.

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Increases in the costs of owning a home could prevent potential customers from buying our homes and adversely affect our business or financial results.

Significant expenses of owning a home, including mortgage loan interest and state and local income and property taxes, have historically been deductible expenses for an individual’s federal income taxes, subject to various limitations. The Tax Cuts and Jobs Act, which became effective January 1, 2018, established new limits on these federal tax deductions. Further changes in income tax laws by the federal or state government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes.

In addition, increases in property tax rates by local governmental authorities, as experienced in some areas in response to reduced federal and state funding, could adversely affect the amount of financing our potential customers could obtain or their desire to purchase new homes.

Further, existing and prospective regulatory and societal responses to climate change intended to reduce potential climate change impacts may increase the upfront costs of purchasing a home, costs to maintain the home and its systems, energy and utility costs and the cost to obtain homeowner and various hazard and flood insurance, or limit homeowners’ ability to obtain these insurance policies altogether. Although these items have had no material effect on our business, they could adversely affect our business in the future.

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

We are subject to extensive and complex regulations that affect land development and home construction, including zoning, density restrictions, building design and building standards. These regulations often provide broad discretion to the administering governmental authorities as to the conditions we must meet prior to development or construction being approved, if approved at all. We are subject to determinations by these authorities as to the adequacy of water or sewage facilities, roads or other local services. New housing developments may also be subject to various assessments for schools, parks, streets and other public improvements. In addition, in many markets government authorities have implemented no growth or growth control initiatives. Any of these may limit, delay or increase the costs of development or home construction.

We are also subject to a significant number and variety of local, state and federal laws and regulations concerning protection of health, safety, labor standards and the environment. The impact of environmental laws varies depending upon the prior uses of the building site or adjoining properties and may be greater in areas with less supply where undeveloped land or desirable alternatives are less available. These matters may result in delays, may cause us to incur substantial compliance, remediation, mitigation and other costs, and can prohibit or severely restrict development and homebuilding activity in environmentally sensitive regions or areas. Government agencies also routinely initiate audits, reviews or investigations of our business practices to ensure compliance with these laws and regulations, which can cause us to incur costs or create other disruptions in our business that can be significant.

Recently, there has been growing concern from advocacy groups, government agencies and the general public over the effects of climate change on the environment. Transition risks, such as government restrictions, standards or regulations intended to reduce greenhouse gas emissions and potential climate change impacts, are emerging and may increase in the future in the form of restrictions or additional requirements on land development and home construction in certain areas. Such restrictions and requirements could increase our operating and compliance costs or require additional technology and capital investment, which could adversely affect our results of operations. This is a particular concern in the western United States, where some of the most extensive and stringent environmental laws and residential building construction standards in the country have been enacted, and where we have business operations. We believe we are in compliance in all material respects with existing climate-related government restrictions, standards and regulations applicable to our business, and such compliance has not had a material impact on our business. However, given the rapidly changing nature of environmental laws and matters that may arise that are not currently known, we cannot predict our future exposure concerning such matters, and our future costs to achieve compliance or remedy potential violations could be significant.

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Additionally, actual or perceived ESG and other sustainability matters and our response to these matters could harm our business. Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess and report. These factors may alter the environment in which we do business and may increase the ongoing costs of compliance and adversely impact our results of operations and cash flows. If we are unable to adequately address such ESG matters or fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.

The subcontractors we rely on to perform the actual construction of our homes are also subject to a significant number of local, state and federal laws and regulations, including laws involving matters that are not within our control. If the subcontractors who construct our homes fail to comply with all applicable laws, we can suffer reputational damage, and may be exposed to possible liability.

We are also subject to an extensive number of laws and regulations because our common stock and debt securities and the common stock of our Forestar subsidiary are publicly traded in the capital markets. These regulations govern our communications with our shareholders and the capital markets, our financial statement disclosures and our legal processes, and they also impact the work required to be performed by our independent registered public accounting firm and our legal counsel. Changes in these laws and regulations, including the subsequent implementation of rules by the administering government authorities, may require us to incur additional compliance costs, and such costs may be significant.

Governmental regulation of our financial services operations could adversely affect our business or financial results.

Our financial services operations are subject to extensive state and federal laws and regulations, which are administered by numerous agencies, including but not limited to the Consumer Financial Protection Bureau, Federal Housing Finance Agency, U.S. Department of Housing and Urban Development, FHA, VA, USDA, Fannie Mae, Freddie Mac and Ginnie Mae. These laws and regulations include many compliance requirements, including but not limited to licensing, consumer disclosures, fair lending and real estate settlement procedures. As a result, our operations are subject to regular, extensive examinations by the applicable agencies. Additional future regulations or changing rule interpretations and examinations by regulatory agencies may result in more stringent compliance standards and could adversely affect the results of our operations.

We operate in competitive industries, and competitive conditions could adversely affect our business or financial results.

The homebuilding, lot development and rental housing industries are highly competitive. We compete not only for homebuyers and renters, but also for desirable properties, raw materials, skilled labor and financing. We compete with local, regional and national companies in these industries, and also with existing home sales, foreclosures and rental properties. The competitive conditions in these industries can negatively affect our sales volumes, selling prices, leased occupancy levels, rental rates and incentive levels, reduce our profit margins, and cause the value of our inventory or other assets to be impaired. Competition can also affect our ability to acquire suitable land, raw materials and skilled labor at acceptable prices or terms, or cause delays in land development or in construction.

The competitors to our financial services businesses include other mortgage lenders and title companies, including national, regional and local mortgage banks and other financial institutions. Some of these competitors are subject to fewer governmental regulations and have greater access to capital than we do, may operate with different lending criteria and/or may offer a broader or more attractive array of financing and other products and services to potential customers.

Our businesses compete with other companies across all industries to attract and retain highly skilled and experienced employees, managers and executives. Competition for the services of these individuals increases as business conditions improve in the homebuilding, lot development, financial services and rental housing industries and in the general economy. If we are unable to attract and retain key employees, managers or executives, our business could be adversely affected.

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Risks Related to our Indebtedness

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

As of September 30, 2022, our consolidated debt was $6.1 billion, which consisted of $2.9 billion related to our homebuilding segment, $706 million related to our Forestar segment, $800 million related to our rental segment and $1.6 billion related to our financial services segment. The indentures governing our homebuilding senior notes do not restrict the incurrence of future unsecured debt by us or our homebuilding subsidiaries or the incurrence of secured or unsecured debt by our non-guarantor subsidiaries, and the agreement governing our homebuilding revolving credit facility allows us to incur a substantial amount of future unsecured debt. Also, the indentures governing our homebuilding senior notes and the agreement governing our homebuilding revolving credit facility impose restrictions on our ability and on that of the guarantors under our homebuilding senior notes and our homebuilding revolving credit facility to incur debt secured by certain assets, but still permit us and our homebuilding subsidiaries to incur significant amounts of additional secured debt. The Forestar revolving credit facility and the indentures governing Forestar’s senior notes impose restrictions on the ability of Forestar and its restricted subsidiaries to incur secured and unsecured debt, but still permit Forestar and its restricted subsidiaries to incur a substantial amount of future secured and unsecured debt, and do not restrict the incurrence of future secured and unsecured debt by Forestar’s unrestricted subsidiaries. The rental revolving credit facility imposes restrictions on the ability of DRH Rental and its restricted subsidiaries to incur secured and unsecured debt, but still permits DRH Rental and its restricted subsidiaries to incur a substantial amount of future secured and unsecured debt, and does not restrict the incurrence of future secured and unsecured debt by DRH Rental’s unrestricted subsidiaries. The mortgage repurchase facility imposes restrictions on the ability of DHI Mortgage and its restricted subsidiaries to incur secured and unsecured debt, but still permits DHI Mortgage and its restricted subsidiaries to incur a substantial amount of future secured and unsecured debt, and does not restrict the incurrence of future secured and unsecured debt by DHI Mortgage’s unrestricted subsidiaries.

The amount and the maturities of our debt and the debt of our subsidiaries could have important consequences. For example, possible consequences for our homebuilding, Forestar, financial services and rental operations each with respect to their individual debt obligations, could:

•require the dedication of a substantial portion of cash flow from operations to payment of debt and reduce the ability to use cash flow for other operating or investing purposes;

•limit the flexibility to adjust to changes in business or economic conditions; and

•limit the ability to obtain future financing for working capital, capital expenditures, acquisitions, debt service requirements or other requirements.

Servicing our debt requires a significant amount of cash, and we or our subsidiaries may not have sufficient cash flow from our respective businesses to pay our substantial debt.

Our ability and that of our subsidiaries to meet our respective debt service obligations will depend, in part, upon our and our subsidiaries’ future financial performance. Future results are subject to the risks and uncertainties described in this report. Our revenues and earnings vary with the level of general economic activity in the markets we serve. Our businesses are also affected by financial, political, business and other factors, many of which are beyond our control. The factors that affect our ability to generate cash can also affect our ability to raise additional funds for these purposes through the sale of debt or equity, the refinancing of debt or the sale of assets. Changes in prevailing interest rates may affect the cost of our debt service obligations, because borrowings under the homebuilding, Forestar and rental revolving credit facilities and mortgage repurchase facility bear interest at floating rates.

The instruments governing our and our subsidiaries’ indebtedness impose certain restrictions on our and our subsidiaries’ business, and the ability of us and our subsidiaries to comply with related covenants, restrictions or limitations could adversely affect our and our subsidiaries’ financial condition or operating flexibility.

The restrictions imposed by our and certain of our subsidiaries’ indebtedness could limit our or our subsidiaries’ ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict our activities or business plans and adversely affect our or our subsidiaries’ ability to finance our operations, acquisitions, investments or strategic alliances or other capital needs or to engage in other business activities that would be in our interest.

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The agreements governing our indebtedness contain restrictions on our and our guarantor subsidiaries’ ability to, among other things, engage in sale and leaseback transactions with respect to certain assets, incur secured debt, create liens, pay dividends and make other distributions on or redeem or repurchase equity securities, sell certain assets and engage in mergers, consolidations or sales of all or substantially all of our assets. The applicable instruments governing each of Forestar’s indebtedness and DRH Rental’s indebtedness contain restrictions on the ability of Forestar and DRH Rental, as applicable, and certain of their respective subsidiaries to, among other things, incur additional indebtedness, create liens, pay dividends and make other distributions on or redeem or repurchase equity securities, sell certain assets, enter into affiliate transactions and engage in mergers, consolidations or sales of all or substantially all of Forestar’s or DRH Rental’s assets, as applicable.

In addition, the agreements governing certain of our and our subsidiaries’ debt instruments contain the following financial covenants:

Homebuilding revolving credit facility. Our homebuilding revolving credit facility contains financial covenants requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if our leverage ratio exceeds a certain level. 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.

Forestar and rental revolving credit facilities. The Forestar and rental revolving credit facilities each contain financial covenants requiring the maintenance by Forestar or DRH Rental, as applicable, of a minimum level of tangible net worth, a minimum level of liquidity, a maximum allowable leverage ratio and a borrowing base restriction based on the book value of Forestar’s or DRH Rental’s real estate assets and unrestricted cash. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the applicable revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.

Mortgage repurchase facility and other restrictions. The mortgage repurchase facility for our mortgage subsidiary requires the maintenance of a minimum level of tangible net worth, a maximum allowable leverage ratio and a minimum level of liquidity by our mortgage subsidiary. A failure to comply with these requirements could allow the lending banks to terminate the availability of funds to our mortgage subsidiary or cause any outstanding borrowings to become due and payable prior to maturity. Any difficulty experienced in complying with these covenants could make the renewal of the facility more difficult or costly.

In addition, although our financial services business is conducted through subsidiaries that are not restricted by the indentures governing our and Forestar’s senior notes or the agreements governing the homebuilding, Forestar and rental revolving credit facilities, the ability of our financial services subsidiaries to distribute funds to our homebuilding operations would be restricted in the event such distribution would cause an event of default under the mortgage repurchase facility or if an event of default had occurred under this facility. Moreover, our right to receive assets from our financial services subsidiaries upon their liquidation or recapitalization is subject to the prior claims of the creditors of these subsidiaries. Any claims we may have to funds from our financial services subsidiaries would be subordinate to subsidiary indebtedness to the extent of any security for such indebtedness and to any indebtedness otherwise recognized as senior to our claims.

Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our debt ratings.

Our homebuilding senior unsecured debt is currently rated investment grade by all three major rating agencies; however, there can be no assurance that we will be able to maintain these ratings. Any lowering of our debt ratings could make accessing the public capital markets or obtaining additional credit from banks more difficult and/or more expensive. Any lowering of Forestar’s debt ratings could also make Forestar’s ability to access the public capital markets or obtain additional credit from banks more difficult and/or more expensive.

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The instruments governing our indebtedness contain change of control provisions which could affect the timing of repayment.

Change of control purchase options under our homebuilding senior notes and change of control default under our homebuilding revolving credit facility. Upon the occurrence of both a change of control and a ratings downgrade event, each as defined in the indentures governing our homebuilding senior notes, we will be required to offer to repurchase such notes at 101% of their principal amount, together with all accrued and unpaid interest, if any. Moreover, a change of control (as defined in our homebuilding revolving credit facility) would constitute an event of default under our homebuilding revolving credit facility, which could result in the acceleration of the repayment of any borrowings outstanding under the facility, a requirement to cash collateralize all letters of credit outstanding thereunder and the termination of the commitments thereunder. If repayment of more than $50 million outstanding under our homebuilding revolving credit facility were accelerated and such acceleration were not rescinded or such indebtedness were not satisfied, in either case within 30 days, an event of default would result under the indentures governing our homebuilding senior notes, entitling the trustee for the notes or holders of at least 25% in principal amount of the relevant series of notes then outstanding to declare all such notes to be due and payable immediately. If purchase offers were required under the indentures for our homebuilding senior notes, repayment of the borrowings under our homebuilding revolving credit facility were required, or if the senior notes were accelerated, we can give no assurance that we would have sufficient funds to pay the required amounts.

Change of control purchase option under Forestar’s notes and change of control default under the Forestar revolving credit facility. Upon the occurrence of a change of control triggering event (as defined in the indentures governing Forestar’s notes), Forestar will be required to offer to repurchase Forestar’s notes at 101% of their principal amount, together with all accrued and unpaid interest, if any. A change of control (as defined in the Forestar revolving credit facility) with respect to Forestar would constitute an event of default under the Forestar revolving credit facility, which could result in the acceleration of the repayment of any borrowings outstanding under the Forestar revolving credit facility, a requirement to cash collateralize all letters of credit outstanding thereunder and the termination of the commitments thereunder. If the maturity of the Forestar revolving credit facility and/or other indebtedness of Forestar and its restricted subsidiaries together having an aggregate principal amount outstanding of $40 million or more is accelerated, an event of default would result under the indentures governing the Forestar notes, entitling the trustee for the Forestar notes or holders of at least 25% in aggregate principal amount of the then outstanding Forestar notes to declare all such Forestar notes to be due and payable immediately. If purchase offers were required under the indentures for Forestar’s notes, repayment of the borrowings under Forestar’s revolving credit facility were required, or if Forestar’s notes were accelerated, we can give no assurance that Forestar would have sufficient funds to pay the required amounts.

Change of control default under the rental revolving credit facility. A change of control (as defined in the rental revolving credit facility agreement) with respect to DRH Rental would constitute an event of default under the rental revolving credit facility, which could result in the acceleration of the repayment of any borrowings outstanding under the rental revolving credit facility, a requirement to cash collateralize all letters of credit outstanding thereunder and the termination of the commitments thereunder. If repayment of the borrowings under the rental revolving credit facility were required, we can give no assurance that DRH Rental would have sufficient funds to pay the required amounts.

Change of control default under mortgage repurchase facility. A change of control (as defined in the mortgage repurchase facility) with respect to DHI Mortgage would constitute an event of default under the mortgage repurchase facility, which could result in the acceleration of the repurchase of any loans outstanding under the facility and an increase in the repurchase price of such loans. If repayments of the loans under DHI Mortgage’s mortgage repurchase facility were required, we can give no assurance that DHI Mortgage would have sufficient funds to pay the required amounts.

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General Risk Factors

Damage to our corporate reputation or brands from negative publicity could adversely affect our business, financial results and/or stock price.

Adverse publicity related to our company, industry, personnel, operations or business performance may cause damage to our corporate reputation or brands and may generate negative sentiment, potentially affecting the performance of our business or our stock price, regardless of its accuracy or inaccuracy. Our reputation could be adversely affected by actual or perceived failures or concerns related to ethics, compliance, product quality and safety, environmental matters, privacy, diversity and inclusion, human rights, compensation and benefits and corporate governance, among other things. Negative publicity can be disseminated rapidly through digital platforms, including social media, websites, blogs and newsletters. Customers and other interested parties value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording us an opportunity for redress or correction, and our success in preserving our brand image depends on our ability to recognize, respond to and effectively manage negative publicity in a rapidly changing environment. Adverse publicity or unfavorable commentary from any source could damage our reputation, reduce the demand for our homes or negatively impact the morale and performance of our employees, which could adversely affect our business.

Our business could be adversely affected by the loss of key personnel.

We rely on our key personnel to effectively operate and manage our businesses. Specifically, our success depends heavily on the performance of our homebuilding division and region presidents and their management teams, our rental housing management team, our financial services management team, our corporate office management teams, our Forestar management team and our executive officers. These key personnel have significant experience and skills in the homebuilding, lot development, financial services and rental housing industries, as well as leadership and management abilities that are vital to our success. Our ability to attract and retain our key personnel may be impacted by matters involving reputation, culture, diversity and inclusion, compensation and benefits and our management of executive succession. We seek to retain our key personnel and to have succession plans in place to address the potential loss of key personnel. However, if our retention and succession planning efforts are unsuccessful or if we fail to attract suitable replacements, the loss of key personnel could adversely affect our business.

Our business could be negatively impacted as a result of actions by activist stockholders or others.

We may be subject to actions or proposals from activist stockholders or others that may not align with our business strategies or the interests of our other stockholders. Responding to such actions could be costly and time-consuming, disrupt our business and operations and/or divert the attention of our Board of Directors and senior management from the pursuit of our business strategies. Activist stockholders may create perceived uncertainties as to the future direction of our business or strategy, including with respect to our ESG efforts, which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel, potential homebuyers and business partners and may affect our relationships with current homebuyers, subcontractors, investors and other third parties. In addition, actions of activist stockholders may cause periods of fluctuation in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Information technology failures, data security breaches, and the failure to satisfy privacy and data protection laws and regulations could harm our business.

We use information technology and other computer resources to carry out important operational and marketing activities and to maintain our business records. These information technology systems are dependent upon global communications providers, web browsers, third-party software and data storage providers and other aspects of the Internet infrastructure that have experienced security breaches, cyber-attacks, ransomware attacks, significant systems failures and service outages in the past. Additionally, phishing attacks, whereby perpetrators attempt to fraudulently induce employees, customers, vendors or other users of a company’s systems to disclose sensitive information to gain access to its data, have become more prevalent in recent years. The use of remote work environments and virtual platforms may increase our risk of cyber-attack or data security breaches. Further, geopolitical tensions or conflicts, such as the ongoing conflict between Russia and Ukraine, may create a heightened risk of cyber-attacks or other data security breaches. Our normal business activities involve collecting and storing information specific to our homebuyers, renters, employees, vendors and suppliers and maintaining operational and financial information related to our business, both in

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an office setting and remote locations as needed. A material breach in the security of our information technology systems or other data security controls could include the theft or release of this information. The unintended or unauthorized disclosure of personal identifying and confidential information as a result of a security breach by any means could lead to litigation or other proceedings against us by the affected individuals or business partners, or by regulators. The outcome of such proceedings, which could include penalties or fines, could have a significant negative impact on our business.

We may also be required to incur significant costs to protect against damages caused by information technology failures, security breaches, and the failure to satisfy privacy and data protection laws and regulations in the future as legal requirements continue to increase. The European Union and other international regulators, as well as state governments, have enacted or enhanced data privacy regulations, such as the California Consumer Privacy Act (and its successor the California Privacy Rights Act which will go into effect on January 1, 2023), and other governments are considering establishing similar or stronger protections. These regulations impose certain obligations for handling specified personal information in our systems, including notifying individuals regarding information we have collected from them. We have incurred costs in an effort to comply with these requirements, but our costs may increase significantly if new requirements are enacted and based on how individuals exercise their rights. Any noncompliance could result in substantial penalties, reputational damage or litigation.

We provide employee awareness training about cybersecurity threats. We routinely utilize information technology security experts to assist us in our evaluations of the effectiveness of the security of our information technology systems, and we regularly enhance our security measures to protect our systems and data. We use various encryption, tokenization and authentication technologies to mitigate cybersecurity risks and have increased our monitoring capabilities to enhance early detection and rapid response to potential cyber threats. However, because the techniques used to obtain unauthorized access, disable or degrade systems change frequently and are increasing in sophistication, they often are not recognized until launched against a target. As such, we may be unable to anticipate these techniques, to implement adequate preventative measures or to identify and investigate cybersecurity incidents.

Although past cybersecurity incidents have not had a material effect on our business or operations to date, in the future a data security breach, a significant and extended disruption in the functioning of our information technology systems or a breach of any of our data security controls could disrupt our business operations, damage our reputation and cause us to lose customers. We cannot provide assurances that a security breach, cyber-attack, data theft or other significant systems or security failures will not occur in the future, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position.

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ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

Our homebuilding and lot development operations own inventories of land, lots and homes, and our rental operations own rental properties that are both completed and under construction as part of the ordinary course of our business. We also own office buildings totaling approximately 1.6 million square feet, and we lease approximately 730,000 square feet of office space under leases expiring through September 2027. These properties are located in our various operating markets to house our homebuilding, Forestar, financial services and rental operating divisions and our regional and corporate offices.

We own ranch land and improvements totaling 93,600 acres, most of which has been owned for over 20 years. We use this land to conduct ranching and agricultural activities and to host company meetings and events.

ITEM 3.    LEGAL PROCEEDINGS

We are involved in lawsuits and other contingencies in the ordinary course of business. While the outcome of such contingencies cannot be predicted with certainty, we believe that the liabilities arising from these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, to the extent the liability arising from the ultimate resolution of any matter exceeds our estimates reflected in the recorded reserves relating to such matter, we could incur additional charges that could be significant.

With respect to administrative or judicial proceedings involving the environment, we have determined that we will disclose any such proceeding if we reasonably believe such proceeding will result in monetary sanctions, exclusive of interest and costs, at or in excess of $1 million.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the NYSE under the symbol “DHI.” As of November 10, 2022, the closing price of our common stock on the NYSE was $83.92, and there were approximately 274 holders of record.

In October 2022, our Board of Directors approved a quarterly cash dividend of $0.25 per common share, payable on December 12, 2022, to stockholders of record on December 2, 2022. 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.

We may repurchase shares of our common stock from time to time pursuant to our $1.0 billion common stock repurchase authorization, which was approved by our Board of Directors effective April 20, 2022, and which replaced our prior $1.0 billion common stock repurchase authorization. The authorization has no expiration date. During fiscal 2022, we purchased 14.0 million shares of our common stock for $1.1 billion. All share repurchases were made in accordance with the safe harbor provisions of Rule 10b-18 under the Securities Exchange Act of 1934, as amended (Exchange Act). We intend to use a trading plan under Rule 10b5-1 under the Exchange Act at any time we seek to repurchase shares during a self-imposed trading blackout period. At September 30, 2022, our remaining stock repurchase authorization was $438.3 million. The following table sets forth information concerning our common stock repurchases during the three months ended September 30, 2022.

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (In millions)
July 1, 2022 - July 31, 2022	19,400	$	74.76	19,400	$	688.5
August 1, 2022 - August 31, 2022	513,500	72.81		513,500	651.1
September 1, 2022 - September 30, 2022	3,023,347	70.39		3,023,347	438.3
Total	3,556,247	$	70.76	3,556,247	$	438.3

During fiscal years 2022, 2021 and 2020, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended (Securities Act).

The information required by this item with respect to equity compensation plans is set forth under Item 12 of this annual report on Form 10-K and is incorporated herein by reference.

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Stock Performance Graph

The following graph illustrates the cumulative total stockholder return on D.R. Horton common stock for the last five fiscal years through September 30, 2022, compared to the S&P 500 Index and the S&P 1500 Homebuilding Index. The comparison assumes a hypothetical investment in D.R. Horton common stock and in each of the foregoing indices of $100 at September 30, 2017 and assumes that all dividends were reinvested. Shareholder returns over the indicated period are based on historical data and should not be considered indicative of future shareholder returns. The graph and related disclosure in no way reflect our forecast of future financial performance.

	September 30,
	2017		2018		2019		2020		2021		2022
D.R. Horton, Inc.	$	100.00	$	106.80	$	135.44	$	196.74	$	220.50	$	178.82
S&P 500 Index	100.00		117.91		122.93		141.55		184.02		155.55
S&P 1500 Homebuilding Index	100.00		94.58		127.00		169.16		189.97		150.47

This performance graph shall not be deemed to be incorporated by reference into our SEC filings and should not constitute soliciting material or otherwise be considered filed under the Securities Act or the Exchange Act.

ITEM 6.    [Reserved]

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote an understanding of our financial condition, results of operations, liquidity and certain other factors that may affect future results. MD&A is provided as a supplement to, and should be read in conjunction with our consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-K. This section discusses the results of operations for fiscal 2022 compared to 2021. For similar operating and financial data and discussion of our fiscal 2021 results compared to our fiscal 2020 results, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the fiscal year ended September 30, 2021, which was filed with the SEC on November 18, 2021.

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption “Forward-Looking Statements” and under Item 1A, “Risk Factors.”

Results of Operations — Overview

Fiscal 2022 Operating Results

In fiscal 2022, our number of homes closed and home sales revenues increased 1% and 20%, respectively, compared to the prior year, and our consolidated revenues increased 21% to $33.5 billion compared to $27.8 billion in the prior year. Our pre-tax income was $7.6 billion in fiscal 2022 compared to $5.4 billion in fiscal 2021, and our pre-tax operating margin was 22.8% compared to 19.3%. Net income was $5.9 billion in fiscal 2022 compared to $4.2 billion in fiscal 2021, and our diluted earnings per share was $16.51 compared to $11.41.

Consolidated net cash provided by operating activities was $561.8 million in fiscal 2022 and $534.4 million in fiscal 2021, and cash provided by our homebuilding operations was $1.9 billion in fiscal 2022 compared to $1.2 billion in fiscal 2021. In fiscal 2022, our return on equity (ROE) was 34.5% compared to 31.6% in fiscal 2021, and our homebuilding return on inventory (ROI) was 42.8% compared to 37.9%. 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. 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.

During the first half of fiscal 2022 and for most of the third quarter, demand for our homes remained strong. In June 2022, we began to see a moderation in housing demand that persisted through the end of our fiscal year as mortgage interest rates increased substantially and inflationary pressures remained elevated. The supply of homes at affordable price points remains limited across most of our markets, and disruptions in the supply chains for certain building materials and tightness in the labor market have caused our construction cycle to lengthen. Although these pressures may persist for some time, we believe we are well-positioned to meet these changing market conditions with our affordable product offerings and lot supply, and we will manage our home pricing, sales incentives and number of homes in inventory based on the level of homebuyer demand.

Within our homebuilding land and lot portfolio, our lots controlled through purchase contracts represent 77% of the lots owned and controlled at September 30, 2022 compared to 76% at September 30, 2021. Our relationship with Forestar and expanded relationships with other land developers across the country have allowed us to significantly increase the controlled portion of our lot pipeline over the past few years.

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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.

Strategy

Our operating strategy focuses on 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. Our strategy remains consistent and includes the following initiatives:

•Developing and retaining highly experienced and productive teams of personnel throughout our company that are aligned and focused on continuous improvement in our operational execution and financial performance.

•Maintaining a significant cash balance and strong overall liquidity position while controlling our level of debt.

•Allocating and actively managing our inventory investments across our operating markets to diversify our geographic risk.

•Offering new home communities that appeal to a broad range of entry-level, move-up, active adult and luxury homebuyers based on consumer demand in each market.

•Modifying product offerings, sales pace, home prices and sales incentives as necessary in each of our markets to meet consumer demand and maintain affordability.

•Delivering high quality homes and a positive experience to our customers both during and after the sale.

•Managing our inventory of homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.

•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.

•Continuing to seek opportunities to expand the portion of our land and finished lots controlled through purchase contracts with Forestar and other land developers.

•Controlling the cost of goods purchased from both vendors and subcontractors.

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

•Controlling our selling, general and administrative (SG&A) expense infrastructure to match production levels.

•Ensuring that our financial services business provides high quality mortgage and title services to homebuyers efficiently and effectively.

•Investing in the construction and leasing of single-family and multi-family rental properties to meet rental demand in high growth suburban markets and selling these properties profitably.

•Opportunistically evaluating potential acquisitions to enhance our operating platform.

We believe our operating strategy, which has produced positive results in recent years, will allow us to successfully operate through changing economic conditions and maintain our strong financial performance and competitive position. However, we cannot provide any assurances that the initiatives listed above will continue to be successful, and we may need to adjust parts of our strategy to meet future market conditions.

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Key Results

Key financial results as of and for our fiscal year ended September 30, 2022, as compared to fiscal 2021, were as follows:

Homebuilding:

•Homebuilding revenues increased 20% to $31.9 billion compared to $26.6 billion.

•Homes closed increased 1% to 82,744 homes, and the average closing price of those homes increased 19% to $385,100.

•Net sales orders decreased 6% to 76,137 homes, while the value of net sales orders increased 9% to $30.4 billion.

•Sales order backlog decreased 25% to 19,614 homes, and the value of sales order backlog decreased 16% to $8.0 billion.

•Home sales gross margin was 28.7% compared to 25.5%.

•Homebuilding SG&A expense was 6.8% of homebuilding revenues compared to 7.3%.

•Homebuilding pre-tax income was $6.9 billion compared to $4.8 billion.

•Homebuilding pre-tax income was 21.7% of homebuilding revenues compared to 18.1%.

•Homebuilding return on inventory was 42.8% compared to 37.9%.

•Net cash provided by homebuilding operations was $1.9 billion compared to $1.2 billion.

•Homebuilding cash and cash equivalents totaled $2.0 billion compared to $3.0 billion.

•Homebuilding inventories totaled $17.3 billion compared to $13.9 billion.

•Homes in inventory totaled 46,400 compared to 47,800.

•Owned lots totaled 131,100 compared to 127,800, and lots controlled through purchase contracts increased to 442,100 from 402,500.

•Homebuilding debt was $2.9 billion compared to $3.2 billion.

•Homebuilding debt to total capital was 13.2% compared to 17.8%, and net homebuilding debt to total capital was 4.4% compared to 1.7%.

Forestar:

•Forestar’s revenues increased 15% to $1.5 billion compared to $1.3 billion. Revenues in both fiscal 2022 and 2021 included $1.2 billion of revenue from land and lot sales to our homebuilding segment.

•Forestar’s lots sold increased 11% to 17,691 compared to 15,915. Lots sold to D.R. Horton totaled 14,895 compared to 14,839.

•Forestar’s pre-tax income was $235.8 million compared to $146.6 million.

•Forestar’s pre-tax income was 15.5% of revenues compared to 11.1%.

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•Forestar’s cash and cash equivalents totaled $264.8 million compared to $153.6 million.

•Forestar’s inventories totaled $2.0 billion compared to $1.9 billion.

•Forestar’s owned and controlled lots totaled 90,100 compared to 97,000. Of these lots, 36,700 were under contract to sell to or subject to a right of first offer with D.R. Horton compared to 39,200.

•Forestar’s debt was $706.0 million compared to $704.5 million.

•Forestar’s debt to total capital was 37.1% compared to 41.0%, and Forestar’s net debt to total capital was 26.9% compared to 35.2%.

Financial Services:

•Financial services revenues decreased 3% to $795.0 million compared to $823.6 million.

•Financial services pre-tax income decreased 20% to $290.6 million compared to $364.6 million.

•Financial services pre-tax income was 36.6% of financial services revenues compared to 44.3%.

Rental:

•Rental revenues were $510.2 million compared to $267.8 million.

•Rental pre-tax income was $202.0 million compared to $86.5 million.

•Rental inventory totaled $2.6 billion compared to $840.9 million.

•Multi-family rental units closed totaled 775 compared to 959.

•Single-family rental homes closed totaled 774 compared to 257.

Consolidated Results:

•Consolidated revenues increased 21% to $33.5 billion compared to $27.8 billion.

•Consolidated pre-tax income increased 42% to $7.6 billion compared to $5.4 billion.

•Consolidated pre-tax income was 22.8% of consolidated revenues compared to 19.3%.

•Income tax expense was $1.7 billion compared to $1.2 billion, and our effective tax rate was 22.7% compared to 21.8%.

•Net income attributable to D.R. Horton increased 40% to $5.9 billion compared to $4.2 billion.

•Diluted net income per common share attributable to D.R. Horton increased 45% to $16.51 compared to $11.41.

•Net cash provided by operations was $561.8 million compared to $534.4 million.

•Stockholders’ equity was $19.4 billion compared to $14.9 billion.

•Book value per common share increased to $56.39 compared to $41.81.

•Debt to total capital was 23.8% compared to 26.7%, and net debt to total capital was 15.4% compared to 12.9%.

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Results of Operations — Homebuilding

Our operating segments are our 78 homebuilding divisions, our majority-owned Forestar residential lot development operations, our financial services operations, our rental operations and our other business activities. The homebuilding operating segments are aggregated into six reporting segments. These reporting segments, which we also refer to as reporting regions, have homebuilding operations located in the following states:

Northwest:	Colorado, Oregon, Utah and Washington
Southwest:	Arizona, California, Hawaii, Nevada and New Mexico
South Central:	Arkansas, Oklahoma and Texas
Southeast:	Alabama, Florida, Louisiana and Mississippi
East:	Georgia, North Carolina, South Carolina and Tennessee
North:	Delaware, Illinois, Indiana, Iowa, Kentucky, Maryland, Minnesota, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia

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, 2022 and 2021.

	Net Sales Orders (1)
	Year Ended September 30,
	Net Homes Sold				Value (In millions)						Average Selling Price
	2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest	4,509	4,530	—	%	$	2,566.5	$	2,320.2	11	%	$	569,200	$	512,200	11	%
Southwest	8,111	9,456	(14)	%	4,235.5		4,179.3		1	%	522,200		442,000		18	%
South Central	21,417	23,631	(9)	%	7,409.8		6,992.9		6	%	346,000		295,900		17	%
Southeast	21,649	24,239	(11)	%	8,193.6		7,632.1		7	%	378,500		314,900		20	%
East	13,479	14,038	(4)	%	5,059.7		4,496.9		13	%	375,400		320,300		17	%
North	6,972	5,484	27	%	2,908.5		2,126.8		37	%	417,200		387,800		8	%
	76,137	81,378	(6)	%	$	30,373.6	$	27,748.2	9	%	$	398,900	$	341,000	17	%

._____________

(1)Net sales orders represent the number and dollar value of new sales contracts executed with customers (gross sales orders), net of cancelled sales orders.

	Sales Order Cancellations
	Year Ended September 30,
	Cancelled Sales Orders		Value (In millions)				Cancellation Rate (1)
	2022	2021	2022		2021		2022		2021
Northwest	845	583	$	468.2	$	294.2	16	%	11	%
Southwest	2,485	1,497	1,190.8		598.0		23	%	14	%
South Central	6,866	5,301	2,343.8		1,510.2		24	%	18	%
Southeast	5,612	5,356	2,006.3		1,585.1		21	%	18	%
East	2,913	3,136	1,055.5		947.6		18	%	18	%
North	1,384	986	564.2		354.6		17	%	15	%
	20,105	16,859	$	7,628.8	$	5,289.7	21	%	17	%

_____________

(1)Cancellation rate represents the number of cancelled sales orders divided by gross sales orders.

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Net Sales Orders

The number of net sales orders decreased 6% during 2022 compared to 2021, and the value of net sales orders increased 9% to $30.4 billion (76,137 homes) in 2022 from $27.7 billion (81,378 homes) in 2021 due to the increase in our average selling price. The average selling price of net sales orders during fiscal 2022 was $398,900, up 17% from the prior year.

During the first half of fiscal 2022 and for most of the third quarter, demand for our homes remained strong. We restricted our sales order pace during the year in most of our communities to match our longer construction cycles, which have resulted from disruptions in the supply chains for certain building materials and tightness in the labor market. In June 2022, we began to see a moderation in housing demand that persisted through the end of our fiscal year as mortgage interest rates increased substantially and inflationary pressures remained elevated. Our net sales order volume decreased 15% in the fourth quarter of fiscal 2022 compared to the prior year quarter, and the average selling price of net sales orders declined by 4% sequentially in the fourth quarter compared to the third quarter. Although these pressures may persist for some time, we believe we are well-positioned to meet these changing market conditions with our affordable product offerings.

In regions with a decrease in sales order volume, the markets contributing most to the decreases were: the Arizona and California markets in the Southwest; the Austin market in the South Central; the Louisiana markets in the Southeast; and the Atlanta market in the East. In the North region, the markets contributing most to the increase in sales order volume were the Chicago, Indianapolis, New Jersey and Iowa markets.

Our sales order cancellation rate (cancelled sales orders divided by gross sales orders for the period) was 21% in 2022 compared to 17% in 2021. The increase in the cancellation rate primarily reflects the moderation in demand we experienced beginning in June 2022 as mortgage rates increased substantially and inflationary pressures remained elevated throughout the remainder of the year. Our cancellation rate in the fourth quarter of fiscal 2022 was 32%, up sequentially from 24% in the third quarter.

	Sales Order Backlog
	As of September 30,
	Homes in Backlog				Value (In millions)						Average Selling Price
	2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest	724	954	(24)	%	$	427.1	$	497.7	(14)	%	$	589,900	$	521,700	13	%
Southwest	1,760	3,438	(49)	%	905.0		1,495.9		(40)	%	514,200		435,100		18	%
South Central	5,692	8,733	(35)	%	2,051.7		2,825.4		(27)	%	360,500		323,500		11	%
Southeast	6,983	7,319	(5)	%	2,787.3		2,534.7		10	%	399,200		346,300		15	%
East	3,086	4,217	(27)	%	1,214.8		1,469.4		(17)	%	393,600		348,400		13	%
North	1,369	1,560	(12)	%	589.1		640.0		(8)	%	430,300		410,300		5	%
	19,614	26,221	(25)	%	$	7,975.0	$	9,463.1	(16)	%	$	406,600	$	360,900	13	%

Sales Order Backlog

Sales order backlog represents homes under contract but not yet closed at the end of the period. Many of the contracts in our sales order backlog are subject to contingencies, including mortgage loan approval and buyers selling their existing homes, which can result in cancellations. A portion of the contracts in backlog will not result in closings due to cancellations.

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	Homes Closed and Revenue
	Year Ended September 30,
	Homes Closed				Home Sales Revenue (In millions)						Average Selling Price
	2022	2021	% Change		2022		2021		% Change		2022		2021		% Change
Northwest	4,739	5,120	(7)	%	$	2,637.1	$	2,515.6	5	%	$	556,500	$	491,300	13	%
Southwest	9,789	9,760	—	%	4,826.4		4,024.7		20	%	493,000		412,400		20	%
South Central	24,458	22,236	10	%	8,183.5		6,104.2		34	%	334,600		274,500		22	%
Southeast	21,985	23,842	(8)	%	7,941.0		7,066.1		12	%	361,200		296,400		22	%
East	14,610	14,678	—	%	5,314.2		4,453.9		19	%	363,700		303,400		20	%
North	7,163	6,329	13	%	2,959.5		2,338.1		27	%	413,200		369,400		12	%
	82,744	81,965	1	%	$	31,861.7	$	26,502.6	20	%	$	385,100	$	323,300	19	%

Home Sales Revenue

Revenues from home sales increased 20% to $31.9 billion (82,744 homes closed) in 2022 from $26.5 billion (81,965 homes closed) in 2021. Although our homes closed during the year were negatively impacted by supply chain disruptions, home sales revenues increased in all of our regions due to an increase in average selling price.

The number of homes closed in 2022 increased 1% from 2021. In regions with an increase in closings volume, the markets contributing most to the increases were: the Dallas market in the South Central and the Chicago and New Jersey markets in the North. In regions with a decrease in closings volume, the markets contributing most to the decreases were: the Seattle market in the Northwest and the Orlando market in the Southeast.

Homebuilding Operating Margin Analysis

	Percentages of Related Revenues
	Year Ended September 30,
	2022		2021
Gross profit — home sales	28.7	%	25.5	%
Gross profit — land/lot sales and other	36.3	%	25.1	%
Inventory and land option charges	(0.2)	%	(0.1)	%
Gross profit — total homebuilding	28.5	%	25.4	%
Selling, general and administrative expense	6.8	%	7.3	%
Other (income) expense	(0.1)	%	—	%
Homebuilding pre-tax income	21.7	%	18.1	%

Home Sales Gross Profit

Gross profit from home sales increased to $9.1 billion in 2022 from $6.8 billion in 2021 and increased 320 basis points to 28.7% as a percentage of home sales revenues. The percentage increase resulted from improvements of 340 basis points due to the average selling price of our homes closed increasing by more than the average cost of those homes, partially offset by increased warranty and construction defect costs of 20 basis points.

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 market conditions, we increased our use of incentives in the fourth quarter of fiscal 2022, and our home sales gross profit margin declined sequentially by 180 basis points from 30.1% in the third quarter to 28.3% in the fourth quarter. During fiscal 2023, we expect to continue offering a higher level of incentives and also expect our average sales price to decrease, which will cause our gross profit margins to decline from current levels.

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Land/Lot Sales and Other Revenues

Land/lot sales and other revenues from our homebuilding operations were $61.4 million and $75.0 million in fiscal 2022 and 2021, respectively. We continually evaluate our land and lot supply, and fluctuations in revenues and profitability from land sales occur based on how we manage our inventory levels in various markets. We generally purchase land and lots with the intent to build and sell homes on them. However, some of the land that we purchase includes commercially zoned parcels that we may sell to commercial developers. We may also sell residential lots or land parcels to manage our supply or for other strategic reasons. As of September 30, 2022, our homebuilding operations had $29.4 million of land held for sale that we expect to sell in the next twelve months.

Inventory and Land Option Charges

At the end of each quarter, we review the performance and outlook for all of our communities and land inventories for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of these reviews, there were no impairments recorded in our homebuilding segment during the three months ended September 30, 2022 or during fiscal 2022. There were $5.6 million of homebuilding impairment charges recorded in fiscal 2021.

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. If the housing market or economic conditions are adversely affected for a prolonged period, we may be required to evaluate additional communities for potential impairment. These evaluations could result in impairment charges, which could be significant.

During fiscal 2022 and 2021, earnest money and pre-acquisition cost write-offs related to land purchase contracts that we have terminated or expect to terminate were $57.2 million and $19.3 million, respectively.

Selling, General and Administrative (SG&A) Expense

SG&A expense from homebuilding activities increased 12% to $2.2 billion in fiscal 2022 from $1.9 billion in fiscal 2021. SG&A expense as a percentage of homebuilding revenues was 6.8% and 7.3% in fiscal 2022 and 2021, respectively.

Employee compensation and related costs were $1.8 billion and $1.6 billion in fiscal 2022 and 2021, respectively, representing 82% and 81% of SG&A costs in those years. These costs increased 13% in fiscal 2022 from the prior year period. Our homebuilding operations employed 9,499 and 8,429 people at September 30, 2022 and 2021, respectively.

We attempt to control our homebuilding SG&A costs while ensuring that our infrastructure adequately supports our operations; however, we cannot make assurances that we will be able to maintain or improve upon the current SG&A expense as a percentage of revenues.

Interest Incurred

We capitalize interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. Interest incurred by our homebuilding operations was $110.7 million and $93.6 million in fiscal 2022 and 2021, respectively. Interest charged to cost of sales was 0.6% and 0.7% of total cost of sales (excluding inventory and land option charges) in those years.

Other Income

Other income, net of other expenses, included in our homebuilding operations was $16.4 million in fiscal 2022 compared to $10.3 million in fiscal 2021. Other income consists of interest income and various other types of ancillary income, gains, expenses and losses not directly associated with sales of homes, land and lots. The activities that result in this ancillary income are not significant, either individually or in the aggregate.

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Homebuilding Results by Reporting Region

	Year Ended September 30,
	2022						2021
	Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues		Homebuilding Revenues		Homebuilding Pre-tax Income (1)		% of Revenues
	(In millions)
Northwest	$	2,658.4	$	560.8	21.1	%	$	2,516.6	$	510.8	20.3	%
Southwest	4,840.7		968.3		20.0	%	4,071.0		653.1		16.0	%
South Central	8,192.3		1,910.7		23.3	%	6,111.2		1,150.2		18.8	%
Southeast	7,951.2		1,918.5		24.1	%	7,079.6		1,371.9		19.4	%
East	5,318.1		1,126.3		21.2	%	4,459.0		795.1		17.8	%
North	2,962.4		456.3		15.4	%	2,340.2		331.7		14.2	%
	$	31,923.1	$	6,940.9	21.7	%	$	26,577.6	$	4,812.8	18.1	%

________

(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 our corporate office. 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 increased 6% in fiscal 2022 compared to fiscal 2021, due to increases in the average selling price of homes closed in all markets, partially offset by a decrease in the number of homes closed in our Seattle and Portland markets. The region generated pre-tax income of $560.8 million in 2022 compared to $510.8 million in 2021. Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) increased by 130 basis points in 2022 compared to 2021, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses increased by 10 basis points in 2022 compared to 2021.

Southwest Region — Homebuilding revenues increased 19% in fiscal 2022 compared to fiscal 2021, primarily due to increases in the average selling price of homes closed in all markets. The region generated pre-tax income of $968.3 million in 2022 compared to $653.1 million in 2021. Home sales gross profit percentage increased by 330 basis points in 2022 compared to 2021, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 70 basis points in 2022 compared to 2021, primarily due to the increase in homebuilding revenues.

South Central Region — Homebuilding revenues increased 34% in fiscal 2022 compared to fiscal 2021, primarily due to increases in the average selling price of homes closed in all markets. The region generated pre-tax income of $1.9 billion in 2022 compared to $1.2 billion in 2021. Home sales gross profit percentage increased by 370 basis points in 2022 compared to 2021, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 80 basis points in 2022 compared to 2021, primarily due to the increase in homebuilding revenues.

Southeast Region — Homebuilding revenues increased 12% in fiscal 2022 compared to fiscal 2021, due to increases in the average selling price of homes closed in all markets, partially offset by a decrease in the number of homes closed. The region generated pre-tax income of $1.9 billion in 2022 compared to $1.4 billion in 2021. Home sales gross profit percentage increased by 440 basis points in 2022 compared to 2021, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 30 basis points in 2022 compared to 2021, primarily due to the increase in homebuilding revenues.

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East Region — Homebuilding revenues increased 19% in fiscal 2022 compared to fiscal 2021, due to increases in the average selling price of homes closed in all markets. The region generated pre-tax income of $1.1 billion in 2022 compared to $795.1 million in 2021. Home sales gross profit percentage increased by 300 basis points in 2022 compared to 2021, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 40 basis points in 2022 compared to 2021, primarily due to the increase in homebuilding revenues.

North Region — Homebuilding revenues increased 27% in fiscal 2022 compared to fiscal 2021, due to increases in the average selling price and the number of homes closed in all markets. The region generated pre-tax income of $456.3 million in 2022 compared to $331.7 million in 2021. Home sales gross profit percentage increased by 120 basis points in 2022 compared to 2021, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 20 basis points in 2022 compared to 2021, primarily due to the increase in homebuilding revenues.

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Homebuilding Inventories, Land and Lot Position and Homes in Inventory

We routinely enter into contracts to purchase land or developed residential lots at predetermined prices on a defined schedule commensurate with planned development or anticipated new home demand. At the time of purchase, the undeveloped land is generally vested with the rights to begin development or construction work, and we plan and coordinate the development of our land into residential lots for use in our homebuilding business. We manage our inventory of owned land and lots and homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.

Our homebuilding segment’s inventories at September 30, 2022 and 2021 are summarized as follows:

	September 30, 2022
	Construction in Progress and Finished Homes		Residential Land/Lots Developed and Under Development		Land Held for Development		Land Held for Sale		Total Inventory
	(In millions)
Northwest	$	854.9	$	945.1	$	—	$	2.2	$	1,802.2
Southwest	1,328.7		1,447.2		7.2		18.6		2,801.7
South Central	2,304.9		1,625.4		0.3		1.1		3,931.7
Southeast	2,692.7		1,385.2		13.2		—		4,091.1
East	1,389.3		1,153.4		—		—		2,542.7
North	1,251.9		676.7		—		7.1		1,935.7
Corporate and unallocated (1)	129.1		89.5		0.3		0.4		219.3
	$	9,951.5	$	7,322.5	$	21.0	$	29.4	$	17,324.4

	September 30, 2021
	Construction in Progress and Finished Homes		Residential Land/Lots Developed and Under Development		Land Held for Development		Land Held for Sale		Total Inventory
	(In millions)
Northwest	$	609.6	$	685.4	$	—	$	12.5	$	1,307.5
Southwest	1,113.5		1,315.8		6.9		9.4		2,445.6
South Central	1,977.4		1,501.5		0.4		—		3,479.3
Southeast	2,002.4		1,160.1		16.1		—		3,178.6
East	1,124.6		792.3		1.3		1.4		1,919.6
North	901.4		460.4		5.3		1.8		1,368.9
Corporate and unallocated (1)	119.1		88.5		0.4		0.3		208.3
	$	7,848.0	$	6,004.0	$	30.4	$	25.4	$	13,907.8

_____________

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

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Our land and lot position and homes in inventory at September 30, 2022 and 2021 are summarized as follows:

	September 30, 2022
	Land/Lots Owned (1)		Lots Controlled Through Land and Lot Purchase Contracts (2)(3)		Total Land/Lots Owned and Controlled		Homes in Inventory (4)
Northwest	11,100		32,200		43,300		2,900
Southwest	22,100		36,500		58,600		4,900
South Central	37,800		66,500		104,300		12,400
Southeast	24,700		138,600		163,300		14,200
East	22,700		105,700		128,400		6,800
North	12,700		62,600		75,300		5,200
	131,100		442,100		573,200		46,400
	23	%	77	%	100	%

	September 30, 2021
	Land/Lots Owned (1)		Lots Controlled Through Land and Lot Purchase Contracts (2)(3)		Total Land/Lots Owned and Controlled		Homes in Inventory (4)
Northwest	9,000		31,400		40,400		2,600
Southwest	22,800		34,300		57,100		5,500
South Central	42,800		79,000		121,800		14,000
Southeast	26,700		125,500		152,200		13,600
East	17,300		83,100		100,400		7,300
North	9,200		49,200		58,400		4,800
	127,800		402,500		530,300		47,800
	24	%	76	%	100	%

_________________________

(1)Land/lots owned included approximately 37,600 and 30,800 owned lots that are fully developed and ready for home construction at September 30, 2022 and 2021, respectively. Land/lots owned also included land held for development representing 400 and 1,300 lots at September 30, 2022 and 2021, respectively.

(2)The total remaining purchase price of lots controlled through land and lot purchase contracts at September 30, 2022 and 2021 was $19.7 billion and $15.5 billion, respectively, secured by earnest money deposits of $1.6 billion and $1.1 billion, respectively. The total remaining purchase price of lots controlled through land and lot purchase contracts at September 30, 2022 and 2021 included $1.4 billion and $1.6 billion, respectively, related to lot purchase contracts with Forestar, secured by $131.7 million and $151.0 million, respectively, of earnest money. Our lots controlled under land and lot purchase contracts include approximately 4,077 lots at September 30, 2022, representing lots controlled under contracts for which we do not expect to exercise our option to purchase the land or lots, but the underlying contracts have yet to be terminated. We have reserved the deposits related to these contracts if the deposits are not refundable.

(3)Lots controlled at September 30, 2022 included approximately 36,700 lots owned or controlled by Forestar, 17,800 of which our homebuilding divisions have under contract to purchase and 18,900 of which our homebuilding divisions have a right of first offer to purchase. Of these, approximately 14,100 lots were in our Southeast region, 6,800 lots were in our East region, 6,200 lots were in our South Central region, 4,900 lots were in our Southwest region, 3,900 lots were in our North region and 800 lots were in our Northwest region. Lots controlled at September 30, 2021 included approximately 39,200 lots owned or controlled by Forestar, 21,000 of which our homebuilding divisions had under contract to purchase and 18,200 of which our homebuilding divisions had a right of first offer to purchase.

(4)Approximately 27,200 and 21,700 of our homes in inventory were unsold at September 30, 2022 and 2021, respectively. At September 30, 2022, approximately 4,400 of our unsold homes were completed, of which approximately 90 homes had been completed for more than six months. At September 30, 2021, approximately 900 of our unsold homes were completed, of which approximately 100 homes had been completed for more than six months. Homes in inventory exclude approximately 1,800 model homes at both September 30, 2022 and 2021.

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Results of Operations — Forestar

In fiscal 2018, we acquired 75% of the outstanding shares of Forestar and at September 30, 2022, we owned 63% of its outstanding shares. Forestar is a publicly traded residential lot development company with operations in 53 markets across 21 states as of September 30, 2022. Forestar’s segment results are presented on their historical cost basis, consistent with the manner in which management evaluates segment performance. (See Note B to the accompanying financial statements for additional Forestar segment information.)

Results of operations for the Forestar segment for the fiscal years ended September 30, 2022 and 2021 were as follows:

	Year Ended September 30,
	2022		2021
	(In millions)
Total revenues	$	1,519.1	$	1,325.8
Cost of land/lot sales and other	1,182.7		1,093.6
Inventory and land option charges	12.4		3.0
Total cost of sales	1,195.1		1,096.6
Selling, general and administrative expense	93.6		68.4
Loss on extinguishment of debt	—		18.1
Other (income) expense	(5.4)		(3.9)
Income before income taxes	$	235.8	$	146.6

Revenues are primarily derived from sales of single-family residential lots to local, regional and national homebuilders. During fiscal 2022 and 2021, Forestar’s land and lot sales, including the portion sold to D.R. Horton and the revenues generated from those sales, were as follows:

	Year Ended September 30,
	2022		2021
	($ in millions)
Total residential single-family lots sold	17,691		15,915
Residential single-family lots sold to D.R. Horton	14,895		14,839
Residential lot sales revenues from sales to D.R. Horton	$	1,231.8	$	1,206.5
Tract acres sold to D.R. Horton	—		85
Tract sales revenues from sales to D.R. Horton	$	—	$	25.9

SG&A expense for fiscal 2022 and 2021 included charges of $4.1 million and $4.0 million, respectively, related to the shared services agreement between Forestar and D.R. Horton whereby D.R. Horton provides Forestar with certain administrative, compliance, operational and procurement services.

Loss on extinguishment of debt of $18.1 million in fiscal 2021 was due to Forestar’s redemption of its $350 million principal amount of 8.0% senior notes due 2024 in May 2021.

At September 30, 2022, Forestar owned directly or controlled through land and lot purchase contracts approximately 90,100 residential lots, of which 5,500 are fully developed. Approximately 36,700 of these lots are under contract to sell to D.R. Horton or subject to a right of first offer under the master supply agreement with D.R. Horton, and 1,400 of these lots are under contract to sell to other builders.

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Results of Operations — Financial Services

The following tables and related discussion set forth key operating and financial data for our financial services operations, comprising DHI Mortgage and our subsidiary title companies, for the fiscal years ended September 30, 2022 and 2021.

	Year Ended September 30,
	2022		2021		% Change
Number of first-lien loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	57,355		54,694		5	%
Number of homes closed by D.R. Horton	82,744		81,965		1	%
Percentage of D.R. Horton homes financed by DHI Mortgage	69	%	67	%
Number of total loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers	57,414		54,767		5	%
Total number of loans originated or brokered by DHI Mortgage	58,298		56,054		4	%
Captive business percentage	98	%	98	%
Loans sold by DHI Mortgage to third parties	57,213		54,977		4	%

	Year Ended September 30,
	2022		2021		% Change
	(In millions)
Loan origination and other fees	$	52.3	$	48.1	9	%
Gains on sale of mortgage loans and mortgage servicing rights	561.7		619.1		(9)	%
Servicing income	3.4		3.6		(6)	%
Total mortgage operations revenues	617.4		670.8		(8)	%
Title policy premiums	177.6		152.8		16	%
Total revenues	795.0		823.6		(3)	%
General and administrative expense	547.6		488.3		12	%
Other (income) expense	(43.2)		(29.3)		47	%
Financial services pre-tax income	$	290.6	$	364.6	(20)	%

Financial Services Operating Margin Analysis

	Percentages of Financial Services Revenues
	Year Ended September 30,
	2022		2021
General and administrative expense	68.9	%	59.3	%
Other (income) expense	(5.4)	%	(3.6)	%
Financial services pre-tax income	36.6	%	44.3	%

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Mortgage Loan Activity

The volume of loans originated by our mortgage operations is directly related to the number of homes closed by our homebuilding operations. In fiscal 2022, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers increased 5% from the prior year due to an increase in the percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing.

Homes closed by our homebuilding operations constituted 98% of DHI Mortgage loan originations in both fiscal 2022 and 2021. This percentage reflects DHI Mortgage’s consistent focus on the captive business provided by our homebuilding operations.

The number of loans sold increased 4% in fiscal 2022 compared to the prior year. Virtually all of the mortgage loans held for sale on September 30, 2022 were eligible for sale to Fannie Mae, Freddie Mac or Ginnie Mae. During fiscal 2022, approximately 62% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 30% were sold to one other major financial entity. Changes in market conditions could result in a greater concentration of our mortgage sales in future periods to fewer financial entities and directly to Fannie Mae, Freddie Mac or Ginnie Mae, and we may need to make other adjustments to our mortgage operations.

Financial Services Revenues and Expenses

Revenues from our mortgage operations decreased 8% to $617.4 million in fiscal 2022 from $670.8 million in fiscal 2021, primarily due to a more competitive environment in the mortgage industry due to rising interest rates. Revenues from our title operations increased 16% to $177.6 million in fiscal 2022 from $152.8 million in fiscal 2021, primarily due to an increase in the average premium collected on closing transactions from higher sales prices of homes closed by our homebuilding operations, as well as expansion of our title insurance operations.

General and administrative (G&A) expense related to our financial services operations increased 12% to $547.6 million in fiscal 2022 from $488.3 million in the prior year. As a percentage of financial services revenues, G&A expense was 68.9% in fiscal 2022 compared to 59.3% in the prior year. Fluctuations in financial services G&A expense as a percentage of revenues can occur because some components of revenue fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned. Our financial services operations employed 3,024 and 2,891 people at September 30, 2022 and 2021, respectively.

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

Primarily as a result of the reduction in revenue and operating margin of our mortgage operations, pre-tax income from our financial services operations decreased 20% to $290.6 million in fiscal 2022 from $364.6 million in fiscal 2021.

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Results of Operations — Rental

Our rental segment consists of multi-family and single-family rental operations. The multi-family rental operations develop, construct, lease and sell residential rental properties, with a primary focus on constructing garden style multi-family rental communities typically accommodating 200 to 400 dwelling units in high growth suburban markets. 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. Multi-family and single-family rental property sales are recognized as revenues, and rental income is recognized as other income. Results of operations for the rental segment for the fiscal years ended September 30, 2022 and 2021 were as follows:

	Year Ended September 30,
	2022		2021
	(In millions)
Revenues
Single-family rental	$	313.8	$	75.9
Multi-family rental and other	196.4		191.9
Total revenues	510.2		267.8
Cost of sales
Single-family rental	147.8		42.4
Multi-family rental and other	96.4		119.1
Total cost of sales	244.2		161.5
Selling, general and administrative expense	91.1		44.6
Other (income) expense	(27.1)		(24.8)
Income before income taxes	$	202.0	$	86.5

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. At September 30, 2021, our rental property inventory of $840.9 million included $415.8 million of assets related to our single-family rental operations and $425.1 million of assets related to our multi-family rental operations.

During fiscal 2022, we sold 774 single-family rental homes for $313.8 million compared to 257 homes sold for $75.9 million in fiscal 2021. At September 30, 2022, we had single-family rental properties consisting of 7,400 homes, of which 3,530 were completed, and 6,680 lots, of which 1,770 were finished. At September 30, 2021, we had single-family rental properties consisting of 1,895 homes, of which 895 homes were completed, and 3,930 lots, of which 760 were finished.

During fiscal 2022, we sold 775 multi-family rental units for $195.5 million compared to 959 units sold for $191.9 million in fiscal 2021. At September 30, 2022, we had multi-family rental properties consisting of 5,810 units under active construction and 300 units that were substantially complete and in the lease-up phase. At September 30, 2021, we had multi-family rental properties consisting of 4,340 units under active construction and 350 units that were substantially complete and in the lease-up phase.

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Results of Operations — Other Businesses

In addition to our homebuilding, Forestar, financial services and rental operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own water rights and other water-related assets, own non-residential real estate including ranch land and improvements and own and operate energy-related assets. The pre-tax income of all of our subsidiaries engaged in other business activities was $58.1 million in fiscal 2022 compared to $32.7 million in fiscal 2021.

In May 2022, we acquired Vidler Water Resources, Inc. (Vidler) for a total purchase price of $290.5 million. The assets acquired through the Vidler transaction consisted primarily of water rights and other water-related assets.

Results of Operations — Consolidated

Income before Income Taxes

Pre-tax income was $7.6 billion in fiscal 2022 compared to $5.4 billion in fiscal 2021. The increase was primarily due to an increase in pre-tax income generated by our homebuilding operations as a result of higher revenues from increased average selling prices and an increase in home sales gross margin. In fiscal 2022, our homebuilding, financial services, Forestar and rental businesses generated pre-tax income of $6.9 billion, $290.6 million, $235.8 million and $202.0 million, respectively, compared to $4.8 billion, $364.6 million, $146.6 million and $86.5 million, respectively, in fiscal 2021.

Income Taxes

Our income tax expense was $1.7 billion and $1.2 billion in fiscal 2022 and 2021, respectively, and our effective tax rate was 22.7% and 21.8% 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.

The federal energy efficient homes tax credit was retroactively extended to qualifying homes closed from January 1, 2022 through December 31, 2032 as a result of the enactment of the Inflation Reduction Act (IRA) that was signed into law on August 16, 2022. Beginning with homes closed after December 31, 2022, the requirements to qualify for the energy efficient homes tax credit will be increased. We are currently analyzing the impact of the increased requirements on our ability to qualify homes for the credit. Other tax related provisions of the IRA, including the corporate alternative minimum tax, had no material impact on our financial statements and are not expected to have a material impact on our financial statements in the future.

Our deferred tax assets, net of deferred tax liabilities, were $159.0 million at September 30, 2022 compared to $159.5 million at September 30, 2021. We have a valuation allowance of $17.9 million and $4.2 million at September 30, 2022 and 2021, 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. Of the $17.9 million valuation allowance, $15.8 million relates to state NOL, state capital loss and tax credit carryforwards acquired in the Vidler acquisition. 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, state capital loss and tax credit carryforwards. Any reversal of the valuation allowance in future periods will impact our effective tax rate.

We have $30.9 million of tax benefits for a federal NOL carryforward acquired in the Vidler acquisition. The utilization of the federal NOL is subject to IRC Section 382 limitations; however, it is expected that all of the federal NOL will be utilized within the carryforward period. D.R. Horton has $12.0 million of tax benefits for state NOL carryforwards that expire at various times depending on the tax jurisdiction. Of the total amount, $4.3 million of the tax benefits expire over the next ten years and the remaining $7.7 million expire from fiscal years 2033 to 2042. Forestar has $1.2 million of tax benefits for state NOL carryforwards that expire at various times depending on the tax jurisdiction.

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The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on our consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of our deferred tax assets.

Unrecognized tax benefits are the differences between tax positions taken or expected to be taken in a tax return and the benefits recognized in our financial statements. Our unrecognized tax benefits totaled $2.9 million at both September 30, 2022 and 2021.

D.R. Horton is subject to federal income tax and state income tax in multiple jurisdictions. The statute of limitations for D.R. Horton’s major tax jurisdictions remains open for examination for fiscal years 2018 through 2022. An audit by the Internal Revenue Service of a federal refund claim related to the retroactive extension of energy efficient homes tax credits for fiscal 2018 and additional energy efficient tax credits for fiscal 2017 was completed during the current fiscal year with no material adjustments. D.R. Horton is under audit by various states; however, we are not aware of any significant findings by the state taxing authorities.

Forestar is subject to federal income tax and state income tax in multiple jurisdictions. The statute of limitations for Forestar’s federal income tax remains open for examination for tax years 2019 through 2022. The statute of limitations for Forestar’s major state tax jurisdictions generally remain open for examination for tax years 2017 through 2022. Forestar is not currently under audit for federal or state income taxes.

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Capital Resources and Liquidity

We have historically funded our operations with cash flows from operating activities, borrowings under bank credit facilities and the issuance of new debt securities. 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 homebuilding inventories and single-family and multi-family rental properties to expand our operations and grow our revenues and profitability. We are also returning capital to our shareholders through dividend payments and repurchases of our common stock. 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, 2022, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $6.1 billion, of which $2.5 billion is payable within 12 months and includes $1.6 billion outstanding under the mortgage repurchase facility. Future interest payments associated with the notes total $507.6 million, of which $215.8 million is payable within 12 months.

At September 30, 2022, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 23.8% compared to 26.7% at September 30, 2021. Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 15.4% at September 30, 2022 compared to 12.9% at September 30, 2021. At September 30, 2022, our ratio of homebuilding debt to total capital (homebuilding notes payable divided by stockholders’ equity plus homebuilding notes payable) was 13.2% compared to 17.8% at September 30, 2021. Our net homebuilding debt to total capital (homebuilding notes payable net of cash divided by stockholders’ equity plus homebuilding notes payable net of cash) was 4.4% at September 30, 2022 compared to 1.7% at September 30, 2021. Over the long term, we intend to maintain our ratio of homebuilding debt to total capital below 30%, and we expect it to remain significantly lower than 30% throughout fiscal 2023. We believe that the ratio of homebuilding debt to total capital is useful in understanding the leverage employed in our homebuilding operations and comparing our capital structure with other homebuilders. We exclude the debt of Forestar, DRH Rental and our financial services business because they are separately capitalized and not guaranteed by our parent company or any of our homebuilding entities.

At September 30, 2022, we had outstanding letters of credit of $273.3 million and surety bonds of $2.8 billion, issued by third parties to secure performance under various contracts. We expect that our performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms. When we complete our performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving us with no continuing obligations. We have no material third-party guarantees.

We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations, pay dividends, repurchase our common stock and maintain sufficient cash and liquidity levels to support our other operational needs, and we regularly evaluate our opportunities to raise additional capital. D.R. Horton has an automatically effective universal shelf registration statement filed with the SEC in July 2021, registering debt and equity securities that may be issued from time to time in amounts to be determined. Forestar also has an effective shelf registration statement filed with the SEC in October 2021, registering $750 million of equity securities, of which $300 million was reserved for sales under its at-the-market equity offering program that became effective in November 2021. At September 30, 2022, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its at-the-market equity offering program. 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. We believe that our existing cash resources, revolving credit facilities, mortgage repurchase facility and ability to access the capital markets or obtain additional bank financing will provide sufficient liquidity to fund our near-term working capital needs and debt obligations for the next 12 months and thereafter for the foreseeable future.

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Capital Resources - Homebuilding

Cash and Cash Equivalents — At September 30, 2022, cash and cash equivalents of our homebuilding segment totaled $2.0 billion.

Bank Credit Facility — We have a $2.19 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $3.0 billion, subject to certain conditions and availability of additional bank commitments. 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. Borrowings and repayments under the facility totaled $3.45 billion each during fiscal 2022. At September 30, 2022, there were no borrowings outstanding and $220 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $1.97 billion.

In October 2022, our senior unsecured homebuilding revolving credit facility was amended to extend its maturity date to October 28, 2027.

Our homebuilding revolving credit facility imposes restrictions on our operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if our leverage ratio exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. 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. The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens. At September 30, 2022, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility.

Public Unsecured Debt — We have $2.8 billion principal amount of homebuilding senior notes outstanding as of September 30, 2022 that mature from February 2023 through October 2027. The indentures governing our senior notes impose restrictions on the creation of secured debt and liens. At September 30, 2022, 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. 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 2022, 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 2022, we repurchased 14.0 million shares of our common stock for $1.1 billion. At September 30, 2022, the full amount of the debt repurchase authorization was remaining, and $438.3 million of the stock repurchase authorization was remaining. These authorizations have no expiration date.

Capital Resources - Forestar

The achievement of Forestar’s long-term growth objectives will depend on its ability to obtain financing and generate sufficient cash flows from operations. As market conditions permit, Forestar may issue new debt or equity securities through the capital markets or obtain additional bank financing to provide capital for future growth and additional liquidity. At September 30, 2022, Forestar’s ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 37.1% compared to 41.0% at September 30, 2021. Forestar’s ratio of net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 26.9% compared to 35.2% at September 30, 2021.

Cash and Cash Equivalents — At September 30, 2022, Forestar had cash and cash equivalents of $264.8 million.

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Bank Credit Facility — Forestar has a $410 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $600 million, subject to certain conditions and availability of additional bank commitments. 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. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of Forestar’s real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At September 30, 2022, there were no borrowings outstanding and $53.3 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $356.7 million.

In October 2022, Forestar’s senior unsecured revolving credit facility was amended to extend its maturity date to October 28, 2026.

The Forestar revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. 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.

Unsecured Debt — As of September 30, 2022, Forestar had $700 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, which represent unsecured obligations of Forestar. These notes include $400 million principal amount of 3.85% senior notes that mature in May 2026 and $300 million principal amount of 5.0% senior notes that mature in March 2028.

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. They are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, financial services or rental operations. At September 30, 2022, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations.

Debt Repurchase Authorization — In April 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities. All of the $30 million authorization was remaining at September 30, 2022, and the authorization has no expiration date.

Issuance of Common Stock — During fiscal 2022, Forestar issued 84,547 shares of common stock under its at-the-market equity offering program for proceeds of $1.7 million, net of commissions and other issuance costs totaling $0.1 million. At September 30, 2022, $748.2 million remained available for issuance under Forestar’s shelf registration statement, of which $298.2 million was reserved for sales under its at-the-market equity offering program.

Capital Resources - Financial Services

Cash and Cash Equivalents — At September 30, 2022, cash and cash equivalents of our financial services segment totaled $103.3 million.

Mortgage Repurchase Facility — Our mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that provides financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties upon receipt of funds from the counterparties. 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 from 45 to 60 days in accordance with the terms of the mortgage repurchase facility. The total capacity of the facility is $1.6 billion; however, the capacity automatically increases during certain higher volume periods and can be further increased through additional commitments. The total capacity of the facility at September 30, 2022 was $2.2 billion, and its maturity date is February 17, 2023.

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As of September 30, 2022, $2.5 billion of mortgage loans held for sale with a collateral value of $2.4 billion were pledged under the mortgage repurchase facility. As a result of advance paydowns totaling $827.2 million, DHI Mortgage had an obligation of $1.6 billion outstanding under the mortgage repurchase facility at September 30, 2022 at a 4.6% annual interest rate.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or rental operations. The facility contains financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable leverage ratio and its minimum required liquidity. These covenants are measured and reported to the lenders monthly. At September 30, 2022, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facility.

In the past, DHI Mortgage has been able to renew or extend its mortgage credit facility at a sufficient capacity and on satisfactory terms prior to its maturity and obtain temporary additional commitments through amendments to the credit agreement during periods of higher than normal volumes of mortgages held for sale. The liquidity of our financial services business depends upon its continued ability to renew and extend the mortgage repurchase facility or to obtain other additional financing in sufficient capacities.

Capital Resources - Rental

Cash and Cash Equivalents — At September 30, 2022, cash and cash equivalents of our rental segment totaled $109.9 million. During fiscal 2022, we continued to increase the investment in our rental operations. The inventory in our rental segment totaled $2.6 billion at September 30, 2022 compared to $840.9 million at September 30, 2021.

Bank Credit Facility — In March 2022, our rental subsidiary, DRH Rental, entered into a $625 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.25 billion, subject to certain conditions and availability of additional bank commitments. On subsequent occasions, DRH Rental utilized the accordion feature to obtain additional commitments, thereby increasing the size of the facility to $975 million at September 30, 2022. Availability under the revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental’s real estate assets and unrestricted cash. At September 30, 2022, the borrowing base limited the available capacity under the facility to $811.9 million. 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. At September 30, 2022, there were $800 million of borrowings outstanding at a 4.8% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $11.9 million.

In November 2022, DRH Rental utilized the accordion feature and increased the size of the revolving credit facility to $1.025 billion through an additional commitment.

The revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require DRH Rental to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. 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 September 30, 2022, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

DRH Rental’s 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 not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or financial services operations.

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Operating Cash Flow Activities

In fiscal 2022, net cash provided by operating activities was $561.8 million compared to $534.4 million in fiscal 2021. Cash provided by operating activities in the current year primarily consisted of $1.9 billion and $108.7 million of cash provided by our homebuilding and Forestar segments, respectively, partially offset by $1.4 billion and $10.5 million of cash used in our rental and financial services segments, respectively. The most significant source of cash provided by operating activities in both years was net income.

Cash used to increase construction in progress and finished home inventory was $2.1 billion in fiscal 2022 compared to $1.7 billion in fiscal 2021. The increase is due to increased home construction costs and more homes in inventory that were complete or closer to completion at the end of the current year. Cash used to increase residential land and lots was $1.4 billion in fiscal 2022 compared to $1.7 billion in fiscal 2021. Of these amounts, $142.3 million and $585.6 million, respectively, related to Forestar.

During fiscal 2022, cash used to increase our single-family and multi-family rental properties totaled $1.7 billion and is reflected as cash used in operating activities. During fiscal 2021, cash used to increase our single-family and multi-family rental properties totaled $477.5 million, of which $173.9 million related to the first half of the year and is presented as cash used in investing activities and $303.6 million related to the second half of the year and is presented as cash used in operating activities.

Investing Cash Flow Activities

In fiscal 2022, net cash used in investing activities was $414.9 million compared to $252.2 million in fiscal 2021. In fiscal 2022, uses of cash included the acquisition of Vidler Water Resources, Inc. for $271.5 million, net of the cash acquired, and purchases of property and equipment totaling $148.2 million. In fiscal 2021, uses of cash included expenditures related to our rental operations totaling $173.9 million, the acquisition of the homebuilding operations of Braselton Homes for $23.0 million and purchases of property and equipment totaling $93.5 million, partially offset by proceeds from the sale of a single-family rental community for $31.8 million.

Financing Cash Flow Activities

We expect the short-term financing needs of our operations will be funded with existing cash, cash generated from operations and borrowings under our credit facilities. 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 2022, net cash used in financing activities was $811.2 million, consisting primarily of repayments of amounts drawn on our homebuilding revolving credit facility totaling $3.5 billion, cash used to repurchase shares of our common stock of $1.1 billion, repayment of $350 million principal amount of our 4.375% homebuilding senior notes at maturity and payment of cash dividends totaling $316.5 million. These uses of cash were partially offset by draws on our homebuilding revolving credit facility of $3.5 billion, draws on DRH Rental’s revolving credit facility of $800 million and net advances on our mortgage repurchase facility of $123.7 million.

In fiscal 2021, net cash used in financing activities was $85.1 million, consisting primarily of repayment of $400 million principal amount of our 2.55% homebuilding senior notes at maturity, Forestar’s redemption of its $350 million principal amount of 8.0% senior notes, cash used to repurchase shares of our common stock of $848.4 million and payment of cash dividends totaling $289.3 million. These uses of cash were partially offset by note proceeds from our issuance of $500 million principal amount of 1.4% homebuilding senior notes and $600 million principal amount of 1.3% homebuilding senior notes, Forestar’s issuance of $400 million principal amount of 3.85% senior notes and net advances of $362.0 million on our mortgage repurchase facility.

Our Board of Directors approved and paid quarterly cash dividends of $0.225 per common share in fiscal 2022 and $0.20 per common share in fiscal 2021. In October 2022, our Board of Directors approved a quarterly cash dividend of $0.25 per common share, payable on December 12, 2022, to stockholders of record on December 2, 2022. 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.

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Supplemental Guarantor Financial Information

As of September 30, 2022, D.R. Horton, Inc. had $2.8 billion principal amount of homebuilding senior notes outstanding due through October 2027 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. Horton, Inc. (Guarantors or Guarantor Subsidiaries). Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by D.R. Horton, Inc. Our subsidiaries associated with the Forestar lot development operations, financial services operations, multi-family and single-family rental operations and certain other subsidiaries do not guarantee the homebuilding senior notes or the homebuilding revolving credit facility (collectively, Non-Guarantor Subsidiaries). The guarantees are senior unsecured obligations of each Guarantor and rank equal with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees are effectively subordinated to any secured debt of such Guarantor to the extent of the value of the assets securing such debt. The guarantees will be structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries of the Guarantors.

The guarantees by a Guarantor Subsidiary will be automatically and unconditionally released and discharged upon: (1) the sale or other disposition of its common stock whereby it is no longer a subsidiary of ours; (2) the sale or other disposition of all or substantially all of its assets (other than to us or another Guarantor); (3) its merger or consolidation with an entity other than us or another Guarantor; or (4) its ceasing to guarantee any of our publicly traded debt securities and ceasing to guarantee any of our obligations under our homebuilding revolving credit facility.

The enforceability of the obligations of the Guarantor Subsidiaries under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. 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. 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 following tables present summarized financial information for D.R. Horton, Inc. and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among D.R. Horton, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.

D.R. Horton, Inc. and Guarantor Subsidiaries
Summarized Balance Sheet Data	September 30, 2022