DR Horton: HORTON DR INC / DE / MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included in this quarterly report and with our
annual report on Form 10-K for the fiscal year ended September 30, 2020. Some of
the information contained in this discussion and analysis constitutes
forward-looking statements that involve risks and uncertainties. Actual results
could differ materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to these differences include,
but are not limited to, those described in the "Forward-Looking Statements"
section following this discussion.


COMPANY

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 96 markets across 30 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 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 business operations consist of homebuilding, a majority-owned residential
lot development company, financial services and other activities. Our
homebuilding operations are our core business and primarily include the
construction and sale of single-family homes with sales prices generally ranging
from $150,000 to more than $1,000,000, with an average closing price of $315,000
during the nine months ended June 30, 2021. Approximately 91% of our home sales
revenue in the nine months ended June 30, 2021 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.

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 across our markets. Our entry-level
homes at affordable price points have experienced very strong demand from
homebuyers, as this segment of the new home market remains under-served, with
low inventory levels relative to demand.

During fiscal 2020, we also began constructing and leasing homes as
income-producing single-family rental communities. After a rental community is
constructed and achieves a stabilized level of leased occupancy, we generally
market the community for a bulk sale of homes. These operations are reported in
our homebuilding segment. During the third quarter of fiscal 2021, we sold a
single-family rental community for $23.1 million in revenues and $11.4 million
of gross profit. In the first quarter of fiscal 2021, we sold a single-family
rental community for $31.8 million and recorded a gain on sale of $14.0 million.
At June 30, 2021, our homebuilding inventory included $303.1 million of assets
related to 44 single-family rental communities, and our single-family rental
platform included 2,340 homes and finished lots, of which 680 homes were
completed.

At June 30, 2021, we owned 64% of the outstanding shares of Forestar Group Inc.
(Forestar), a publicly traded residential lot development company listed on the
New York Stock Exchange under the ticker symbol "FOR." Forestar is a key part 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.
Forestar has made significant investments in land acquisition and development
over the last few years to expand its business across the United States.

Our financial services operations provide mortgage financing and title agency
services to homebuyers in many of our homebuilding markets. DHI Mortgage, our
100% owned subsidiary, provides mortgage financing services primarily to our
homebuyers and sells substantially all of the mortgages it originates and the
majority of the related servicing rights to third-party purchasers. DHI Mortgage
originates loans in accordance with purchaser guidelines and sells substantially
all of its mortgage production shortly after origination. Our 100% owned
subsidiary title companies serve as title insurance agents by providing title
insurance policies, examination, underwriting and closing services, primarily
related to our homebuilding transactions.

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In addition to our homebuilding, Forestar and financial services operations, we
engage in other business activities through our subsidiaries. We conduct
insurance-related operations, construct, own and sell income-producing
multi-family rental properties, own non-residential real estate including ranch
land and improvements and own and operate oil and gas related assets. The
results of these operations are immaterial for separate reporting and therefore
are grouped together and presented as other. Our multi-family rental operations
develop, construct, lease, own and sell multi-family residential properties that
produce rental income. We primarily focus on constructing garden style
multi-family communities, which typically accommodate 200 to 400 dwelling units,
in high growth suburban markets. After we complete construction and achieve a
stabilized level of leased occupancy, the property is typically marketed for
sale. At June 30, 2021 and September 30, 2020, our consolidated balance sheets
included $458.3 million and $246.2 million, respectively, of assets related to
multi-family rental operations. Total assets related to other business
activities were $632.2 million and $379.4 million at June 30, 2021 and
September 30, 2020, respectively.


PREVIEW

During the nine months ended June 30, 2021, the number and value of our net
sales orders increased 20% and 33%, respectively, compared to the prior year
period. During the nine months ended June 30, 2021, our number of homes closed
and home sales revenues increased 33% and 41%, respectively, compared to the
prior year period, and our consolidated revenues increased 41% to $19.7 billion
compared to $13.9 billion in the prior year period. Our pre-tax income was $3.6
billion in the nine months ended June 30, 2021 compared to $1.9 billion in the
prior year period, and our pre-tax operating margin was 18.5% compared to 13.9%.
Net income was $2.8 billion in the nine months ended June 30, 2021 compared to
$1.5 billion in the prior year period.

In the trailing twelve months ended June 30, 2021, our return on equity (ROE)
was 29.5% compared to 19.9% in the prior year period, and our homebuilding
return on inventory (ROI) was 34.9% compared to 21.6%. ROE is calculated as net
income attributable to D.R. Horton for the trailing twelve months 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
trailing twelve months divided by average inventory, where average inventory is
the sum of ending homebuilding inventory balances for the trailing five quarters
divided by five.

During March 2020, the impacts of the COVID-19 pandemic and the related
widespread reductions in economic activity across the United States began to
adversely affect our business. As economic activity resumed and restrictive
orders relating to COVID-19 were eased, demand for our homes improved
significantly during the remainder of fiscal 2020 and has remained strong
throughout fiscal 2021. We believe the increase in demand has been fueled by
historically low interest rates on mortgage loans and the limited supply of
homes at affordable price points across most of our markets. We are
well-positioned for increased demand with our affordable product offerings, lot
supply and housing inventory. However, multiple disruptions in the supply chain,
combined with the improvement in economic conditions and strong demand for new
homes, have resulted in shortages in certain building materials and tightness in
the labor market, which has caused our construction cycle to lengthen. During
the current quarter, we have slowed our home sales pace to more closely align
with our production levels, and we are selling homes later in the construction
cycle when we have more certainty regarding the home close date for our
homebuyers. Based on the stage of completion of our current homes in inventory,
production schedules and capacity, we expect to continue restricting the pace of
our sales orders during our fourth fiscal quarter.

Within our homebuilding land and lot portfolio, our lots controlled through
purchase contracts represent 76% of the lots owned and controlled at June 30,
2021 compared to 70% at September 30, 2020 and 66% at June 30, 2020. Our
relationship with Forestar and expanded relationships with other land developers
across the country have allowed us to increase the controlled portion of our lot
pipeline.

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.

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STRATEGY

Our operating strategy focuses on enhancing long-term value to our shareholders
by leveraging our financial and competitive position in our core homebuilding
business 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 and make
opportunistic strategic investments. We made operational adjustments as a result
of COVID-19; however, 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 strong cash balance and overall liquidity position and
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 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 across the country.
•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.
•Opportunistically evaluating potential acquisitions to enhance our operations
and improve returns.
•Ensuring that our financial services business provides high quality mortgage
and title services to homebuyers efficiently and effectively.
•Increasing our investments 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.

We believe our operating strategy, which has produced positive results in recent
years, will allow us to successfully operate through changing economic
conditions to maintain and improve our financial 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

Main financial results for and for the three months ended June 30, 2021, compared to the same period of 2020, were as follows:

Construction of houses:

•Homebuilding revenues increased 35% to $7.1 billion compared to $5.2 billion.
•Homes closed increased 22% to 21,588 homes, and the average closing price of
those homes was $326,100.
•Net sales orders decreased 17% to 17,952 homes, while the value of net sales
orders increased 2% to $6.4 billion.
•Sales order backlog increased 39% to 32,209 homes, and the value of sales order
backlog increased 57% to $11.0 billion.
•Home sales gross margin was 25.9% compared to 21.6%.
•Homebuilding SG&A expense was 7.1% of homebuilding revenues compared to 7.9%.
•Homebuilding pre-tax income was $1.3 billion compared to $709.8 million.
•Homebuilding pre-tax income was 18.9% of homebuilding revenues compared to
13.6%.
•Homebuilding cash and cash equivalents totaled $1.7 billion compared to $2.6
billion and $1.9 billion at September 30, 2020 and June 30, 2020, respectively.
•Homebuilding inventories totaled $13.9 billion compared to $11.0 billion and
$10.9 billion at September 30, 2020 and June 30, 2020, respectively.
•Homes in inventory totaled 47,300 compared to 38,000 and 32,800 at
September 30, 2020 and June 30, 2020, respectively.
•Owned lots totaled 123,900 compared to 112,600 and 115,200 at September 30,
2020 and June 30, 2020, respectively. Lots controlled through purchase contracts
increased to 393,200 from 264,300 and 220,300 at September 30, 2020 and June 30,
2020, respectively.
•Homebuilding debt was $2.6 billion compared to $2.5 billion at both
September 30, 2020 and June 30, 2020.
•Homebuilding debt to total capital was 16.0% compared to 17.5% and 18.4% at
September 30, 2020 and June 30, 2020, respectively.

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Forestar:
•Forestar's revenues increased 76% to $312.9 million compared to $177.9 million.
Revenues in the current and prior year quarters included $303.2 million and
$175.5 million, respectively, of revenue from land and lot sales to our
homebuilding segment.
•Forestar's lots sold increased 91% to 3,858 compared to 2,023. Lots sold to
D.R. Horton totaled 3,719 compared to 1,991.
•Forestar's pre-tax income was $21.1 million, including an $18.1 million loss on
extinguishment of debt, compared to $10.3 million.
•Forestar's pre-tax income was 6.7% of Forestar revenues compared to 5.8%.
•Forestar's cash and cash equivalents totaled $116.0 million compared to $394.3
million and $355.6 million at September 30, 2020 and June 30, 2020,
respectively.
•Forestar's inventories totaled $1.9 billion compared to $1.3 billion at both
September 30, 2020 and June 30, 2020.
•Forestar's owned and controlled lots totaled 96,600 compared to 60,500 and
50,700 at September 30, 2020 and June 30, 2020, respectively. Of these lots,
39,400 were under contract to sell to or subject to a right of first offer with
D.R. Horton compared to 30,400 and 29,600 at September 30, 2020 and June 30,
2020, respectively.
•Forestar's debt was $704.1 million compared to $641.1 million and $640.6
million at September 30, 2020 and June 30, 2020, respectively.
•Forestar's debt to total capital was 42.1% compared to 42.4% and 43.1% at
September 30, 2020 and June 30, 2020, respectively. Forestar's net debt to total
capital was 37.8% compared to 22.1% and 25.2% at September 30, 2020 and June 30,
2020, respectively.

Financial Services:
•Financial services revenues increased 20% to $188.7 million compared to $156.6
million.
•Financial services pre-tax income increased 2% to $70.3 million compared to
$68.8 million.
•Financial services pre-tax income was 37.3% of financial services revenues
compared to 43.9%.

Consolidated Results:
•Consolidated pre-tax income increased 81% to $1.4 billion compared to $782.4
million.
•Consolidated pre-tax income was 19.4% of consolidated revenues compared to
14.5%.
•Income tax expense was $299.1 million compared to $149.5 million, and our
effective tax rate was 21.1% compared to 19.1%.
•Net income attributable to D.R. Horton increased 77% to $1.1 billion compared
to $630.7 million.
•Diluted net income per common share attributable to D.R. Horton increased 78%
to $3.06 compared to $1.72.
•Stockholders' equity was $13.8 billion compared to $11.8 billion and $11.0
billion at September 30, 2020 and June 30, 2020, respectively.
•Book value per common share increased to $38.54 compared to $32.53 and $30.38
at September 30, 2020 and June 30, 2020, respectively.
•Debt to total capital was 24.2% compared to 26.6% and 28.0% at September 30,
2020 and June 30, 2020, respectively.

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Key financial results for the nine months ended June 30, 2021, as compared to
the same period of 2020, were as follows:

Construction of houses:

•Homebuilding revenues increased 41% to $19.0 billion compared to $13.5 billion.
•Homes closed increased 33% to 60,028 homes, and the average closing price of
those homes was $315,000.
•Net sales orders increased 20% to 65,429 homes, and the value of net sales
orders increased 33% to $21.7 billion.
•Home sales gross margin was 24.9% compared to 21.3%.
•Homebuilding SG&A expense was 7.5% of homebuilding revenues compared to 8.4%.
•Homebuilding pre-tax income was $3.3 billion compared to $1.7 billion.
•Homebuilding pre-tax income was 17.5% of homebuilding revenues compared to
12.9%.
•Net cash provided by homebuilding operations was $276.1 million compared to
$1.2 billion.

Forester:

•Forestar's revenues increased 55% to $907.1 million compared to $584.3 million.
Revenues in the current and prior year periods included $865.8 million and
$548.6 million, respectively, of revenue from land and lot sales to our
homebuilding segment.
•Forestar's lots sold increased 72% to 11,013 compared to 6,396. Lots sold to
D.R. Horton totaled 10,466 compared to 6,287.
•Forestar's pre-tax income was $87.9 million compared to $46.1 million.
•Forestar's pre-tax income was 9.7% of Forestar revenues compared to 7.9%.

Financial Services:
•Financial services revenues increased 65% to $601.1 million compared to $364.0
million.
•Financial services pre-tax income increased 111% to $262.1 million compared to
$124.0 million.
•Financial services pre-tax income was 43.6% of financial services revenues
compared to 34.1%.

Consolidated Results:
•Consolidated pre-tax income increased 88% to $3.6 billion compared to $1.9
billion.
•Consolidated pre-tax income was 18.5% of consolidated revenues compared to
13.9%.
•Income tax expense was $784.1 million compared to $377.6 million, and our
effective tax rate was 21.6% compared to 19.6%.
•Net income attributable to D.R. Horton increased 84% to $2.8 billion compared
to $1.5 billion.
•Diluted net income per common share attributable to D.R. Horton increased 85%
to $7.73 compared to $4.17.
•Net cash used in operations was $34.5 million compared to $588.9 million of
cash provided by operations.

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RESULTS OF OPERATIONS - HOMEBUILDING

We conduct our homebuilding operations in the geographic regions, states and
markets listed below, and we conduct our financial services operations in many
of these markets. 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.
State                     Reporting Region/Market                             State                    Reporting Region/Market

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



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The following tables and the related discussion present key operating and financial data for our home construction business by operating segment as at and for the three and nine months ended. June 30, 2021 and 2020.

                                                                                                         Net Sales Orders (1)
                                                                                                     Three Months Ended June 30,
                                                 Net Homes Sold                                         Value (In millions)                                       Average Selling Price
                                                                          %                                                          %                                                          %
                                   2021               2020              Change              2021                2020               Change               2021                2020              Change
East                                   2,158             2,803             (23) %       $    766.3          $    837.8                 (9) %       $   355,100          $ 298,900                 19  %
Midwest                                  789             1,374             (43) %            327.2               483.8                (32) %           414,700            352,100                 18  %
Southeast                              5,843             6,991             (16) %          1,956.6             1,920.0                  2  %           334,900            274,600                 22  %
South Central                          5,897             6,644             (11) %          1,826.8             1,693.5                  8  %           309,800            254,900                 22  %
Southwest                                830             1,017             (18) %            315.8               285.4                 11  %           380,500            280,600                 36  %
West                                   2,435             2,690              (9) %          1,256.2             1,116.8                 12  %           515,900            415,200                 24  %
                                      17,952            21,519             (17) %       $  6,448.9          $  6,337.3                  2  %       $   359,200          $ 294,500                 22  %

                                                                                                      Nine Months Ended June 30,
                                                 Net Homes Sold                                         Value (In millions)                                       Average Selling Price
                                                                          %                                                          %                                                          %
                                   2021               2020              Change              2021                2020               Change               2021                2020              Change
East                                   8,079             7,393               9  %       $  2,702.3          $  2,188.3                 23  %       $   334,500          $ 296,000                 13  %
Midwest                                3,814             3,514               9  %          1,494.8             1,245.5                 20  %           391,900            354,400                 11  %
Southeast                             22,323            17,381              28  %          6,992.7             4,746.7                 47  %           313,300            273,100                 15  %
South Central                         21,161            16,558              28  %          6,039.7             4,226.7                 43  %           285,400            255,300                 12  %
Southwest                              3,050             2,626              16  %          1,042.8               752.8                 39  %           341,900            286,700                 19  %
West                                   7,002             7,260              (4) %          3,441.6             3,147.9                  9  %           491,500            433,600                 13  %
                                      65,429            54,732              20  %       $ 21,713.9          $ 16,307.9                 33  %       $   331,900          $ 298,000                 11  %


                                                                                           Sales Order Cancellations
                                                                                          Three Months Ended June 30,
                                         Cancelled Sales Orders                           Value (In millions)                                Cancellation Rate (2)
                                      2021                      2020                    2021                2020                            2021                       2020
East                                        532                       841           $    173.3          $   239.7                                      20  %              23  %
Midwest                                     188                       311                 68.2               98.8                                      19  %              18  %
Southeast                                 1,123                     2,005                351.1              556.3                                      16  %              22  %
South Central                             1,438                     1,970                417.3              507.4                                      20  %              23  %
Southwest                                   164                       276                 54.0               77.4                                      16  %              21  %
West                                        267                       565                135.7              243.6                                      10  %              17  %
                                          3,712                     5,968           $  1,199.6          $ 1,723.2                                      17  %              22  %

                                                                                           Nine Months Ended June 30,
                                         Cancelled Sales Orders                           Value (In millions)                                Cancellation Rate (2)
                                      2021                      2020                    2021                2020                            2021                       2020
East                                      1,771                     1,931           $    549.3          $   551.3                                      18  %              21  %
Midwest                                     725                       696                266.2              225.7                                      16  %              17  %
Southeast                                 4,734                     4,871              1,404.2            1,340.0                                      17  %              22  %
South Central                             4,483                     4,336              1,220.0            1,114.8                                      17  %              21  %
Southwest                                   556                       660                170.3              187.8                                      15  %              20  %
West                                        768                     1,251                365.8              552.3                                      10  %              15  %
                                         13,037                    13,745           $  3,975.8          $ 3,971.9                                      17  %              20  %


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


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Net customer orders

The number of net sales orders decreased 17% in the three months ended June 30,
2021 compared to the prior year period, while the value of net sales orders
increased 2% to $6.4 billion (17,952 homes) for the three months ended June 30,
2021 compared to $6.3 billion (21,519 homes) in the prior year period due to the
increase in our average selling price. The average selling price of net sales
orders during the three months ended June 30, 2021 was $359,200, up 22% from the
prior year period.

During the third quarter of fiscal 2021, demand for homes remained strong.
However, multiple disruptions in the supply chain, combined with the improvement
in economic conditions and strong demand for new homes, have resulted in
shortages in certain building materials and tightness in the labor market, which
has caused our construction cycle to lengthen. As a result, during the quarter,
we slowed our home sales pace to more closely align with our production levels,
and we are selling homes later in the construction cycle when we have more
certainty regarding the home close date for our homebuyers. Based on the stage
of completion of our current homes in inventory, production schedules and
capacity, we expect to continue restricting the pace of our sales orders during
our fourth fiscal quarter.

The number of net sales orders increased 20% in the nine months ended June 30,
2021 compared to the prior year period, and the value of net sales orders
increased 33% to $21.7 billion (65,429 homes) for the nine months ended June 30,
2021 compared to $16.3 billion (54,732 homes) in the prior year period. The
average selling price of net sales orders during the nine months ended June 30,
2021 was $331,900, up 11% from the prior year period.

The markets contributing most to the year to date increases in sales volumes in
our regions in the nine month period were as follows: the Carolina markets in
the East; the Denver market in the Midwest; the Florida markets (particularly
Tampa) in the Southeast; the San Antonio, Dallas and Louisiana markets in the
South Central; and the Phoenix market in the Southwest. The decrease in sales
volume in our West region in both periods compared to the prior year was
primarily due to our Seattle and Portland markets.

Our sales order cancellation rate (cancelled sales orders divided by gross sales
orders for the period) was 17% in both the three and nine months ended June 30,
2021 compared to 22% and 20% in the prior year periods.

                                                                                                        Sales Order Backlog
                                                                                                          As of June 30,
                                               Homes in Backlog                                        Value (In millions)                                      Average Selling Price
                                                                         %                                                         %                                                          %
                                  2021               2020              Change              2021                2020              Change               2021                2020              Change
East                                  3,324             3,028              10  %       $  1,141.2          $   929.3                 23  %       $   343,300          $ 306,900                 12  %
Midwest                               2,075             1,834              13  %            832.3              646.6                 29  %           401,100            352,600                 14  %
Southeast                             9,831             6,675              47  %          3,275.3            1,873.7                 75  %           333,200            280,700                 19  %
South Central                        11,601             7,380              57  %          3,467.0            1,920.0                 81  %           298,900            260,200                 15  %
Southwest                             2,529             1,348              88  %            872.7              384.8                127  %           345,100            285,500                 21  %
West                                  2,849             2,940              (3) %          1,433.7            1,259.4                 14  %           503,200            428,400                 17  %
                                     32,209            23,205              39  %       $ 11,022.2          $ 7,013.8                 57  %       $   342,200          $ 302,300                 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 Home Sales Revenue
                                                                                                        Three Months Ended June 30,
                                                    Homes Closed                                             Value (In millions)                                       Average Selling Price
                                                                               %                                                          %                                                          %
                                      2021                 2020              Change              2021                2020               Change               2021                2020              Change
East                                        3,077             2,500              23  %       $  1,032.6          $    735.2                 40  %       $   335,600          $ 294,100                 14  %
Midwest                                     1,371             1,053              30  %            514.2               372.7                 38  %           375,100            353,900                  6  %
Southeast                                   7,456             5,921              26  %          2,276.4             1,627.8                 40  %           305,300            274,900                 11  %
South Central                               6,222             5,397              15  %          1,705.1             1,375.6                 24  %           274,000            254,900                  7  %
Southwest                                     946               750              26  %            291.0               213.8                 36  %           307,600            285,100                  8  %
West                                        2,516             2,021              24  %          1,220.8               882.5                 38  %           485,200            436,700                 11  %
                                           21,588            17,642              22  %       $  7,040.1          $  5,207.6                 35  %       $   326,100          $ 295,200                 10  %

                                                                                                        Nine Months Ended June 30,
                                                    Homes Closed                                             Value (In millions)                                       Average Selling Price
                                                                               %                                                          %                                                          %
                                      2021                 2020              Change              2021                2020               Change               2021                2020              Change
East                                        8,338             6,281              33  %       $  2,698.4          $  1,835.1                 47  %       $   323,600          $ 292,200                 11  %
Midwest                                     3,755             2,743              37  %          1,394.1               963.6                 45  %           371,300            351,300                  6  %
Southeast                                  20,748            14,983              38  %          6,095.9             4,092.5                 49  %           293,800            273,100                  8  %
South Central                              17,598            13,344              32  %          4,681.4             3,390.8                 38  %           266,000            254,100                  5  %
Southwest                                   2,526             2,093              21  %            766.3               609.5                 26  %           303,400            291,200                  4  %
West                                        7,063             5,696              24  %          3,273.1             2,542.7                 29  %           463,400            446,400                  4  %
                                           60,028            45,140              33  %       $ 18,909.2          $ 13,434.2                 41  %       $   315,000          $ 297,600                  6  %




Home Sales Revenue

Revenues from home sales increased 35% to $7.0 billion (21,588 homes closed) for
the three months ended June 30, 2021 from $5.2 billion (17,642 homes closed) in
the prior year period. Revenues from home sales increased 41% to $18.9 billion
(60,028 homes closed) for the nine months ended June 30, 2021 from $13.4 billion
(45,140 homes closed) in the prior year period. Home sales revenues increased in
all of our regions due to an increase in the number of homes closed and an
increase in average selling prices. Home sales revenues and the number of homes
closed exclude sales of single-family and multi-family rental communities.

The number of homes closed increased 22% in the three months ended June 30, 2021
compared to the prior year period. The markets contributing most to the
increased closing volumes in our regions were as follows: the Carolina markets
(particularly Myrtle Beach) in the East; the Indianapolis and Denver markets in
the Midwest; the Florida markets (particularly Tampa) in the Southeast; the
Houston, Louisiana and Austin markets in the South Central; the Phoenix market
in the Southwest; and the Salt Lake City, Reno and Sacramento markets in the
West.

The number of homes closed increased 33% in the nine months ended June 30, 2021
compared to the prior year period. The markets contributing most to the
increased closing volumes in our regions were as follows: the Carolina markets
(particularly Myrtle Beach) in the East; the Denver and Indianapolis markets in
the Midwest; the Florida markets (particularly Tampa) in the Southeast; the
Houston, Dallas and San Antonio markets in the South Central; the Phoenix market
in the Southwest; and the Las Vegas, Southern California and Sacramento markets
in the West.

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                                                   Homebuilding Operating Margin Analysis
                                                                           

Percentages of related income

                                                                   Three Months Ended                            Nine Months Ended
                                                                        June 30,                                     June 30,
                                                               2021                   2020                  2021                  2020
Gross profit - home sales                                          25.9  %               21.6  %               24.9  %               21.3  %
Gross profit - land/lot sales and other                            52.3  %               29.7  %               39.3  %               29.8  %
Inventory and land option charges                                  (0.1) %               (0.1) %               (0.1) %               (0.1) %
Gross profit - total homebuilding                                  25.9  %               21.5  %               24.9  %               21.2  %
Selling, general and administrative expense                         7.1  %                7.9  %                7.5  %                8.4  %
Gain on sale of assets                                                -  %                  -  %               (0.1) %                  -  %
Other (income) expense                                             (0.1) %                  -  %               (0.1) %               (0.1) %
Homebuilding pre-tax income                                        18.9  %               13.6  %               17.5  %               12.9  %



Home Sales Gross Profit

Gross profit from home sales increased to $1.8 billion in the three months ended
June 30, 2021 from $1.1 billion in the prior year period and increased 430 basis
points to 25.9% as a percentage of home sales revenues. The percentage increase
resulted from improvements of 390 basis points due to the average selling price
of our homes closed increasing by more than the average cost of those homes, 20
basis points due to a decrease in the amortization of capitalized interest and
20 basis points due to a decrease in warranty and construction defect costs.

Gross profit from home sales increased to $4.7 billion in the nine months ended
June 30, 2021 from $2.9 billion in the prior year period and increased 360 basis
points to 24.9% as a percentage of home sales revenues. The percentage increase
resulted from improvements of 330 basis points due to the average selling price
of our homes closed increasing by more than the average cost of those homes, 20
basis points due to a decrease in warranty and construction defect costs and 10
basis points due to a decrease in the amortization of capitalized interest.

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. These actions could cause our
gross profit margins to fluctuate in future periods. If new home demand declines
from current levels, we would expect our gross profit margins to also decline.

Sales of land / lots and other income

Land/lot sales and other revenues from our homebuilding operations were $30.2
million and $67.4 million in the three and nine months ended June 30, 2021,
respectively, and $14.5 million and $49.7 million in the comparable periods of
fiscal 2020. During the current quarter, we began recording bulk sales of
single-family rental communities in land/lot sales and other revenues in our
homebuilding segment. Revenues during the three and nine months ended June 30,
2021 included our sale of a single-family rental community for $23.1 million in
the current quarter, which generated $11.4 million of gross profit.

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 June 30, 2021, our homebuilding
operations had $23.5 million of land held for sale that we expect to sell in the
next twelve months.

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Inventory and land option costs

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 of
June 30, 2021, we determined that no communities were impaired, and no
impairment charges were recorded during the three months ended June 30, 2021.
During the nine months ended June 30, 2021, impairment charges totaled $5.6
million. There were no impairment charges recorded in the prior year quarter and
$1.7 million of impairment charges recorded in the nine months ended June 30,
2020.

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 additional impairment charges which could be significant.

During the three and nine months ended June 30, 2021, earnest money and
pre-acquisition cost write-offs related to land purchase contracts that we have
terminated or expect to terminate were $4.9 million and $10.4 million,
respectively, compared to $4.9 million and $15.6 million in the same periods of
fiscal 2020.

Selling, general and administrative expenses (SG&A)

SG&A expense from homebuilding activities increased 21% to $502.0 million and
25% to $1.4 billion in the three and nine months ended June 30, 2021,
respectively, from $415.1 million and $1.1 billion in the prior year periods.
SG&A expense as a percentage of homebuilding revenues was 7.1% and 7.5% in the
three and nine months ended June 30, 2021, respectively, compared to 7.9% and
8.4% in the prior year periods.

Employee compensation and related costs represented 82% and 81% of SG&A costs in
the three and nine months ended June 30, 2021, respectively, compared to 77% and
75% in the prior year periods. These costs increased 29% to $411.6 million and
36% to $1.1 billion in the three and nine months ended June 30, 2021,
respectively, from $320.3 million and $848.0 million in the prior year periods.
Our homebuilding operations employed 8,203 and 7,077 people at June 30, 2021 and
2020, respectively.

We try to control our selling and administrative costs while ensuring that our infrastructure adequately supports our operations; however, we cannot guarantee that we will be able to maintain or improve current selling, general and administrative expenses as a percentage of revenue.

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 $22.7 million and $69.7 million in the three and
nine months ended June 30, 2021, respectively, compared to $22.3 million and
$69.5 million in the prior year periods. Interest charged to cost of sales was
0.7% of total cost of sales (excluding inventory and land option charges) in
both the three and nine months ended June 30, 2021 compared to 0.8% in both
prior year periods.

Gain on sale of assets

In December 2020, we sold a single-family rental community for $31.8 million
which resulted in a gain on sale of $13.1 million in our homebuilding segment
and $0.9 million in our other businesses during the nine months ended June 30,
2021.

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Other Income

Other income, net of other expenses, included in our homebuilding operations was
$7.1 million and $10.4 million in the three and nine months ended June 30, 2021,
respectively, compared to $0.2 million and $9.7 million in the prior year
periods. 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. Beginning in the current quarter, rental income of $2.9
million from our single-family rental communities is also included in other
income in our homebuilding segment. The activities that result in this ancillary
income are not significant, either individually or in the aggregate.

Business acquisition

In October 2020, we acquired the homebuilding operations of Braselton Homes in
Corpus Christi, Texas for approximately $23.0 million in cash. The assets
acquired included approximately 90 homes in inventory, 95 lots and control of
approximately 840 additional lots through purchase contracts. We also acquired a
sales order backlog of approximately 125 homes.

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Residential construction results by Reporting region

                                                                                         Three Months Ended June 30,
                                                                  2021                                                                 2020
                                                              Homebuilding                                                         Homebuilding
                                       Homebuilding             Pre-tax                  % of               Homebuilding             Pre-tax                  % of
                                         Revenues              Income (1)              Revenues               Revenues              Income (1)              Revenues
                                                                                                (In millions)
East                                 $     1,032.7          $       190.3                   18.4  %       $       736.3          $       106.9                   14.5  %
Midwest                                      514.6                   67.2                   13.1  %               373.3                   34.1                    9.1  %
Southeast                                  2,300.1                  465.3                   20.2  %             1,629.1                  233.5                   14.3  %
South Central                              1,709.8                  323.1                   18.9  %             1,376.4                  201.8                   14.7  %
Southwest                                    291.0                   46.7                   16.0  %               216.1                   29.7                   13.7  %
West                                       1,222.1                  244.3                   20.0  %               890.9                  103.8                   11.7  %
                                     $     7,070.3          $     1,336.9                   18.9  %       $     5,222.1          $       709.8                   13.6  %

                                                                                         Nine Months Ended June 30,
                                                                  2021                                                                 2020
                                                              Homebuilding                                                         Homebuilding
                                       Homebuilding             Pre-tax                  % of               Homebuilding             Pre-tax                  % of
                                         Revenues              Income (1)              Revenues               Revenues              Income (1)              Revenues
                                                                                                (In millions)
East                                 $     2,703.4          $       468.8                   17.3  %       $     1,836.5          $       240.1                   13.1  %
Midwest                                    1,396.1                  177.3                   12.7  %               964.6                   76.4                    7.9  %
Southeast                                  6,133.4                1,147.8                   18.7  %             4,096.4                  567.4                   13.9  %
South Central                              4,688.8                  854.6                   18.2  %             3,401.5                  490.7                   14.4  %
Southwest                                    766.7                  124.8                   16.3  %               626.8                   95.0                   15.2  %
West                                       3,288.2                  550.9                   16.8  %             2,558.1                  267.3                   10.4  %
                                     $    18,976.6          $     3,324.2                   17.5  %       $    13,483.9          $     1,736.9                   12.9  %

______________

(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.


East Region - Homebuilding revenues increased 40% and 47% in the three and nine
months ended June 30, 2021, respectively, compared to the prior year periods,
primarily due to increases in the number of homes closed in our Myrtle Beach,
Delaware, Raleigh and Suburban Washington, D.C. markets. The region generated
pre-tax income of $190.3 million and $468.8 million in the three and nine months
ended June 30, 2021, respectively, compared to $106.9 million and $240.1 million
in the prior year periods. Gross profit from home sales as a percentage of home
sales revenue (home sales gross profit percentage) increased by 340 and 350
basis points in the three and nine months ended June 30, 2021, respectively,
compared to the prior year periods, 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 60 and 100 basis
points in the three and nine months ended June 30, 2021, respectively, compared
to the prior year periods, primarily due to the increase in homebuilding
revenues.

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Midwest Region - Homebuilding revenues increased 38% and 45% in the three and
nine months ended June 30, 2021, respectively, compared to the prior year
periods, primarily due to increases in the number of homes closed in our Denver,
Indianapolis and Chicago markets. The region generated pre-tax income of $67.2
million and $177.3 million in the three and nine months ended June 30, 2021,
respectively, compared to $34.1 million and $76.4 million in the prior year
periods. Home sales gross profit percentage increased by 310 and 340 basis
points in the three and nine months ended June 30, 2021, respectively, compared
to the prior year periods, 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 10 and 120 basis points in
the three and nine months ended June 30, 2021, respectively, compared to the
prior year periods, primarily due to the increase in homebuilding revenues.

Southeast Region - Homebuilding revenues increased 41% and 50% in the three and
nine months ended June 30, 2021, respectively, compared to the prior year
periods, primarily due to increases in the number of homes closed in all of our
markets. The region generated pre-tax income of $465.3 million and $1.1 billion
in the three and nine months ended June 30, 2021, respectively, compared to
$233.5 million and $567.4 million in the prior year periods. Home sales gross
profit percentage increased by 460 and 380 basis points in the three and nine
months ended June 30, 2021, respectively, compared to the prior year periods,
primarily due to the average selling price of homes closed increasing while the
average cost of those homes decreased slightly. As a percentage of homebuilding
revenues, SG&A expenses decreased by 90 and 100 basis points in the three and
nine months ended June 30, 2021, respectively, compared to the prior year
periods, primarily due to the increase in homebuilding revenues.

South Central Region - Homebuilding revenues increased 24% and 38% in the three
and nine months ended June 30, 2021, respectively, compared to the prior year
periods, primarily due to increases in the number of homes closed in our
Houston, Dallas, San Antonio and Austin markets. The region generated pre-tax
income of $323.1 million and $854.6 million in the three and nine months ended
June 30, 2021, respectively, compared to $201.8 million and $490.7 million in
the prior year periods. Home sales gross profit percentage increased by 360 and
270 basis points in the three and nine months ended June 30, 2021, respectively,
compared to the prior year periods, 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 60 and 70 basis
points in the three and nine months ended June 30, 2021, respectively, compared
to the prior year periods, primarily due to the increase in homebuilding
revenues.

Southwest Region - Homebuilding revenues increased 35% and 22% in the three and
nine months ended June 30, 2021, respectively, compared to the prior year
periods, primarily due to increases in the number of homes closed in our Phoenix
market. The region generated pre-tax income of $46.7 million and $124.8 million
in the three and nine months ended June 30, 2021, respectively, compared to
$29.7 million and $95.0 million in the prior year periods. Home sales gross
profit percentage increased by 190 and 180 basis points in the three and nine
months ended June 30, 2021, respectively, compared to the prior year periods,
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 and increased by 50 basis points in
the three and nine months ended June 30, 2021, respectively, compared to the
prior year periods. The increase in the nine month period was due to increased
employee compensation and related costs to support inventory growth.

West Region - Homebuilding revenues increased 37% and 29% in the three and nine
months ended June 30, 2021, respectively, compared to the prior year periods,
primarily due to increases in the number of homes closed in our Southern
California, Las Vegas, Sacramento and Reno markets. The region generated pre-tax
income of $244.3 million and $550.9 million in the three and nine months ended
June 30, 2021, respectively, compared to $103.8 million and $267.3 million in
the prior year periods. Home sales gross profit percentage increased by 650 and
500 basis points in the three and nine months ended June 30, 2021, respectively,
compared to the prior year periods, primarily due to the average selling price
of homes closed increasing by more than the average cost of those homes in the
three month period and the average cost of homes closed decreasing while the
average selling price increased in the nine month period. As a percentage of
homebuilding revenues, SG&A expenses decreased by 170 and 130 basis points in
the three and nine months ended June 30, 2021, respectively, compared to the
prior year periods, primarily due to the increase in homebuilding revenues.

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INVENTORIES OF BUILDINGS, POSITION OF LAND AND LAND AND HOUSES 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.

Inventories in our residential construction segment at June 30, 2021 and September 30, 2020
are summarized as follows:

                                                                                         As of June 30, 2021
                                                          Residential
                                                           Land/Lots
                                Construction in          Developed and
                                  Progress and               Under                  Land Held              Land Held             Rental
                                 Finished Homes           Development            for Development           for Sale          Properties (1)          Total Inventory
                                                                                            (In millions)
East                           $         955.8          $       611.1          $            5.6          $      1.4          $       31.7          $        1,605.6
Midwest                                  697.8                  506.1                         -                 1.8                  20.2                   1,225.9
Southeast                              2,200.7                1,135.7                      17.3                 0.6                 156.3                   3,510.6
South Central                          2,151.7                1,639.1                       0.3                   -                  33.5                   3,824.6
Southwest                                417.0                  512.1                       1.1                   -                  25.5                     955.7
West                                   1,291.7                1,183.9                       5.7                19.4                  35.9                   2,536.6
Corporate and unallocated (2)            123.1                   87.4                       0.4                 0.3                     -                     211.2
                               $       7,837.8          $     5,675.4          $           30.4          $     23.5          $      303.1          $       13,870.2



                                                                            As of September 30, 2020
                                                           Residential
                                                            Land/Lots
                                 Construction in          Developed and
                                   Progress and               Under                  Land Held              Land Held
                                  Finished Homes           Development            for Development           for Sale            Total Inventory
                                                                                  (In millions)
East                            $         785.3          $       531.2          $            5.5          $      6.3          $        1,328.3
Midwest                                   497.0                  459.0                       1.8                 0.7                     958.5
Southeast                               1,655.5                1,231.5                      32.3                 0.6                   2,919.9
South Central                           1,596.3                1,282.3                       0.3                 1.0                   2,879.9
Southwest                                 244.2                  449.7                       1.6                 0.3                     695.8
West                                    1,137.3                  847.1                       5.7                19.0                   2,009.1
Corporate and unallocated (2)             121.9                  100.6                       0.6                 0.4                     223.5
                                $       6,037.5          $     4,901.4          $           47.8          $     28.3          $       11,015.0


__________

(1)These inventory amounts relate to our single-family rental communities that
are reported in our homebuilding segment. Multi-family rental property inventory
totaling $436.3 million at June 30, 2021 is included in our other segment.
(2)Corporate and unallocated inventory consists primarily of capitalized
interest and property taxes.

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Table of contents The position of land and lots in our residential construction segment and houses in inventory at
June 30, 2021 and September 30, 2020 are summarized as follows:

                                             As of June 30, 2021
                                        Lots Controlled
                                            Through             Total
                                          Land and Lot        Land/Lots            Homes
                     Land/Lots              Purchase          Owned and             in
                     Owned (1)          Contracts (2)(3)      Controlled       Inventory (4)
East                         12,800                78,100          90,900                5,600
Midwest                       8,400                29,600          38,000                3,700
Southeast                    25,600               139,700         165,300               14,600
South Central                47,200                93,300         140,500               15,500
Southwest                     7,000                16,100          23,100                3,000
West                         22,900                36,400          59,300                4,900
                            123,900               393,200         517,100               47,300
                              24  %                 76  %          100  %



                                              As of September 30, 2020
                                              Lots Controlled
                                                  Through             Total
                                                Land and Lot        Land/Lots            Homes
                        Land/Lots                 Purchase          Owned and             in
                        Owned (1)             Contracts (2)(3)      Controlled       Inventory (4)
East                               11,300                50,500          61,800                4,900
Midwest                             8,000                17,800          25,800                2,600
Southeast                          28,700                95,700         124,400               11,500
South Central                      40,100                65,200         105,300               12,600
Southwest                           7,200                 7,600          14,800                1,800
West                               17,300                27,500          44,800                4,600
                                  112,600               264,300         376,900               38,000
                                    30  %                 70  %          100  %


___________________

(1)Land/lots owned included approximately 31,100 and 33,800 owned lots that are
fully developed and ready for home construction at June 30, 2021 and
September 30, 2020, respectively. Land/lots owned also included land held for
development representing 1,400 and 1,600 lots at June 30, 2021 and September 30,
2020, respectively. Land/lots owned exclude 3,400 and 100 lots related to our
single-family rental operations at June 30, 2021 and September 30, 2020,
respectively.
(2)The total remaining purchase price of lots controlled through land and lot
purchase contracts at June 30, 2021 and September 30, 2020 was $15.0 billion and
$9.9 billion, respectively, secured by earnest money deposits of $999.8 million
and $653.4 million, respectively. The total remaining purchase price of lots
controlled through land and lot purchase contracts at June 30, 2021 and
September 30, 2020 included $1.6 billion and $1.0 billion, respectively, related
to lot purchase contracts with Forestar, secured by $152.7 million and $98.2
million, respectively, of earnest money.
(3)Lots controlled at June 30, 2021 included approximately 39,400 lots owned or
controlled by Forestar, 21,500 of which our homebuilding divisions have under
contract to purchase and 17,900 of which our homebuilding divisions have a right
of first offer to purchase. Of these, approximately 20,500 lots were in our
Southeast region, 5,100 lots were in our South Central region, 4,900 lots were
in our West region, 4,000 lots were in our East region, 2,500 lots were in our
Southwest region and 2,400 lots were in our Midwest region. Lots controlled at
September 30, 2020 included approximately 30,400 lots owned or controlled by
Forestar, 14,000 of which our homebuilding divisions had under contract to
purchase and 16,400 of which our homebuilding divisions had a right of first
offer to purchase.
(4)Approximately 15,400 and 14,900 of our homes in inventory were unsold at
June 30, 2021 and September 30, 2020, respectively. At June 30, 2021,
approximately 500 of our unsold homes were completed, of which approximately 100
homes had been completed for more than six months. At September 30, 2020,
approximately 1,900 of our unsold homes were completed, of which approximately
300 homes had been completed for more than six months. Homes in inventory
exclude 1,300 and 600 homes related to our single-family rental operations at
June 30, 2021 and September 30, 2020, respectively, and also exclude
approximately 1,800 model homes at both dates.

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RESULTS OF OPERATIONS - FORESTAR

In fiscal 2018, we acquired 75% of the outstanding shares of Forestar and at
June 30, 2021, we owned 64% of its outstanding shares. Forestar is a publicly
traded residential lot development company with operations in 55 markets across
22 states as of June 30, 2021. Forestar's segment results are presented on their
historical cost basis, consistent with the manner in which management evaluates
segment performance. (See Note B for additional Forestar segment information.)

Forestar segment operating results for the three and nine months ended June 30, 2021 and 2020 were as follows:

                                                       Three Months Ended                      Nine Months Ended
                                                            June 30,                               June 30,
                                                     2021                2020               2021               2020
                                                                            (In millions)
Residential lot sales                          $    307.4             $  164.4          $    894.5          $  537.9
Tract sales and other                                 5.5                 13.5                12.6              46.4
Total revenues                                 $    312.9             $  177.9          $    907.1          $  584.3
Cost of sales                                       257.1                157.1               753.8             510.3
Selling, general and administrative expense          16.9                 11.2                48.7              32.8
Gain on sale of assets                                  -                    -                   -              (0.1)
Loss on extinguishment of debt                       18.1                    -                18.1                 -
Other (income) expense                               (0.3)                (0.7)               (1.4)             (4.8)
Income before income taxes                     $     21.1             $   10.3          $     87.9          $   46.1



Residential land and lot sales primarily consist of the sale of single-family
lots to local, regional and national homebuilders. During the three and nine
months ended June 30, 2021 and 2020, Forestar's land and lot sales, including
the portion sold to D.R. Horton and the revenues generated from those sales,
were as follows:
                                                        Three Months Ended                      Nine Months Ended
                                                             June 30,                               June 30,
                                                      2021                2020               2021               2020
                                                                            ($ in millions)
Total residential single-family lots sold            3,858                2,023              11,013             6,396
Residential single-family lots sold to D.R.
Horton                                               3,719                1,991              10,466             6,287
Residential lot sales revenues from sales to
D.R. Horton                                     $    300.2             $  162.1          $    859.8          $  528.0
Tract acres sold to D.R. Horton                          7                   30                  21                66
Tract sales revenues from sales to D.R. Horton  $      3.0             $   

13.4 $ 6.0 $ 20.6



SG&A expense for the three and nine months ended June 30, 2021 included charges
of $1.0 million and $2.9 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.
Shared services charges were $1.2 million and $3.8 million, respectively, in the
same periods of fiscal 2020.

Loss on extinction of the debt of $ 18.1 million in the three and nine months ended June 30, 2021 was due to the purchase by Forestar of its $ 350 million
capital of 8.0% senior bonds maturing in 2024 in May 2021.

At June 30, 2021, Forestar owned directly or controlled through land and lot
purchase contracts approximately 96,600 residential lots, of which approximately
4,400 are fully developed. Approximately 39,400 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. Approximately 900 of these lots are under
contract to sell to other builders.

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OPERATING RESULTS – 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 three and nine months ended June 30,
2021 and 2020.
                                                             Three Months Ended June 30,                                       Nine Months Ended June 30,
                                                  2021                  2020                % Change                2021                  2020                % Change
Number of first-lien loans originated
or brokered by DHI Mortgage for D.R.
Horton homebuyers                                  14,313                12,487                    15  %             40,262                30,628                    31  %
Number of homes closed by D.R. Horton              21,588                17,642                    22  %             60,028                45,140                    33  %
Percentage of D.R. Horton homes
financed by DHI Mortgage                               66  %                 71  %                                       67  %                 68  %
Number of total loans originated or
brokered by DHI Mortgage for D.R.
Horton homebuyers                                  14,337                12,511                    15  %             40,315                30,745                    31  %
Total number of loans originated or
brokered by DHI Mortgage                           14,668                12,920                    14  %             41,294                31,672                    30  %
Captive business percentage                            98  %                 97  %                                       98  %                 97  %
Loans sold by DHI Mortgage to third
parties                                            15,261                12,661                    21  %             41,090                30,180                    36  %



                                                            Three Months Ended June 30,                                Nine Months Ended June 30,
                                                    2021             2020             % Change                 2021                2020             % Change
                                                                                                  (In millions)
Loan origination and other fees                  $   12.9          $ 11.0                    17  %       $        35.8          $  26.0                    38  %
Gains on sale of mortgage loans and
mortgage servicing rights                           135.4           116.7                    16  %               453.0            263.7                    72  %
Servicing income                                      0.8               -                     -  %                 3.1                -                     -  %
Total mortgage operations revenues                  149.1           127.7                    17  %               491.9            289.7                    70  %
Title policy premiums                                39.6            28.9                    37  %               109.2             74.3                    47  %
Total revenues                                      188.7           156.6                    20  %               601.1            364.0                    65  %
General and administrative expense                  127.0            93.9                    35  %               360.4            257.7                    40  %
Other (income) expense                               (8.6)           (6.1)                   41  %               (21.4)           (17.7)                   21  %
Financial services pre-tax income                $   70.3          $ 68.8                     2  %       $       262.1          $ 124.0                   111  %




                  Financial Services Operating Margin Analysis
                                                                                               Percentages of
                                                                                         Financial Services Revenues
                                                                        Three Months Ended                               Nine Months Ended
                                                                             June 30,                                        June 30,
                                                                    2021                      2020                  2021                  2020
General and administrative expense                                         67.3  %               60.0  %               60.0  %               70.8  %
Other (income) expense                                                     (4.6) %               (3.9) %               (3.6) %               (4.9) %
Financial services pre-tax income                                          37.3  %               43.9  %               43.6  %               34.1  %




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Mortgage activity

The volume of loans originated by our mortgage operations is directly related to
the number of homes closed by our homebuilding operations. In the three and nine
months ended June 30, 2021, the volume of first-lien loans originated or
brokered by DHI Mortgage for our homebuyers increased 15% and 31%, respectively,
from the prior year periods, due to increases in the number of homes closed by
our homebuilding operations of 22% and 33%.

Homes closed by our homebuilding operations constituted 98% of DHI Mortgage loan
originations in both the three and nine months ended June 30, 2021 compared to
97% in the prior year periods. These percentages reflect DHI Mortgage's
consistent focus on the captive business provided by our homebuilding
operations.

The number of loans sold increased 21% and 36% in the three and nine months
ended June 30, 2021, respectively, compared to the prior year periods. Virtually
all of the mortgage loans held for sale on June 30, 2021 were 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). During the nine months ended June 30, 2021,
approximately 55% of our mortgage loans were sold directly to Fannie Mae or into
securities backed by Ginnie Mae, and 37% were sold to two other major financial
entities. 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 or Ginnie Mae, and we may need to make other adjustments to our
mortgage operations.

Financial services income and expenditure

Revenues from our mortgage operations increased 17% to $149.1 million and 70% to
$491.9 million in the three and nine months ended June 30, 2021, respectively,
from $127.7 million and $289.7 million in the prior year periods, primarily due
to increases of 14% and 30% in loan originations. In the nine month period,
higher net gains achieved on the sale of loan originations in the secondary
market also contributed to the increase. Net gains on the sale of mortgage loan
originations decreased in the third quarter due to competitive pricing pressures
in the marketplace. Revenues from our title operations increased 37% to $39.6
million and 47% to $109.2 million in the three and nine months ended June 30,
2021, respectively, from $28.9 million and $74.3 million in the prior year
periods, primarily due to increases of 26% and 38% in escrow closings.

General and administrative (G&A) expense related to our financial services
operations increased 35% to $127.0 million and 40% to $360.4 million in the
three and nine months ended June 30, 2021, respectively, from $93.9 million and
$257.7 million in the prior year periods. The increases were primarily due to
increases in employee related costs to support a higher volume of transactions.
Our financial services operations employed 2,755 and 1,979 people at June 30,
2021 and 2020, respectively.

As a percentage of financial services revenues, G&A expense was 67.3% and 60.0%
in the three and nine months ended June 30, 2021, respectively, compared to
60.0% and 70.8% in the prior year periods. 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.

The other income, net of other charges, included in our financial services activities mainly consists of interest income from our mortgage subsidiary.

As a result of the revenue increase from a higher volume of mortgage
originations and escrow closings and better leverage of our G&A expenses,
pre-tax income from our financial services operations increased 111% to $262.1
million in the nine months ended June 30, 2021 from $124.0 million in the prior
year period.

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RESULTS OF OPERATIONS - OTHER BUSINESSES

The pre-tax income of all of our subsidiaries engaged in other business
activities was $7.7 million and $10.1 million in the three and nine months ended
June 30, 2021, respectively, compared to a pre-tax loss of $0.6 million and
pre-tax income of $56.9 million in the prior year periods. Income generated by
our other businesses can vary significantly based on the timing of multi-family
rental property sales. There were no multi-family rental properties sold during
the current year periods or in the prior year quarter. There were two
multi-family rental properties sold during the prior year nine month period for
a total of $128.5 million with gains on sale totaling $59.4 million.

Our multi-family rental operations develop, construct, lease, own and sell
multi-family residential properties that produce rental income. We primarily
focus on constructing garden style multi-family communities, which typically
accommodate 200 to 400 dwelling units, in high growth suburban markets. After we
complete construction and achieve a stabilized level of leased occupancy, the
property is typically marketed for sale. At June 30, 2021, we had eleven
multi-family rental projects under active construction and four projects that
were substantially complete and in the lease-up phase. These 15 projects
represent 4,540 multi-family units, of which 3,230 units were under active
construction and 1,310 units were completed.


OPERATING RESULTS – CONSOLIDATED

Income before taxes

Pre-tax income for the three and nine months ended June 30, 2021 was $1.4
billion and $3.6 billion, respectively, compared to $782.4 million and $1.9
billion in the prior year periods. The increases were primarily due to increases
in pre-tax income generated by our homebuilding operations as a result of higher
revenues from increased home closings and an increase in home sales gross
margin.

Income taxes

Our income tax expense for the three and nine months ended June 30, 2021 was
$299.1 million and $784.1 million, respectively, compared to $149.5 million and
$377.6 million in the prior year periods. Our effective tax rate was 21.1% and
21.6% for the three and nine months ended June 30, 2021 compared to 19.1% and
19.6% in the prior year periods. The effective tax rates for all periods include
an expense for state income taxes and tax benefits related to stock-based
compensation and the federal energy efficient homes tax credit. For the three
and nine months ended June 30, 2020, the fiscal 2020 retroactive reinstatement
of the federal energy efficient homes tax credit reduced our effective tax rate
by 3.1% and 2.8%, respectively. For the three and nine months ended June 30,
2021, a change in the estimate of homes qualifying for the fiscal 2020 energy
efficient tax credit and the retroactive extension of the energy efficient tax
credit reduced our effective tax rate by 1.9% and 0.9%, respectively.

Our deferred tax assets, net of deferred tax liabilities, were $154.4 million at
June 30, 2021 compared to $152.4 million at September 30, 2020. We have a
valuation allowance of $7.3 million and $7.5 million at June 30, 2021 and
September 30, 2020, respectively, related to state deferred tax assets for net
operating loss (NOL) carryforwards that are more likely than not to expire
before being realized. We will continue to evaluate both the positive and
negative evidence in determining the need for a valuation allowance with respect
to our remaining state NOL carryforwards. Any reversal of the valuation
allowance in future periods will impact our effective tax rate.

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.

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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.

Currently, we are increasing our investments in homebuilding inventories and
single-family and multi-family rental properties to expand our operations and
grow our revenues and profitability, as well as considering opportunistic
strategic investments as they arise. We are also returning capital to our
shareholders through dividend payments and repurchases of our common stock. We
are maintaining higher homebuilding cash balances than in prior years to support
the increased scale and level of activity in our business and to provide
flexibility to adjust to changing conditions and opportunities.

At June 30, 2021, our ratio of debt to total capital (notes payable divided by
stockholders' equity plus notes payable) was 24.2% compared to 26.6% at
September 30, 2020 and 28.0% at June 30, 2020. Our ratio of homebuilding debt to
total capital (homebuilding notes payable divided by stockholders' equity plus
homebuilding notes payable) was 16.0% compared to 17.5% at September 30, 2020
and 18.4% at June 30, 2020. Over the long term, we intend to maintain our ratio
of homebuilding debt to total capital below 35%, and we expect it to remain
significantly lower than 35% in the fourth quarter of fiscal 2021 and throughout
fiscal 2022. 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 and our financial services business because they are separately
capitalized and not guaranteed by our parent company or any of our homebuilding
entities.

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 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 Securities and Exchange Commission (SEC) in August 2018, registering debt
and equity securities that may be issued from time to time in amounts to be
determined. Forestar also has an effective shelf registration statement filed
with the SEC in September 2018, registering $500 million of equity securities.
At June 30, 2021, $361.0 million remained available under Forestar's shelf
registration statement, of which $66.7 million is 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.

Capital resources – Residential construction

Cash and cash equivalents – To June 30, 2021, cash and cash equivalents in our residential construction segment totaled $ 1.7 billion.

Bank Credit Facilities - In April 2021, our senior unsecured homebuilding
revolving credit facility was amended to increase its capacity to $2.19 billion
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 revolving credit
commitment. Letters of credit issued under the facility reduce the available
borrowing capacity. The interest rate on borrowings under the revolving credit
facility may be based on either the Prime Rate or London Interbank Offered Rate
(LIBOR) plus an applicable margin, as defined in the credit agreement governing
the facility. The maturity date of the facility was extended to April 20, 2026.
At June 30, 2021, there were no borrowings outstanding and $159.3 million of
letters of credit issued under the revolving credit facility, resulting in
available capacity of $2.03 billion.

Our $ 375 million The 364-day unsecured residential construction revolving credit facility was not renewed when due on May 27, 2021.

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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 June 30, 2021, we were in compliance with all of
the covenants, limitations and restrictions of our homebuilding revolving credit
facility.

Public Unsecured Debt - We have $2.55 billion principal amount of homebuilding
senior notes outstanding as of June 30, 2021 that mature from September 2022
through October 2027. In October 2020, we issued $500 million principal amount
of 1.4% senior notes due October 15, 2027, with interest payable semi-annually.
The annual effective interest rate of these notes after giving effect to the
amortization of the discount and financing costs is 1.6%. In December 2020, we
repaid $400 million principal amount of our 2.55% senior notes at maturity. The
indentures governing our senior notes impose restrictions on the creation of
secured debt and liens. At June 30, 2021, we were in compliance with all of the
limitations and restrictions associated with our public debt obligations.

Debt and Equity Repurchase Authorizations - In July 2019, our Board of Directors
authorized the repurchase of up to $500 million of debt securities. In April
2021, our Board of Directors authorized the repurchase of up to $1.0 billion of
our common stock, replacing the prior authorization. We repurchased 2.6 million
shares of our common stock for $241.2 million during the current quarter for a
total of 8.1 million shares repurchased for $661.4 million during the nine
months ended June 30, 2021. At June 30, 2021, the full amount of the debt
repurchase authorization was remaining and $758.8 million of the equity
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 in sufficient capacities. 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 June 30, 2021, Forestar's ratio of debt to total
capital (notes payable divided by stockholders' equity plus notes payable) was
42.1% compared to 42.4% at September 30, 2020 and 43.1% at June 30, 2020.
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 37.8% compared to
22.1% at September 30, 2020 and 25.2% at June 30, 2020.

Cash and cash equivalents – To June 30, 2021, Forestar had cash and cash equivalents of $ 116.0 million.

Bank Credit Facility - In April 2021, Forestar's senior unsecured revolving
credit facility was amended to increase its capacity to $410 million 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 revolving
credit commitment. Borrowings under the revolving credit facility are subject to
a borrowing base calculation based on Forestar's book value of its real estate
assets and unrestricted cash. Letters of credit issued under the facility reduce
the available borrowing capacity. The maturity date of the facility was extended
to April 16, 2025. Borrowings and repayments under the facility were $25 million
each during the nine months ended June 30, 2021. At June 30, 2021, there were no
borrowings outstanding and $60.2 million of letters of credit issued under the
revolving credit facility, resulting in available capacity of $349.8 million.

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. At June 30, 2021, Forestar was in
compliance with all of the covenants, limitations and restrictions of its
revolving credit facility.

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Unsecured Debt - As of June 30, 2021, 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 issued in April 2021 that mature May 15, 2026 with interest payable
semiannually. The annual effective interest rate of the notes after giving
effect to the amortization of financing costs is 4.1%. The net proceeds from
this issuance were primarily used to redeem Forestar's $350 million principal
amount of 8.0% senior notes due 2024 in May 2021. The redemption price of $365.6
million included a call premium of $14.0 million and accrued and unpaid interest
of $1.6 million. Forestar recognized an $18.1 million loss on extinguishment of
debt during the current quarter upon redemption of the notes. Forestar also has
$300 million principal amount of 5.0% senior notes due 2028.

Forestar's revolving credit facility and its senior notes are not guaranteed by
D.R. Horton, Inc. or any of the subsidiaries that guarantee our homebuilding
debt. At June 30, 2021, Forestar was in compliance with all of the covenants,
limitations and restrictions of its revolving credit facility and senior note
obligations.

Debt Repurchase Authorization - Effective April 30, 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 June 30, 2021,
and the authorization has no expiration date.

Issuance of Common Stock - During the nine months ended June 30, 2021, Forestar
issued 1.4 million shares of common stock under its at-the-market equity
offering program for proceeds of $32.6 million, net of commissions and other
issuance costs. At June 30, 2021, $361.0 million remained available for issuance
under Forestar's shelf registration statement, of which $66.7 million is
reserved for sales under its at-the-market equity offering program.

Capital Resources – Financial Services

Cash and cash equivalents – To June 30, 2021, the cash and cash equivalents of our financial services activities totaled $ 101.1 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. In February 2021, the mortgage
repurchase facility was amended to increase its capacity and extend its maturity
date to February 18, 2022. The total capacity of the facility is $1.4 billion;
however, the capacity increases, without requiring additional commitments, to
$1.6 billion for approximately 30 days at each quarter end and 45 days at fiscal
year end. The capacity of the facility can also be increased to $1.8 billion,
subject to the availability of additional commitments. Through additional
commitments, the total capacity of the facility was temporarily increased to
$1.6 billion effective June 11, 2021 through November 4, 2021. During this
period, the capacity increases, without requiring additional commitments, to
$1.8 billion for approximately 30 days at the end of the third quarter and for
45 days at fiscal year end.

From June 30, 2021, $ 1.5 billion mortgages held for sale valued at $ 1.5 billion were pledged under the mortgage repurchase facility. Due to advance payments totaling $ 410.2 million, DHI mortgage
had the obligation to $ 1.1 billion outstanding under the mortgage loan repurchase facility at June 30, 2021 at an annual interest rate of 2.1%.

The mortgage repurchase facility is not guaranteed by D.R. Horton, Inc. or any
of the subsidiaries that guarantee our homebuilding debt. 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
June 30, 2021, DHI Mortgage was in compliance with all of the conditions and
covenants of the mortgage repurchase facility.

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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.

Operating cash flow activities

In the nine months ended June 30, 2021, net cash used in operating activities
was $34.5 million compared to $588.9 million of cash provided by operating
activities in the prior year period. Cash used in operating activities in the
current year period primarily consisted of $340.6 million and $58.2 million of
cash used in our Forestar segment and other businesses, respectively, partially
offset by $276.1 million and $96.2 million of cash provided by our homebuilding
and financial services segments, respectively. The most significant source of
cash provided by operating activities in both periods was net income.

Cash used to increase construction in progress and finished home inventory was
$1.7 billion in the current year period compared to $602.3 million in the prior
year period. In both periods, the expenditures were made to increase our homes
in inventory in response to the strength of homebuyer demand. Cash used to
increase residential land and lots in the current year period was $1.3 billion
compared to $361.9 million in the prior year period. Of these amounts, $541.7
million and $259.8 million, respectively, related to Forestar.

During the three months ended June 30, 2021, we increased our single-family and
multi-family rental properties by $196.0 million, which is reflected as cash
used in operating activities. During the six month period ended March 31, 2021
and in the prior year nine month period ended June 30, 2020, expenditures
related to rental properties were $173.9 million and $153.6 million,
respectively, and are reflected as cash used in investing activities.

Cash flow investing activities

In the nine months ended June 30, 2021, net cash used in investing activities
was $206.9 million compared to $100.4 million in the prior year period. In the
current year period, uses of cash included expenditures related to our rental
operations totaling $173.9 million, purchases of property and equipment totaling
$46.0 million and the acquisition of the homebuilding operations of Braselton
Homes for $23.0 million, partially offset by proceeds from the sale of a
single-family rental community for $31.8 million in the first quarter of fiscal
2021. In the prior year period, uses of cash included expenditures related to
our rental operations totaling $153.6 million and purchases of property and
equipment totaling $66.8 million, partially offset by proceeds from the sale of
assets, primarily consisting of $128.5 million related to the sale of two
multi-family rental properties.

Cash flow financing 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 homebuilding and Forestar
operations may be funded with the issuance of senior unsecured debt securities
or equity securities through the capital markets.

During the nine months ended June 30, 2021, net cash used in financing
activities was $829.6 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 $661.4 million and payment of cash
dividends totaling $217.7 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 Forestar's issuance of $400 million principal
amount of 3.85% senior notes.

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During the nine months ended June 30, 2020, net cash provided by financing
activities was $370.2 million, consisting primarily of note proceeds of $1.1
billion from draws on our homebuilding revolving credit facility, our issuance
of $500 million principal amount of 2.5% homebuilding senior notes, our issuance
of $500 million principal amount of 2.6% homebuilding senior notes, Forestar's
issuance of $300 million principal amount of 5.0% senior notes and net advances
of $284.0 million on our mortgage repurchase facility. Note proceeds were
partially offset by repayment of amounts drawn on our homebuilding revolving
credit facility totaling $1.1 billion, repayment of $500 million principal
amount of our 4.0% senior notes at maturity, Forestar's repayment of $118.9
million principal amount of its 3.75% convertible senior notes at maturity, cash
used to repurchase shares of our common stock of $360.4 million and payment of
cash dividends totaling $192.3 million.

During each of the first three quarters of fiscal 2021, our Board of Directors
approved a quarterly cash dividend of $0.20 per common share, the most recent of
which was paid on May 20, 2021 to stockholders of record on May 10, 2021. In
July 2021, our Board of Directors approved a quarterly cash dividend of $0.20
per common share, payable on August 17, 2021 to stockholders of record on
August 10, 2021. Cash dividends of $0.175 per common share were approved and
paid in each quarter of fiscal 2020. 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.


CONTRACTUAL CASH OBLIGATIONS, COMMERCIAL COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS

Our primary contractual cash obligations are payments under our debt agreements
and lease payments under operating leases. We expect to fund our contractual
obligations in the ordinary course of business through a combination of our
existing cash resources, cash flows generated from profits, our credit
facilities or other bank financing and the issuance of new debt or equity
securities through the public capital markets as market conditions may permit.

At June 30, 2021, we had outstanding letters of credit of $219.5 million and
surety bonds of $2.1 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.

Our mortgage subsidiary enters into various commitments related to the lending
activities of our mortgage operations. Further discussion of these commitments
is provided in Item 3 "Quantitative and Qualitative Disclosures About Market
Risk" under Part I of this quarterly report on Form 10-Q.

We enter into land and lot purchase contracts to acquire land or lots for the
construction of homes. Lot purchase contracts enable us to control significant
lot positions with limited capital investment. Among our homebuilding land and
lot purchase contracts at June 30, 2021, there were a limited number of
contracts with $136.9 million of remaining purchase price subject to specific
performance provisions that may require us to purchase the land or lots upon the
land sellers meeting their respective contractual obligations. Of this amount,
$67.8 million related to contracts between our homebuilding segment and
Forestar. Further information about our land purchase contracts is provided in
the "Homebuilding Inventories, Land and Lot Position and Homes in Inventory"
section included herein.

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SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

As of June 30, 2021, D.R. Horton, Inc. had $2.55 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
residential construction 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 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

                                                                       June 30,            September 30,
Summarized Balance Sheet Data                                            2021                   2020
                                                                                (In millions)
Assets
Cash                                                                $    1,615.7          $     2,498.5
Inventories                                                             13,773.3               10,921.8
Amount due from Non-Guarantor Subsidiaries                                 651.1                  524.6
Total assets                                                            17,961.9               15,503.9
Liabilities & Stockholders' Equity
Notes payable                                                       $    2,620.0          $     2,514.4
Total liabilities                                                        5,476.9                4,746.9
Stockholders' equity                                                    12,485.0               10,757.0

                                                                      Nine Months            Year Ended
                                                                         Ended             September 30,
Summarized Statement of Operations Data                              June 30, 2021              2020
                                                                                (In millions)
Revenues                                                            $   18,942.3          $    19,630.0
Cost of sales                                                           14,233.0               15,379.2
Selling, general and administrative expense                              1,374.5                1,584.4
Income before income taxes                                               3,313.2                2,666.4
Net income                                                               2,605.1                2,134.7




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A court could void or subordinate any Guarantor's guarantee under the fraudulent
conveyance laws if existing or future creditors of any such Guarantor were
successful in establishing that: (i) such guarantee was incurred with fraudulent
intent; or (ii) such Guarantor did not receive fair consideration or reasonably
equivalent value for issuing its guarantee and was insolvent at the time of the
guarantee, was rendered insolvent by reason of the guarantee, was engaged in a
business or transaction for which its assets constituted unreasonably small
capital to carry on its business, or intended to incur, or believed that it
would incur, debt beyond its ability to pay such debt as it matured.

The measures of insolvency for purposes of determining whether a fraudulent
conveyance occurred would vary depending upon the laws of the relevant
jurisdiction and upon the valuation assumptions and methodology applied by the
court. Generally, however, a company would be considered insolvent for purposes
of the foregoing if the sum of the company's debts, including contingent,
unliquidated and unmatured liabilities, is greater than all of such company's
property at a fair valuation, or if the present fair saleable value of the
company's assets is less than the amount that will be required to pay the
probable liability on its existing debts as they become absolute and matured.

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.

On the basis of historical financial information, operating history and other
factors, we believe that each of the Guarantors, after giving effect to the
issuance of the guarantees when such guarantees were issued, was not insolvent,
did not have unreasonably small capital for the business in which it engaged and
did not and has not incurred debts beyond its ability to pay such debts as they
mature. We cannot assure you, however, as to what standard a court would apply
in making these determinations or that a court would agree with our conclusions
in this regard.


CRITICAL ACCOUNTING POLICIES

As reported in our annual report on Form 10-K for the year ended
September 30, 2020, our most critical accounting policies relate to revenue recognition, inventory and cost of sales, warranty and legal claims, and insurance. Since September 30, 2020, no material changes have been made to these essential accounting policies.

As disclosed in our critical accounting policies in our Form 10-K for the fiscal
year ended September 30, 2020, our reserves for construction defect claims
include the estimated costs of both known claims and anticipated future claims.
At June 30, 2021 and September 30, 2020, we had reserves for approximately 350
and 260 pending construction defect claims, respectively, and no individual
existing claim was material to our financial statements. During the nine months
ended June 30, 2021, we established reserves for approximately 165 new
construction defect claims and resolved 75 construction defect claims for a
total cost of $13.3 million. At June 30, 2020 and September 30, 2019, we had
reserves for approximately 240 and 180 pending construction defect claims,
respectively, and no individual existing claim was material to our financial
statements. During the nine months ended June 30, 2020, we established reserves
for approximately 120 new construction defect claims and resolved 60
construction defect claims for a total cost of $20.6 million.


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 operating 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 of our
homebuilding, lot development and financial services 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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Forward-Looking Statements

Some of the statements contained in this report, as well as in other materials
we have filed or will file with the SEC, statements made by us in periodic press
releases and oral statements we make to analysts, stockholders and the press in
the course of presentations about us, may be construed as "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on
management's beliefs as well as assumptions made by, and information currently
available to, management. These forward-looking statements typically include the
words "anticipate," "believe," "consider," "continue," "could," "estimate,"
"expect," "forecast," "goal," "intend," "likely," "may," "outlook," "plan,"
"possible," "potential," "predict," "projection," "seek," "should," "strategy,"
"target," "will," "would" or other words of similar meaning. Any or all of the
forward-looking statements included in this report and in any other of our
reports or public statements may not approximate actual experience, and the
expectations derived from them may not be realized, due to risks, uncertainties
and other factors. As a result, actual results may differ materially from the
expectations or results we discuss in the forward-looking statements. These
risks, uncertainties and other factors include, but are not limited to:
•the effects of public health issues such as a major epidemic or pandemic,
including the impact of COVID-19 on the economy and our businesses;
•the cyclical nature of the homebuilding and lot development industries and
changes in economic, real estate and other conditions;
•constriction of the credit and public capital markets, which could limit our
ability to access capital and 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;
•the risks associated with our land and lot inventory;
•our ability to effect our growth strategies, acquisitions or investments
successfully;
•the impact of an inflationary, deflationary or higher interest rate
environment;
•home warranty and construction defect claims;
•the effects of health and safety incidents;
•supply shortages and other risks of acquiring land, building materials and
skilled labor;
•reductions in the availability of performance bonds;
•increases in the costs of owning a home;
•the effects of governmental regulations and environmental matters on our
homebuilding and land development operations;
•the effects of governmental regulations on our financial services operations;
•competitive conditions within the homebuilding, lot development and financial
services industries;
•our ability to manage and service our debt and comply with related debt
covenants, restrictions and limitations;
•the effects of negative publicity;
•the effects of the loss of key personnel; and
•information technology failures, data security breaches and our ability to
satisfy privacy and data protection laws and regulations.

We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
However, any further disclosures made on related subjects in subsequent reports
on Forms 10-K, 10-Q and 8-K should be consulted. Additional information about
issues that could lead to material changes in performance and risk factors that
have the potential to affect us is contained in our annual report on Form 10-K
for the fiscal year ended September 30, 2020, including the section entitled
"Risk Factors," which is filed with the SEC.

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