D.R. Horton’s revenues soar as housing demand surges; balance sheet stays strong

By Devika Patel

Knoxville, Tenn., April 22 – D.R. Horton, Inc. saw revenues increase 41% year-over-year, to $6.2 billion from $4.4 billion, as the housing market saw incredibly strong demand, with the company now well-capitalized touting a strong balance sheet and ready to make a dent in its competitors’ market shares.

“Housing markets conditions remain very robust, and we are focused on maximizing returns and capital efficiency in each of our communities, while increasing D.R. Horton’s market share,” president and chief executive officer David V. Auld said on the company’s second quarter ended March 31 earnings conference call on Thursday.

“We believe our strong balance sheet, liquidity and low leverage position us very well to operate effectively through changing economic conditions.

“The D.R. Horton team delivered a strong second quarter, highlighted by 95% increase in earnings to $2.53 per diluted share,” Auld said.

The company recorded earnings of $1.30 per share in the prior year quarter.

Forestar Group Inc., which has a business relationship with D.R. Horton, has been thriving as well and has been rather busy in the markets.

“Forestar has been active in the public capital markets recently, issuing common stock through its at the market equity offering program, issuing new senior unsecured notes, calling for redemption of some of its higher coupon senior notes and extending the maturity and increasing the capacity of its revolving credit facility,” executive vice president and chief financial officer Bill W. Wheat said on the call.

“With low leverage, strong liquidity, capital markets access and its relationship with D.R. Horton, Forestar is in a great position to continue to grow their profitable business,” Wheat said.

Forestar is separately capitalized from D.R. Horton and had approximately $500 million of liquidity at quarter end, which included $170 million of unrestricted cash and $330 million of available capacity on its revolving credit facility.

On April 7, Forestar priced a $400 million issue of five-year senior notes (expected ratings B1/B+) at par to yield 3.85% in a drive-by.

The yield printed inside of yield talk in the 4% area. Initial talk was 4¼% to 4 3/8%.

Lead bookrunner Citigroup Global Markets Inc. billed and delivered.

The company earmarked the proceeds to redeem its 8% senior notes due 2024.

On April 20, Forestar signed a second amendment to its credit agreement with JPMorgan Chase Bank, NA as administrative agent.

The amendment principally increased the size of the revolving credit facility to $410 million and extended the termination date to April 16, 2025.

Additionally, the accordion feature was amended to allow for an increased $600 million amount of borrowings, subject to certain conditions and availability of bank commitments.

Pricing also shifted. Interest ranges from Libor plus 175 basis points to 250 bps, based on the leverage ratio, lower than it was previously.

Joint lead arrangers and joint bookrunners are JPMorgan Chase Bank, NA, Citibank, NA, Mizuho Bank, Ltd., Wells Fargo Securities, LLC and TD Securities (USA) LLC.

Citibank, NA, Mizuho Bank, Ltd. and Wells Fargo Securities, LLC are co-syndication agents.

TD Securities (USA) LLC is the documentation agent.

D.R. Horton is an Arlington, Tex.-based homebuilder. Forestar is an Austin, Tex.-based real estate company.

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