D.R. Horton (DHI) 10-K risk factor changes: FY2018 vs FY2017

In the past, [removed: concerns regarding] the federal government’s fiscal policies and economic stimulus actions have created uncertainty in the financial markets and caused volatility in interest rates, which [removed: has] impacted business and consumer [removed: confidence.][added: behavior.]

[removed: Federal government] [added: Monetary policy] actions [added: affecting interest rates or fiscal policy actions] and new legislation related to [removed: economic stimulus,] taxation, spending levels [removed: and] [added: or] borrowing limits, along with the related political debates, conflicts and compromises associated with such actions, may negatively impact the financial markets and consumer confidence.

Such events could hurt the U.S. economy and the housing market and in turn, could adversely affect the operating results of our [removed: homebuilding, financial services and other] businesses.

We may be unable to change the mix of our home offerings, reduce the costs of the homes we build, offer more affordable homes or satisfactorily address changing market conditions in other ways without adversely affecting our [removed: profit margins.][added: profits and returns.]

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

[removed: We have] [added: Our homebuilding operations utilize] a [removed: $1.275] [added: $1.325] billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.9 billion, subject to certain conditions and availability of additional bank commitments.

The maturity date of the [removed: commitments under the] facility is September 25, [removed: 2022.][added: 2023.]

[removed: Also, our] [added: Our] mortgage subsidiary utilizes a $600 million mortgage repurchase facility to finance the majority of the loans it originates.

The mortgage repurchase facility must be renewed annually and currently expires on February [removed: 23, 2018.][added: 22, 2019.]

We have an automatically effective universal shelf registration statement filed with the SEC in August [removed: 2015,] [added: 2018,] registering debt and equity securities that we may issue from time to time in amounts to be determined.

We believe that our existing cash resources, our revolving credit [removed: facility,] [added: facilities,] our mortgage repurchase facility and our ability to access the capital markets will provide sufficient liquidity to fund our [added: near-term] working capital needs and debt obligations, including the maturity of [removed: $400] [added: $500] million principal amount of senior notes in fiscal [removed: 2018.][added: 2019.]

[removed: There have been ongoing discussions within the government] [added: Any significant change] regarding the long-term structure and viability of Fannie Mae and Freddie [removed: Mac, which] [added: Mac] could result in adjustments to the size of their loan portfolios and to guidelines for their loan products.

[removed: Any] [added: Additionally, a] reduction in the availability of financing provided by these institutions could adversely affect interest rates, mortgage availability and sales of new homes and mortgage loans.

During fiscal [removed: 2017,] [added: 2018,] approximately [removed: 84%] [added: 92%] of [removed: our] [added: the] mortgage loans [added: sold by DHI Mortgage] were sold to [removed: three] [added: four] major financial entities, [removed: one] [added: the largest percentage] of which purchased [removed: 45%] [added: 36%] of the total loans sold.

Mortgage rates are currently low as compared to most historical periods; however, [removed: they are expected to] [added: mortgage rates have increased recently and may] increase [added: further] as the Federal Reserve Board has raised its benchmark rate several times over the past year and has indicated further interest rate increases are likely.

When interest rates increase, the cost of owning a home [removed: will increase,] [added: increases,] which will likely reduce the number of potential homebuyers who can obtain mortgage financing, and could result in a decline in the demand for our homes.

Inventory risks are substantial for our homebuilding [removed: business.][added: and Forestar businesses.]

[removed: Subsequent to September 30,] [added: On October 5,] 2017, we [removed: made an investment of $558.3 million in cash to acquire] [added: acquired] 75% of the outstanding shares of [removed: Forestar,] [added: Forestar for $558.3 million,] pursuant to the terms of [removed: the] [added: a merger agreement entered into in] June 2017 [removed: merger agreement.][added: and approved by a vote of Forestar’s shareholders.]

Our alignment with Forestar advances our strategy of increasing our access to [removed: high-quality] optioned land and lot positions to enhance operational efficiency and returns.

Both [removed: companies] [added: our homebuilding divisions and Forestar] are identifying land development opportunities to expand Forestar’s platform, and [removed: we plan to acquire a large portion of Forestar’s] [added: our homebuilding operations are acquiring] finished lots [added: from Forestar] in accordance with the master supply agreement between the two companies.

In addition to the investment and merger with Forestar, we have acquired the homebuilding operations of several [added: homebuilding] companies [removed: since fiscal 2012,] [added: in recent years,] and we may make strategic acquisitions of or investments in other companies, operations or assets in the future.

The magnitude, timing and nature of any future acquisitions or investments will depend on a number of factors, including our ability to identify suitable additional markets or acquisition candidates, the negotiation of acceptable terms, our financial [removed: capabilities] [added: position] and general economic and business conditions.

| • | reliance on local subcontractors, [removed: manufacturers and] [added: manufacturers,] distributors [added: and land developers] who may be inadequately capitalized; |

These factors may [removed: increase our build times] [added: cause construction delays] or cause us to incur more costs building our homes.

Moreover, [removed: with inflation, the costs] [added: in a highly inflationary environment, our cost] of capital, labor and materials can increase and the purchasing power of our cash resources can [removed: decline.][added: decline, which could have an adverse impact on our business or financial results.]

At September 30, [removed: 2017,] [added: 2018,] we had [removed: $1.2] [added: $1.5] billion of outstanding surety bonds.

[removed: Significant] [added: Prior to the enactment of the Tax Cuts and Jobs Act (Tax Act), which was enacted into law on December 22, 2017, significant] expenses of owning a home, including mortgage [added: loan] interest and [removed: real estate] [added: state and local] taxes, generally [removed: are] [added: were] deductible expenses for an individual’s [removed: federal, and in some cases state,] [added: federal] income taxes, subject to various [removed: limitations under current tax law and policy.][added: limitations.]

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

For example, we have received Notices of Violation from the United States Environmental Protection Agency related to stormwater compliance at certain of our sites in [removed: the Southeast.][added: our Southeast region.]

We are also subject to an extensive number of laws and regulations because our common stock and debt securities [added: and those of our Forestar subsidiary] are publicly traded in the capital markets.

Due to the significant increases in [removed: regulations,] [added: regulations in recent years,] operating costs have increased for our mortgage operations.

As of September 30, [removed: 2017,] [added: 2018,] our consolidated debt was [removed: $2.9] [added: $3.2] billion, and we had [removed: $829.6 million] [added: $1.1 billion] principal amount of our debt maturing before the end of fiscal [removed: 2018,] [added: 2019,] including [removed: $400] [added: $500] million principal amount of senior notes and [removed: $420] [added: $637.7] million outstanding under the mortgage repurchase facility.

The indenture governing our senior notes does not restrict the incurrence of future unsecured debt by us or our homebuilding subsidiaries or the incurrence of secured or unsecured debt by our financial services subsidiaries, and the agreement governing our [added: homebuilding] revolving credit facility allows us to incur a substantial amount of future unsecured debt.

Also, the indenture governing our senior notes and the agreement governing our [added: homebuilding] revolving credit facility impose restrictions on our ability and on that of the guarantors [added: under our senior notes and our homebuilding revolving credit facility] to incur debt secured by certain assets, but still permit us and our homebuilding subsidiaries to incur significant amounts of additional secured debt.

Changes in prevailing interest rates may affect the cost of our debt service obligations, because borrowings under our revolving credit [removed: facility] [added: facilities] and mortgage repurchase facility bear interest at floating rates.

[removed: Revolving] [added: Homebuilding revolving] credit facility.

Our [added: homebuilding] revolving credit facility contains financial covenants requiring the maintenance of a maximum allowable ratio of debt to tangible net worth and a borrowing base restriction if our ratio of debt to tangible net worth exceeds a certain level.

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

In addition, although our financial services business is conducted through subsidiaries that are not restricted by the indenture governing our senior notes or the [removed: agreement] [added: agreements] governing our revolving credit [removed: facility,] [added: facilities,] the ability of our financial services subsidiaries to distribute funds to our homebuilding operations would be restricted in the event such distribution would cause an event of default under the mortgage repurchase facility or if an event of default had occurred under this facility.

Upon the occurrence of both a change of control and a ratings downgrade event, each as defined in the indenture governing our [added: homebuilding] senior notes, we will be required to offer to repurchase such notes at 101% of their principal amount, together with all accrued and unpaid interest, if any.

Recently, the Federal Reserve has increased short-term interest rates and has indicated that future interest rate increases are likely, which has caused long-term interest rates on home mortgage loans to rise.

Forestar and its subsidiaries are not guarantors under the facility or our senior notes.

Forestar has a $380 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $570 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.

The maturity date of the facility is August 16, 2021.

The facility is guaranteed by Forestar’s wholly-owned subsidiaries that are not immaterial subsidiaries or have not been designated as unrestricted subsidiaries.

The facility is not guaranteed by us or our other subsidiaries.

Also, Forestar has an effective shelf registration statement filed with the SEC in September 2018, registering $500 million of equity securities.

Forestar is a publicly traded residential lot development company with operations in 24 markets and 14 states as of September 30, 2018.

As the controlling shareholder of Forestar, we strongly influence the strategic direction and operations of Forestar.

The Tax Act establishes new limits on the federal tax deductions individual taxpayers may take on mortgage loan interest payments and on state and local taxes, including property taxes.

These changes could reduce the actual or perceived affordability of homeownership, which could adversely affect demand for and sales prices of new homes, especially in areas with relatively high housing prices or high state and local income taxes and real estate taxes.

Any further change in income tax laws by the federal or state government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes.

Forestar’s revolving credit facility does not restrict the incurrence of future unsecured debt by Forestar or its subsidiaries or the incurrence of secured debt by Forestar’s subsidiaries that are not guarantors of Forestar’s revolving credit facility.

Forestar’s revolving credit facility.

Forestar’s revolving credit facility contains financial covenants requiring the maintenance by Forestar of a minimum level of tangible net worth, a minimum level of liquidity, a maximum allowable leverage ratio and a borrowing base restriction based on the book value of Forestar’s real estate assets and unrestricted cash.

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

Change of control default under Forestar’s revolving credit facility.

A change of control (as defined in Forestar’s revolving credit facility) with respect to Forestar would constitute an event of default under Forestar’s revolving credit facility, which could result in the acceleration of the repayment of any borrowings outstanding under the facility, a requirement to cash collateralize all letters of credit outstanding thereunder and the termination of the commitments thereunder.

If repayment of the borrowings under Forestar’s revolving credit facility were required, we can give no assurance that Forestar would have sufficient funds to pay the required amounts.

We use various encryption, tokenization and authentication technologies to mitigate cybersecurity risks and have increased our monitoring capabilities to enhance early detection and rapid response to potential cyber threats.

In October 2017, we used cash on hand to purchase 75% of the outstanding shares of Forestar Group Inc. (Forestar) for $558.3 million.

Forestar is and will continue to be a publicly-traded residential and real estate development company with operations currently in 14 markets and 10 states, where it owns, directly or through joint ventures, interests in 44 residential and mixed-use projects.

Current or future efforts by the government to stimulate the economy may increase the risk of significant inflation and its adverse impact on our business or financial results.

If the federal government or a state government changes its income tax laws, as has been discussed from time to time, to eliminate or substantially modify these income tax deductions, the after-tax cost of owning a new home would increase for many of our potential customers.

The loss or reduction of homeowner tax deductions, if such tax law changes were enacted without offsetting provisions, could adversely affect demand for and sales prices of new homes.

Results of Operations — Fiscal Year [removed: 2017] [added: 2018] Overview

[removed: We continue to see varying levels] [added: The level] of strength in new home demand and home prices [added: varied] across our [removed: markets, with demand in each market generally reflecting] [added: markets based on] the relative strength of each market’s economy, as measured by job growth, household incomes, household formations and consumer [removed: confidence.][added: confidence and the relative affordability of new home prices as compared to household incomes in each market.]

Our position as the [removed: largest and] most geographically diverse [added: and largest volume] homebuilder in the United States provides a strong platform for us to compete for new home sales.

In recent years, we have [removed: focused on expanding] [added: expanded] our product offerings to [removed: more consistently] include a broad range of homes for entry-level, move-up and luxury buyers across most of our markets.

[removed: Since the fourth quarter of fiscal 2016,] [added: More recently,] we have [added: also] been introducing [removed: affordable] homes [added: at affordable price points] in communities designed for active adult buyers seeking a low-maintenance lifestyle.

We believe our business is well positioned [removed: because of our] [added: with a] broad geographic [removed: footprint and] [added: footprint,] diverse product offerings, [removed: our ample] [added: a balanced] supply of finished lots, land and homes, [removed: our] [added: a] strong balance sheet and liquidity and [removed: our] experienced personnel across our operating markets.

In fiscal [removed: 2017,] [added: 2018,] our number of homes closed and home sales revenues increased [removed: 14%] [added: 13%] and [removed: 16%,] [added: 14%,] respectively, compared to the prior year.

Our pre-tax income [removed: grew to $1.6] [added: was $2.1] billion in fiscal [removed: 2017] [added: 2018] compared to [removed: $1.4] [added: $1.6] billion in fiscal [removed: 2016] [added: 2017] and [removed: $1.1] [added: $1.4] billion in fiscal [removed: 2015.][added: 2016.]

Our pre-tax operating margin increased to [removed: 11.4%] [added: 12.8%] in fiscal [removed: 2017] [added: 2018] compared to [removed: 11.1%] [added: 11.4%] in fiscal [removed: 2016] [added: 2017] and [removed: 10.4%] [added: 11.1%] in fiscal [removed: 2015.][added: 2016.]

Cash provided by [added: our homebuilding] operations was [removed: $435.1 million] [added: $1.0 billion] in fiscal [removed: 2017] [added: 2018] compared to [removed: $618.0] [added: $303.7] million in fiscal [removed: 2016] [added: 2017] and [removed: $700.4] [added: $580.5] million in fiscal [removed: 2015.][added: 2016.]

In fiscal [removed: 2017,] [added: 2018,] our homebuilding return on inventory (ROI) improved to [removed: 16.6%] [added: 20.2%] compared to [removed: 15.4%] [added: 16.6%] in fiscal [removed: 2016] [added: 2017] and [removed: 12.8%] [added: 15.4%] in fiscal [removed: 2015.][added: 2016.]

The [removed: transaction with] Forestar [removed: Group Inc. (Forestar), which closed subsequent to year end,] [added: acquisition] is [removed: expected to advance] [added: advancing] our [added: homebuilding] strategy of increasing our access to [removed: high-quality] optioned land and lot positions.

We believe that housing demand in our individual operating markets is tied closely to each market’s [removed: economy; therefore, we expect that housing market conditions will vary across our markets.][added: economy.]

The pace and sustainability of new home demand and our future results could be negatively affected by weakening economic conditions, decreases in the level of employment and housing demand, decreased home affordability, [removed: significant] [added: further] increases in mortgage interest rates or tightening of mortgage lending standards.

Our operating strategy focuses on leveraging our financial and competitive position to increase the returns on our inventory investments and generate strong profitability and cash flows, while managing [removed: risk.][added: risk and maintaining financial flexibility to make opportunistic strategic investments.]

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

| • | Investing in land and land development [removed: and pursuing opportunistic acquisitions of homebuilding companies] in desirable markets, while controlling the level of land and lots we own in each of our markets relative to the local new home demand. |

| • | Increasing the amount of land and finished lots controlled through option purchase contracts by expanding relationships with land developers across the [removed: country.] [added: country and growing our majority-owned Forestar lot development operations.] |

Key financial results as of and for our fiscal year ended September 30, [removed: 2017,] [added: 2018 (or from the acquisition date of October 5, 2017 through September 30, 2018 for Forestar’s results),] as compared to fiscal [removed: 2016,] [added: 2017,] were as follows:

| • | Homebuilding revenues increased [removed: 16%] [added: 14%] to [removed: $13.7] [added: $15.6] billion. |

| • | Homes closed increased [removed: 14%] [added: 13%] to [removed: 45,751] [added: 51,857] homes, and the average closing price of those homes [removed: increased 2% to $298,400.] [added: was $298,900.] |

| • | Net sales orders increased [removed: 14%] [added: 13%] to [removed: 46,605] [added: 52,740] homes, and the value of net sales orders increased [removed: 16%] [added: 13%] to [removed: $13.9] [added: $15.8] billion. |

| • | Sales order backlog increased [removed: 7%] [added: 8%] to [removed: 12,329] [added: 13,371] homes, and the value of sales order backlog increased 8% to [removed: $3.7] [added: $4.0] billion. |

| • | Home sales gross margin [removed: decreased 20] [added: increased 130] basis points to [removed: 20.0%.] [added: 21.3%.] |

| • | Homebuilding SG&A expenses as a percentage of homebuilding revenues decreased by [removed: 40] [added: 30] basis points to [removed: 8.9%.] [added: 8.6%.] |

| • | Homebuilding pre-tax income increased [removed: 18%] [added: 31%] to [removed: $1.5] [added: $2.0] billion compared to [removed: $1.3] [added: $1.5] billion. |

| • | Homebuilding pre-tax income as a percentage of homebuilding revenues [removed: was 10.8%] [added: improved to 12.5%] compared to [removed: 10.7%.] [added: 10.8%.] |

| • | Homebuilding return on inventory improved [removed: 120] [added: 360] basis points to [removed: 16.6%.] [added: 20.2%.] |

| • | Homebuilding cash and cash equivalents totaled [removed: $973.0 million] [added: $1.1 billion] compared to [removed: $1.3 billion.] [added: $973.0 million.] |

| • | Homebuilding inventories totaled [removed: $9.2] [added: $9.9] billion compared to [removed: $8.3] [added: $9.2] billion. |

| • | Homes in inventory totaled [removed: 26,200] [added: 29,700] compared to [removed: 23,100.] [added: 26,200.] |

| • | Owned lots totaled [removed: 125,000] [added: 124,300] compared to [removed: 112,900,] [added: 125,000,] and lots controlled through option purchase contracts totaled [removed: 124,000] [added: 164,200] compared to [removed: 91,600.] [added: 124,000.] |

| • | Homebuilding debt was [removed: $2.5] [added: $2.4] billion compared to [removed: $2.8] [added: $2.5] billion. |

| • | Homebuilding debt to total capital [removed: was 24.0%,] improved [added: to 21.4%] from [removed: 29.2%.] [added: 24.0%.] |

Financial [removed: Services and Other:][added: Services:]

| • | Financial services [removed: and other] revenues increased [removed: 18%] [added: 7%] to [removed: $349.5] [added: $375.3] million. |

| • | Financial services [removed: and other] pre-tax income [removed: increased 27% to $112.8 million,] [added: was $117.8 million] compared to [removed: $89.1] [added: $124.5] million. |

| • | Financial services [removed: and other] pre-tax income as a percentage of financial services [removed: and other] revenues was [removed: 32.3%] [added: 31.4%] compared to [removed: 30.1%.] [added: 35.6%.] |

| • | Consolidated pre-tax income increased [removed: 18%] [added: 29%] to [removed: $1.6] [added: $2.1] billion compared to [removed: $1.4] [added: $1.6] billion. |

| • | Consolidated pre-tax income as a percentage of consolidated revenues was [removed: 11.4%] [added: 12.8%] compared to [removed: 11.1%.] [added: 11.4%.] |

During fiscal 2018, demand for new homes across most of our markets was strong, particularly at affordable price points, and the supply of new homes for sale remained limited.

Sales prices for both new and resale homes have increased across most of our markets over the past several years, which has generally reduced housing affordability.

During fiscal 2018, interest rates on mortgage loans increased, which further impacted affordability.

These conditions have resulted in some recent moderation of demand for new homes, particularly at higher price points.

However, we continue to see solid economic fundamentals and a limited supply of homes at affordable prices across most of our markets.

The increase in 2018 compared to 2017 was primarily the result of an increase in our home sales gross margin.

During fiscal 2018, we reduced sales incentives or raised prices in communities where we were achieving our targeted sales pace, while striving to ensure our product offerings remained affordable.

As land and construction costs have generally increased, we have leveraged our scale and relationships to control these increases.

Within our homebuilding land and lot portfolio, our lots controlled under option purchase contracts represent 57% of the lots owned and controlled at September 30, 2018 compared to 50% at September 30, 2017.

Therefore, we expect that housing market conditions will continue to vary across our markets.

If the U.S. economy remains strong, we expect to see continued strength in housing demand, concentrated in markets where job growth is occurring and new home prices remain affordable relative to household incomes.

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

| • | Pursuing acquisitions of companies to enhance and improve the returns of our homebuilding and other operations. |

Forestar:

| • | Forestar’s revenues were $109.2 million, which included $39.1 million of revenues from land and lot sales to our homebuilding segment. |

| • | Forestar’s pre-tax income was $48.7 million, which included gross profit of $9.0 million from land and lot sales to our homebuilding segment. |

| • | Owned and controlled lots totaled 20,100. Of these lots, 13,600 were under contract to sell to or subject to a right of first offer with D.R. Horton. |

| • | Forestar’s cash and cash equivalents totaled $318.8 million. |

| • | Forestar’s inventories totaled $498.0 million. |

| • | Income tax expense was $597.7 million, which included a charge of $108.7 million as a result of the Tax Cuts and Jobs Act, compared to $563.7 million. |

| • | Net income attributable to D.R. Horton increased 41% to $1.5 billion compared to $1.0 billion. |

| • | Diluted earnings per common share attributable to D.R. Horton increased 39% to $3.81 compared to $2.74. |

| • | Debt to total capital improved to 26.3% from 27.0%. |

Our operating segments are our 46 homebuilding divisions, our majority-owned Forestar lot development operations, our financial services operations and our other business activities.

2018 versus 2017

The increases in the value of sales orders were due to increased volume.

The average selling price of homes sold during fiscal 2018 was $298,800, essentially unchanged from the prior year.

The increase in net sales orders reflects the strength in demand in most of our markets, particularly at affordable price points.

Our Chicago and Phoenix markets contributed the most to higher sales volumes in our Midwest and Southwest regions, respectively.

Our sales order cancellation rate was 22% in 2017 compared to 23% in 2016.

| Southeast | | 277,700 | | | | 272,300 | | | | 276,800 | | | | 2 | % | | (2 | )% |

Our acquisition of the assets of Permian Homes contributed 159 homes valued at $44.2 million to the sales order backlog of our South Central region during fiscal 2018.

2018 versus 2017

Revenues from home sales increased 14% to $15.5 billion (51,857 homes closed) in 2018 from $13.7 billion (45,751 homes closed) in 2017.

The increase in home sales revenues reflects the strength in demand in most of our markets, particularly at affordable price points.

The average selling price of homes closed during fiscal 2018 was $298,900, essentially unchanged from the prior year.

| Gain on sale of assets | | (0.1 | )% | | — | % | | — | % |

2018 versus 2017

These actions could cause our gross profit margins to fluctuate in future periods.

Land sales and other revenues during fiscal 2018 included $39.5 million from the sale of a parcel of land in Phoenix.

During fiscal 2017, demand for new homes continued to reflect the stable to moderately improved trends we experienced across most of our operating markets in fiscal 2016.

We plan to continue to expand our product offerings across more of our operating markets.

During the year, we also made significant progress in increasing our lots controlled under option purchase contracts to 50% of our total lots owned and controlled compared to 45% in the prior year.

If the U.S. economy continues to improve, we expect to see slow to moderate growth in housing demand, concentrated in markets where job growth is occurring.

| • | Diluted earnings per share increased 16% to $2.74 compared to $2.36. |

_____________

The increase in net sales orders reflects the continued stable to moderately improved market conditions in most of our markets.

2016 versus 2015

The increase in the value of sales orders was due to increased volume and to a lesser extent, increased selling prices in most regions.

Our Florida markets contributed most to the higher volume in our Southeast region and our Las Vegas market contributed most to the higher volume in our West region.

The increase in home sales revenues reflects the continued stable to moderately improved market conditions in most of our markets.

Revenues from home sales increased 13% to $11.8 billion (40,309 homes closed) in 2016 from $10.5 billion (36,648 homes closed) in 2015.

The decrease in homes closed in our Midwest region was primarily due to lower volume in our Chicago and Denver markets.

Our gross profit margins have remained relatively stable in recent years and based on current market conditions, we expect continued stability; however, our gross profit margins could fluctuate in future periods.

Earnest money and pre-acquisition cost write-offs for fiscal 2016 and 2015 were $11.1 million and $15.4 million, respectively.

This improvement in SG&A expense as a percentage of homebuilding revenues was achieved primarily through leverage of our fixed overhead costs resulting from the increase in homebuilding revenues.

Compensation costs represented 70% of SG&A costs in fiscal 2017 and 68% of SG&A costs in both fiscal 2016 and 2015.

Other income in fiscal 2016 included a $4.5 million gain from the sale of an investment in debt securities.

See Note A.

Pre-tax income in 2016 was reduced by inventory impairment charges of $6.0 million in our Phoenix market.

As a percentage of homebuilding revenues, SG&A expenses increased by 10 basis points in 2016 compared to 2015.

Pre-tax income was reduced by inventory impairment charges of $0.3 million in 2016 and $20.4 million in 2015.

The 2015 impairment charges primarily related to strategic decisions to sell land.

Home sales gross profit percentage decreased 110 basis points in 2016 compared to 2015, largely due to the average cost of homes increasing by more than the average selling price.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | September 30, 2016 | | | | | | | | | | | | | | | | | | |

| East | | $ | 448.9 | | | $ | 415.4 | | | $ | 26.8 | | | $ | — | | | $ | 891.1 | |

| Midwest | | 239.3 | | | | 189.5 | | | | 11.9 | | | | 0.5 | | | | 441.2 | | |

| Southeast | | 1,149.8 | | | | 870.1 | | | | 44.8 | | | | 5.6 | | | | 2,070.3 | | |

| South Central | | 1,009.6 | | | | 1,032.0 | | | | 14.6 | | | | 19.4 | | | | 2,075.6 | | |

| Southwest | | 163.8 | | | | 189.6 | | | | 14.1 | | | | 3.6 | | | | 371.1 | | |

| West | | 906.6 | | | | 1,315.2 | | | | 22.5 | | | | 3.3 | | | | 2,247.6 | | |

| Corporate and unallocated (1) | | 116.7 | | | | 123.4 | | | | 3.1 | | | | 0.8 | | | | 244.0 | | |

| | | $ | 4,034.7 | | | $ | 4,135.2 | | | $ | 137.8 | | | $ | 33.2 | | | $ | 8,340.9 | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | September 30, 2016 | | | | | | | | | |

| Southeast | | 30,600 | | | 36,100 | | | 66,700 | | | 7,600 |

| South Central | | 37,700 | | | 25,100 | | | 62,800 | | | 7,000 |

The hedging instruments related to IRLCs are classified and accounted for as derivative instruments in an economic hedge, with gains and losses recognized in [removed: financial services] revenues in the consolidated statements of operations.

Hedging instruments related to funded, uncommitted loans are accounted for at fair value, with changes recognized in [removed: financial services] revenues in the consolidated statements of operations, along with changes in the fair value of the funded, uncommitted loans.

The net fair value change, which for the years ended September 30, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] was not significant, is recognized in current earnings.

At September 30, [removed: 2017,] [added: 2018,] hedging instruments used to mitigate interest rate risk related to uncommitted mortgage loans held for sale and uncommitted IRLCs totaled a notional amount of [removed: $720.0 million.][added: $1.0 billion.]

Uncommitted IRLCs totaled a notional amount of approximately [removed: $419.3] [added: $459.7] million and uncommitted mortgage loans held for sale totaled a notional amount of approximately [removed: $330.7] [added: $575.9] million at September 30, [removed: 2017.][added: 2018.]

The following table sets forth principal cash flows by scheduled maturity, effective weighted average interest rates and estimated fair value of our debt obligations as of September 30, [removed: 2017.][added: 2018.]

Because the mortgage repurchase facility is effectively secured by certain mortgage loans held for sale [removed: which] [added: that] are typically sold within 60 days, its outstanding balance is included in the most current period presented.

The interest rate for our variable rate debt represents the weighted average interest rate in effect at September 30, [removed: 2017.][added: 2018.]

| | | Fiscal Year Ending September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value at September 30, [removed: 2017] [added: 2018] | | |

| | | [removed: 2018 | | | |] 2019 | | | | 2020 | | | | 2021 | | | | 2022 | | | | [added: 2023 | | | |] Thereafter | | | | Total | | | | | | |

| Average interest rate | | [removed: 3.8] [added: 3.9] | | % | | [removed: 3.9] [added: 4.0] | | % | | [removed: 4.2] [added: 2.8] | | % | | [removed: —] [added: 4.5] | | % | | [removed: 4.5] [added: 5.5] | | % | | [removed: 5.5] [added: —] | | % | | [removed: 4.5] [added: 4.3] | | % | | | | |

| Variable rate | | $ | [removed: 420.0] [added: 637.7] | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | [removed: 420.0] [added: 637.7] | | | $ | [removed: 420.0] [added: 637.7] | |

| Average interest rate | | [removed: 3.3] [added: 4.1] | | % | | — | | % | | — | | % | | — | | % | | — | | % | | — | | % | | [removed: 3.3] [added: 4.1] | | % | | | | |

In our opinion, the [removed: accompanying] consolidated [removed: balance sheets and the related consolidated] [added: financial] statements [removed: of operations and comprehensive income, total equity, and cash flows] [added: referred to above] present fairly, in all material respects, the financial position of [removed: D.R. Horton, Inc. and its subsidiaries] [added: the Company] as of September 30, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of their operations and their cash flows for each of the three years in the period ended September 30, [removed: 2017] [added: 2018] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the [removed: Committee of Sponsoring Organizations of the Treadway Commission (COSO).][added: COSO.]

The [removed: Company’s] [added: Company's] management is responsible for these [added: consolidated] financial statements, for maintaining effective internal control over financial [removed: reporting] [added: reporting,] and for its assessment of the effectiveness of internal control over financial reporting, included in [removed: Management’s] [added: Management's] Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on [removed: these] [added: the Company’s consolidated] financial statements and on the [removed: Company’s] [added: Company's] internal control over financial reporting based on our [removed: integrated] audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the [added: consolidated] financial statements are free of material [removed: misstatement] [added: misstatement, whether due to error or fraud,] and whether effective internal control over financial reporting was maintained in all material respects.

Our audits [removed: of the financial statements] [added: also] included [removed: examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing] [added: evaluating] the accounting principles used and significant estimates made by management, [removed: and] [added: as well as] evaluating the overall [added: presentation of the consolidated] financial [removed: statement presentation.][added: statements.]

Fort Worth, [removed: Texas][added: TX]

| Fixed rate | | $ | 504.5 | | | $ | 618.9 | | | $ | 400.0 | | | $ | 350.0 | | | $ | 700.0 | | | $ | — | | | $ | 2,573.4 | | | $ | 2,607.1 | |

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of D.R. Horton, Inc. and its subsidiaries as of September 30, 2018 and 2017 and the related consolidated statements of operations and comprehensive income, total equity, and cash flows for each of the three years in the period ended September 30, 2018, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of September 30, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Basis for Opinions

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Definition and Limitations of Internal Control over Financial Reporting

November 16, 2018

We have served as the Company’s auditor since 2008.

| Fixed rate | | $ | 409.6 | | | $ | 500.8 | | | $ | 500.7 | | | $ | — | | | $ | 350.0 | | | $ | 700.0 | | | $ | 2,461.1 | | | $ | 2,595.2 | |

November 15, 2017

D.R. Horton, Inc. is the largest homebuilding company in the United States as measured by number of homes [removed: closed and revenues.][added: closed.]

We construct and sell homes through our operating divisions in [removed: 79] [added: 81] markets in [removed: 26] [added: 27] states, under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes, Freedom Homes and Pacific Ridge Homes.

For the year ended September 30, [removed: 2017,] [added: 2018,] we closed [removed: 45,751] [added: 51,857] homes with an average closing price of [removed: $298,400.][added: $298,900.]

Our business operations consist of homebuilding, [added: a majority-owned residential lot development company,] financial services and other activities.

Our homebuilding operations generate most of their revenues from the sale of completed [removed: homes, with] [added: homes and to] a lesser [removed: amount] [added: extent] from the sale of land and lots.

Approximately [removed: 88%] [added: 89%] of our home sales revenue in fiscal [removed: 2017] [added: 2018] was generated from the sale of single-family detached homes, with the remainder from the sale of attached homes, such as townhomes, [removed: duplexes, triplexes] [added: duplexes] and [removed: condominiums.][added: triplexes.]

In addition to our [removed: core homebuilding] [added: homebuilding, Forestar] and financial services operations, we have subsidiaries that engage in other business activities.

One of these subsidiaries, DHI Communities, [removed: recently began] [added: is] developing and constructing multi-family rental properties on land parcels we already owned and currently has four projects under active [removed: construction.][added: construction and two projects that are substantially complete.]

[removed: Costs incurred by DHI Communities totaled $93.7 million at] [added: At] September 30, [removed: 2017] [added: 2018] and [removed: are included in] [added: 2017,] property and equipment in the [removed: Financial Services and Other section of our] consolidated balance [removed: sheet.][added: sheets included $171.4 million and $93.7 million, respectively, of assets owned by DHI Communities.]

The combined assets of all of our subsidiaries engaged in other business activities totaled [removed: $143.3] [added: $198.9] million and [removed: $54.9] [added: $143.3] million at September 30, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively, and the combined pre-tax loss of these subsidiaries was [removed: $11.7] [added: $7.7] million, [removed: $9.0] [added: $11.7] million and [removed: $0] [added: $9.0 million] in fiscal [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] respectively.

Our principal executive offices are located at 1341 Horton Circle, Arlington, Texas [removed: 76011] [added: 76011,] and our telephone number is (817) 390-8200.

[removed: We currently operate] [added: Our homebuilding business operates] in [removed: 26] [added: 27] states and [removed: 79] [added: 81] markets, which provides us with geographic diversification in our homebuilding inventory investments and our sources of revenues and earnings.

| Delaware | | [removed: Northern] [added: Central] Delaware | | Louisiana | | Baton Rouge |

| Georgia | | Savannah | | [added: Oklahoma] | | [removed: Lafayette] [added: Oklahoma City] |

| | | Suburban Washington, D.C. | | [removed: Texas] | | [removed: Austin] [added: Dallas] |

| | | [removed: Wilmington] [added: Raleigh/Durham] | | | | New Braunfels/San Marcos |

| Pennsylvania | | Philadelphia | | | | [removed: San Antonio] |

| South Carolina | | Charleston | | | | [added: Southwest Region] |

| | | Greenville/Spartanburg | | [removed: Arizona] | | [removed: Phoenix] [added: Tucson] |

| | | [removed: Myrtle Beach] [added: Hilton Head] | | New Mexico | | Albuquerque |

| Virginia | | Northern Virginia | | | | [added: West Region] |

| | | Midwest Region | | [removed: California] | | [removed: Bakersfield] [added: Fresno] |

| [removed: Colorado] | | [removed: Denver] | | | | Bay Area |

| | | Fort Collins | | | | [removed: Fresno] [added: Orange County] |

| Illinois | | Chicago | | | | [removed: Los Angeles] [added: Riverside] County |

| Minnesota | | Minneapolis/St. Paul | | | | [removed: Orange] [added: San Bernardino] County |

| | | Southeast Region | | | | [removed: Sacramento] [added: Ventura County] |

| | | [removed: Huntsville] | | | | San Diego County |

| | | [removed: Mobile] [added: Mobile/Baldwin County] | | | | [removed: Ventura County] [added: Maui] |

| Florida | | Fort Myers/Naples | | | | [removed: Maui] [added: Reno] |

| | | [removed: Lakeland] [added: Tuscaloosa] | | Nevada | | Las Vegas |

| | | Miami/Fort Lauderdale | | [removed: Oregon] | | [removed: Portland] [added: Spokane] |

| | | [removed: Ocala] [added: Lakeland] | | Utah | | Salt Lake City |

| | | [removed: Orlando] [added: Melbourne/Vero Beach] | | Washington | | Seattle/Tacoma/Everett |

| | | Pensacola/Panama City | | | | [removed: Vancouver] |

We are the largest homebuilding company in the United States in fiscal [removed: 2017] [added: 2018] as measured by number of homes [removed: closed and revenues,] [added: closed,] and we are also one of the largest builders in many of the markets in which we operate.

| • | Enhanced leverage of our general and administrative activities, which allows us flexibility to adjust to changes in market conditions and compete effectively [removed: in each of] [added: across] our markets. |

At September 30, [removed: 2017,] [added: 2018,] we had [removed: 41] [added: 46] separate homebuilding operating divisions, many of which operate in more than one market area.

Following is a summary of our homebuilding activities that are decentralized in our local operating divisions, and the control and oversight functions that are centralized in our regional and corporate [removed: offices:][added: offices.]

We acquire land for use in our homebuilding [added: and Forestar] operations after we have completed due diligence and generally after we have obtained the rights (known as entitlements) to begin development or construction work resulting in an acceptable number of residential lots.

Our homebuilding operations are our core business, generating 97% of our consolidated revenues of $16.1 billion in fiscal 2018 and 98% of our consolidated revenues of $14.1 billion and $12.2 billion in fiscal 2017 and 2016, respectively.

During fiscal 2018, we acquired 75% of the outstanding shares of Forestar Group Inc. (Forestar) for $558.3 million in cash (the acquisition).

Forestar is a publicly traded residential lot development company listed on the New York Stock Exchange under the ticker symbol “FOR.” The acquisition is a component of our strategy to expand relationships with land developers and increase the optioned portion of our land and lot position to enhance operational efficiency and returns.

Further information regarding this acquisition is provided in the Business Acquisitions section included herein.

Our SEC filings are also available to the public on the SEC’s website at www.sec.gov.

| | | Northern Delaware | | | | Lafayette |

| Maryland | | Baltimore | | Texas | | Austin |

| New Jersey | | Northern New Jersey | | | | Fort Worth |

| | | Southern New Jersey | | | | Houston |

| North Carolina | | Charlotte | | | | Killeen/Temple/Waco |

| | | Greensboro/Winston-Salem | | | | Midland/Odessa |

| | | Wilmington | | | | San Antonio |

| | | Columbia | | Arizona | | Phoenix |

| | | Myrtle Beach | | | | |

| | | Southern Virginia | | California | | Bakersfield |

| Colorado | | Denver | | | | Los Angeles County |

| Indiana | | Indianapolis | | | | Sacramento |

| Alabama | | Birmingham | | Hawaii | | Hawaii |

| | | Huntsville | | | | Kauai |

| | | Montgomery | | | | Oahu |

| | | Jacksonville | | Oregon | | Portland/Salem |

| | | Ocala | | | | Vancouver |

| | | Orlando | | | | |

We are a party to a small number of joint ventures.

Joint ventures are consolidated if we have a controlling interest, or accounted for under the equity method of accounting if we have a significant influence, but not control.

Forestar Residential Lot Development Operations

During fiscal 2018, we acquired 75% of the outstanding shares of Forestar.

Forestar is a residential lot development company with operations in 24 markets and 14 states as of September 30, 2018.

The acquisition is a component of our homebuilding strategy to expand relationships with land developers and increase the optioned portion of our land and lot position to enhance operational efficiency and returns.

As the controlling shareholder of Forestar, we strongly influence the strategic direction and operations of Forestar.

Multi-Family Rental Properties

Through DHI Communities, a 100% owned subsidiary, we are developing and constructing multi-family rental properties on land parcels we already owned.

We currently have four projects under active construction and two projects that are substantially complete.

Forestar is a publicly traded residential lot development company with operations in 24 markets and 14 states as of September 30, 2018.

The transaction costs incurred by us related to this acquisition totaled $7.2 million, of which $5.3 million was incurred during fiscal 2018 and expensed to selling, general and administrative expense.

Our homebuilding operations are the most substantial part of our business, comprising 98% of consolidated revenues, which totaled $14.1 billion in fiscal 2017.

Our SEC filings are also available to the public on the SEC’s website at www.sec.gov, and the public may read and copy any document we file at the SEC’s public reference room located at 100 F Street NE, Washington, D.C. 20549.

Further information on the operation of the public reference room can be obtained by calling the SEC at 1-800-SEC-0330.

Our homebuilding business began in the Dallas/Fort Worth area, which is still one of our largest homebuilding operations and home to our corporate headquarters.

| Maryland | | Baltimore | | Oklahoma | | Oklahoma City |

| New Jersey | | North New Jersey | | | | Dallas |

| | | South New Jersey | | | | El Paso |

| North Carolina | | Charlotte | | | | Fort Worth |

| | | Fayetteville | | | | Houston |

| | | Greensboro/Winston-Salem | | | | Killeen/Temple/Waco |

| | | Raleigh/Durham | | | | Midland/Odessa |

| | | Columbia | | | | Southwest Region |

| | | Hilton Head | | | | Tucson |

| | | | | | | West Region |

| | | | | | | Riverside County |

| Alabama | | Birmingham | | | | San Bernardino County |

| | | Montgomery | | Hawaii | | Hawaii |

| | | Tuscaloosa | | | | Kauai |

| | | Jacksonville | | | | Oahu |

| | | Melbourne/Vero Beach | | | | Reno |

We are a party to a small number of joint ventures, all of which are consolidated in our financial statements.

A portion of the contracts in backlog will not result in closings due to cancellations.

Forestar is and will continue to be a publicly-traded residential and real estate development company with operations currently in 14 markets and 10 states, where it owns, directly or through joint ventures, interests in 44 residential and mixed-use projects.

Our alignment with Forestar advances our strategy of increasing our access to high-quality optioned land and lot positions to enhance operational efficiency and returns.

In May and July of 2014, we received Notices of Violation from the United States Environmental Protection Agency related to stormwater compliance at certain of our sites in [removed: the Southeast.][added: our Southeast region.]

In October 2018, we reached an agreement in principle with the United States Environmental Protection Agency to settle an alleged violation of the wetlands provisions of the Clean Water Act at one of our development sites in our Southeast region.

Upon finalizing the agreement, we expect we will be required to pay a penalty of $267,000.

For the fiscal year ended September 30, [removed: 2017][added: 2018]

Yes ý No [removed: ¨][added: o]

Yes [removed: ¨] [added: o] No ý

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| Large accelerated filer ý | | Accelerated filer [removed: ¨] [added: o] | | Non-accelerated filer [removed: ¨ (Do not check if a smaller reporting company)] [added: o] | | Smaller reporting company [removed: ¨] [added: o] | | Emerging growth company [removed: ¨] [added: o] |

As of March 31, [removed: 2017,] [added: 2018,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $11,733,685,000] [added: $15,499,559,000] based on the closing price as reported on the New York Stock Exchange.

As of November [removed: 8, 2017,] [added: 7, 2018,] there were [removed: 384,087,900] [added: 388,133,243] shares of the registrant’s common stock, par value $.01 per share, issued and [removed: 375,037,829] [added: 376,274,635] shares outstanding.

Portions of the registrant’s definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders are incorporated herein by reference (to the extent indicated) in Part III.

[removed: 2017] [added: 2018] ANNUAL REPORT ON FORM 10-K

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| [ITEM [removed: 6.](#s261BB6CB58964A5663D0E4875ABA738E)] [added: 6.](#s798421B628A61D1B5190952D47FB881B)] | [Selected Financial [removed: Data](#s261BB6CB58964A5663D0E4875ABA738E)] [added: Data](#s798421B628A61D1B5190952D47FB881B)] | [removed: [25](#s261BB6CB58964A5663D0E4875ABA738E)] [added: [26](#s798421B628A61D1B5190952D47FB881B)] |

| [ITEM [removed: 7.](#s27238FEC2ECB095F551DE4875ADD8CE1)] [added: 7.](#sD6A0591CDED79D0641A6952D482B81AB)] | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s27238FEC2ECB095F551DE4875ADD8CE1)] [added: Operations](#sD6A0591CDED79D0641A6952D482B81AB)] | [removed: [26](#s27238FEC2ECB095F551DE4875ADD8CE1)] [added: [27](#sD6A0591CDED79D0641A6952D482B81AB)] |

| [ITEM [removed: 7A.](#sA6AE403C7762BBF77ADFE487543DC40E)] [added: 7A.](#s5EDED7B6341A2277AD49952D43BFD82E)] | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sA6AE403C7762BBF77ADFE487543DC40E)] [added: Risk](#s5EDED7B6341A2277AD49952D43BFD82E)] | [removed: [57](#sA6AE403C7762BBF77ADFE487543DC40E)] [added: [63](#s5EDED7B6341A2277AD49952D43BFD82E)] |

| [ITEM [removed: 8.](#s27E9FDC469FCDB0D53B4E4875DB49503)] [added: 8.](#s50B7AAB03370790A5352952D4A75FFFD)] | [Financial Statements and Supplementary [removed: Data](#s27E9FDC469FCDB0D53B4E4875DB49503)] [added: Data](#s50B7AAB03370790A5352952D4A75FFFD)] | [removed: [59](#s27E9FDC469FCDB0D53B4E4875DB49503)] [added: [66](#s50B7AAB03370790A5352952D4A75FFFD)] |

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| [PART [removed: III](#sEC0B18915EC3BDC0EF71E4876351CEB9)] [added: III](#s4A0AE6DD18BA75905899952D50C75A33)] | | |

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10-K 1 a2018930-10k.htm 10-K

Yes ý No o

Yes ý No o

Yes o No ý

| [PART I](#s2FE140799D45B0156BC9952D468C0B65) | | |

| [PART II](#s1751BD36F0F676608D17952D47A61C99) | | |

| [PART IV](#s565618B21D1B0ED3B800952D51BFC9A7) | | |

| [SIGNATURES](#s2DB8B81629AD2601B4AA952D52480B22) | | [129](#s2DB8B81629AD2601B4AA952D52480B22) |

10-K 1 a2017930-10k.htm 10-K

| [PART I](#sB34AED9AA520A2151230E487593A5C06) | | |

| [PART II](#s2D0422F4DD041F1437D7E4875A7133D3) | | |

| [PART IV](#sB3E62D6AFF5D02A31B92E487644CA425) | | |

| [SIGNATURES](#s2DD0D38F83BB3DAC3CB3E48764A97757) | | [113](#s2DD0D38F83BB3DAC3CB3E48764A97757) |

[removed: In addition to our inventories of land, lots and homes, we] [added: We also] own office buildings totaling approximately [removed: 1,000,000] [added: 1.0 million] square feet, and we lease approximately [removed: 529,000] [added: 515,000] square feet of office space under leases expiring through [removed: November 2023.][added: June 2024.]

These properties are located in our various operating markets to house our [removed: homebuilding] [added: homebuilding, Forestar] and financial services operating divisions and our regional and corporate offices.

We own ranch land and improvements totaling approximately 93,600 [removed: acres] [added: acres,] which we use to conduct ranching and agricultural activities and to host company meetings and events.

Our homebuilding and Forestar operations own inventories of land, lots and homes, and DHI Communities owns multi-family rental properties under construction as part of the ordinary course of our business.

[added: Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “DHI.”] As of November [removed: 8, 2017,] [added: 7, 2018,] the closing price of our common stock on the NYSE was [removed: $45.41,] [added: $37.59,] and there were approximately [removed: 373] [added: 358] holders of record.

In November [removed: 2017,] [added: 2018,] our Board of Directors approved a cash dividend of [removed: $0.125] [added: $0.15] per common share, payable on December [removed: 15, 2017,] [added: 10, 2018,] to stockholders of record on [removed: December 1, 2017.][added: November 26, 2018.]

During fiscal years [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

The following graph illustrates the cumulative total stockholder return on D.R. Horton common stock for the last five fiscal years through September 30, [removed: 2017,] [added: 2018,] compared to the S&P 500 Index and the S&P 1500 Homebuilding Index.

The comparison assumes a hypothetical investment in D.R. Horton common stock and in each of the foregoing indices of $100 at September 30, [removed: 2012] [added: 2013] and assumes that all dividends were reinvested.

[removed: ][added: ]

| | [removed: 2012 | | | |] 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | | 2017 | | | [added: | 2018 | | |]

We may repurchase shares of our common stock from time to time pursuant to our common stock repurchase authorization.

The following table sets forth information concerning our common stock repurchases during the three months ended September 30, 2018.

All share repurchases were made in accordance with the safe harbor provisions of Rule 10b-18 under the Securities Exchange Act of 1934, as amended.

| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | |

| | Total Number of Shares Purchased (1) | | | Average Price Paid per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1) (In millions) | | |

| July 1, 2018 - July 31, 2018 | 640,000 | | | $ | 43.94 | | | 640,000 | | | $ | — | |

| August 1, 2018 - August 31, 2018 | 560,000 | | | 43.78 | | | | 560,000 | | | 375.5 | | |

| September 1, 2018 - September 30, 2018 | — | | | — | | | | — | | | 375.5 | | |

| Total | 1,200,000 | | | $ | 43.87 | | | 1,200,000 | | | $ | 375.5 | |

______________

| (1) | Shares purchased in July 2018 for $28.1 million were part of a $200 million common stock repurchase authorization that expired July 31, 2018. The dollar value of shares that could be purchased following these transactions was $97.0 million up to expiration of this authorization. Effective August 1, 2018, our Board of Directors authorized the repurchase of up to $400 million of our common stock effective through September 30, 2019. During August 2018, we purchased 560,000 shares of our common stock for $24.5 million, resulting in a remaining authorization of $375.5 million at September 30, 2018. |

| D.R. Horton, Inc. | $ | 100.00 | | | $ | 106.24 | | | $ | 153.42 | | | $ | 159.48 | | | $ | 213.53 | | | $ | 228.09 | |

| S&P 500 Index | 100.00 | | | | 119.73 | | | | 119.00 | | | | 137.36 | | | | 162.92 | | | | 192.10 | | |

| S&P 1500 Homebuilding Index | 100.00 | | | | 102.99 | | | | 125.11 | | | | 124.37 | | | | 172.15 | | | | 162.82 | | |

| | |

| --- | --- |

Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “DHI.” The following table sets forth, for the periods indicated, the range of high and low sales prices for our common stock, as reported by the NYSE, and the quarterly cash dividends declared per common share.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Year Ended September 30, 2017 | | | | | | | | | | | | Year Ended September 30, 2016 | | | | | | | | | | |

| | High | | | | Low | | | | Declared Dividends | | | | High | | | | Low | | | | Declared Dividends | | |

| 1st Quarter | $ | 30.62 | | | $ | 26.69 | | | $ | 0.10 | | | $ | 33.10 | | | $ | 28.45 | | | $ | 0.08 | |

| 2nd Quarter | 34.06 | | | | 27.21 | | | | 0.10 | | | | 31.64 | | | | 22.97 | | | | 0.08 | | |

| 3rd Quarter | 34.94 | | | | 31.98 | | | | 0.10 | | | | 32.51 | | | | 28.82 | | | | 0.08 | | |

| 4th Quarter | 40.01 | | | | 34.06 | | | | 0.10 | | | | 34.56 | | | | 29.64 | | | | 0.08 | | |

Effective August 1, 2016, our Board of Directors authorized the repurchase of up to $100 million of our common stock effective through July 31, 2017.

During the third quarter of fiscal 2017, we repurchased 1,850,000 shares of our common stock for $60.6 million, resulting in a remaining authorization of $39.4 million.

Effective August 1, 2017, our Board of Directors authorized the repurchase of up to $200 million of our common stock effective through July 31, 2018.

As there were no repurchases of common stock during the fourth quarter of fiscal 2017, all of the $200 million authorization was remaining at September 30, 2017, and no common stock has been repurchased subsequent to September 30, 2017.

| D.R. Horton, Inc. | $ | 100.00 | | | $ | 95.10 | | | $ | 101.04 | | | $ | 145.90 | | | $ | 151.67 | | | $ | 203.07 | |

| S&P 500 Index | 100.00 | | | | 119.34 | | | | 142.89 | | | | 142.02 | | | | 163.93 | | | | 194.44 | | |

| S&P 1500 Homebuilding Index | 100.00 | | | | 103.93 | | | | 107.04 | | | | 130.03 | | | | 129.26 | | | | 178.92 | | |

The [added: following selected financial] data [added: are derived from our consolidated financial statements and] should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 1A, “Risk Factors,” Item 8, “Financial Statements and Supplementary Data,” and all other financial data contained in this annual report on Form 10-K.

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| [added: Consolidated] Operating Data: | | | | | | | | | | | | | | | | | | | |

| Income tax expense | [removed: 563.7] [added: 597.7] | | | | [removed: 467.2] [added: 563.7] | | | | [removed: 372.7] [added: 467.2] | | | | [removed: 280.7] [added: 372.7] | | | | [removed: 195.1] [added: 280.7] | | |

| Net income | [removed: 1,038.4] [added: 1,462.3] | | | | [removed: 886.3] [added: 1,038.4] | | | | [removed: 750.7] [added: 886.3] | | | | [removed: 533.5] [added: 750.7] | | | | [removed: 462.7] [added: 533.5] | | |

| Net income per [removed: share:] [added: common share attributable to D.R. Horton, Inc.:] | | | | | | | | | | | | | | | | | | | |

| Basic | [removed: 2.77] [added: 3.88] | | | | [removed: 2.39] [added: 2.77] | | | | [removed: 2.05] [added: 2.39] | | | | [removed: 1.57] [added: 2.05] | | | | [removed: 1.44] [added: 1.57] | | |

| Diluted | [removed: 2.74] [added: 3.81] | | | | [removed: 2.36] [added: 2.74] | | | | [removed: 2.03] [added: 2.36] | | | | [removed: 1.50] [added: 2.03] | | | | [removed: 1.33] [added: 1.50] | | |

| Cash dividends declared per common share | [removed: 0.40] [added: 0.50] | | | | [removed: 0.32] [added: 0.40] | | | | [removed: 0.25] [added: 0.32] | | | | [removed: 0.1375] [added: 0.25] | | | | [removed: 0.1875] [added: 0.1375] | | |

| [added: Consolidated] Balance Sheet Data: | | | | | | | | | | | | | | | | | | | |

| Cash and cash equivalents [removed: and marketable securities] | $ | [removed: 1,007.8] [added: 1,473.1] | | | $ | [removed: 1,303.2] [added: 1,007.8] | | | $ | [removed: 1,383.8] [added: 1,303.2] | | | $ | [removed: 661.8] [added: 1,383.8] | | | $ | [removed: 977.4] [added: 661.8] | |

| Inventories | [removed: 9,237.1] [added: 10,395.0] | | | | [removed: 8,340.9] [added: 9,237.1] | | | | [removed: 7,807.0] [added: 8,340.9] | | | | [removed: 7,700.5] [added: 7,807.0] | | | | [removed: 6,197.4] [added: 7,700.5] | | |

| Total assets | [removed: 12,184.6] [added: 14,114.6] | | | | [removed: 11,558.9] [added: 12,184.6] | | | | [removed: 11,151.0] [added: 11,558.9] | | | | [removed: 10,185.4] [added: 11,151.0] | | | | [removed: 8,838.4] [added: 10,185.4] | | |

| Notes payable [removed: (1)] | [removed: 2,871.6] [added: 3,203.5] | | | | [removed: 3,271.3] [added: 2,871.6] | | | | [removed: 3,811.5] [added: 3,271.3] | | | | [removed: 3,665.7] [added: 3,811.5] | | | | [removed: 3,491.0] [added: 3,665.7] | | |

| Total equity | [removed: 7,747.6] [added: 9,158.9] | | | | [removed: 6,793.0] [added: 7,747.6] | | | | [removed: 5,895.4] [added: 6,793.0] | | | | [removed: 5,119.7] [added: 5,895.4] | | | | [removed: 4,061.4] [added: 5,119.7] | | |

As described in Note A to the financial statements, we have changed the presentation of our consolidated balance sheets and statements of operations to present our homebuilding, Forestar, financial services and other operations on a combined basis.

The financial data in the tables below, including prior year amounts, reflect this presentation.

| Revenues | $ | 16,068.0 | | | $ | 14,091.0 | | | $ | 12,157.4 | | | $ | 10,824.0 | | | $ | 8,024.9 | |

| Cost of sales | 12,398.1 | | | | 11,042.8 | | | | 9,502.6 | | | | 8,535.7 | | | | 6,268.6 | | |

| Selling, general and administrative expense | 1,676.8 | | | | 1,471.6 | | | | 1,320.3 | | | | 1,186.0 | | | | 965.4 | | |

| Income before income taxes | 2,060.0 | | | | 1,602.1 | | | | 1,353.5 | | | | 1,123.4 | | | | 814.2 | | |

| Net income attributable to noncontrolling interests | 2.0 | | | | — | | | | — | | | | — | | | | — | | |

| Net income attributable to D.R. Horton, Inc. | 1,460.3 | | | | 1,038.4 | | | | 886.3 | | | | 750.7 | | | | 533.5 | | |

| | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | |

| Stockholders’ equity | 8,984.4 | | | | 7,747.1 | | | | 6,792.5 | | | | 5,894.3 | | | | 5,115.8 | | |

The following selected consolidated financial data are derived from our Consolidated Financial Statements.

| Revenues: | | | | | | | | | | | | | | | | | | | |

| Homebuilding | $ | 13,741.5 | | | $ | 11,861.8 | | | $ | 10,559.0 | | | $ | 7,858.5 | | | $ | 6,085.9 | |

| Financial Services | 349.5 | | | | 295.6 | | | | 265.0 | | | | 166.4 | | | | 173.4 | | |

| Inventory and land option charges | 40.2 | | | | 31.4 | | | | 60.3 | | | | 85.2 | | | | 31.1 | | |

| Gross profit — Homebuilding | 2,698.7 | | | | 2,359.2 | | | | 2,023.3 | | | | 1,589.9 | | | | 1,232.4 | | |

| Income before income taxes: | | | | | | | | | | | | | | | | | | | |

| Homebuilding | 1,489.3 | | | | 1,264.4 | | | | 1,018.3 | | | | 768.5 | | | | 589.8 | | |

| Financial Services and Other | 112.8 | | | | 89.1 | | | | 105.1 | | | | 45.7 | | | | 68.0 | | |

_____________

| | |

| --- | --- |

| (1) | Notes payable includes both homebuilding notes payable and amounts outstanding on our mortgage repurchase facility. |

| | [added: |] September 30, [added: 2018] | | | | | | | [added: | | | | | | | | | | | | | | | | | | | |]

| | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| | [added: |] (In millions) | | | | | | | [added: | | | | | | | | | | | | | | | | | | | |]

| Cash and cash equivalents | [added: |] $ | 973.0 | | | $ | [removed: 1,271.8] [added: 24.1] | | [added: | $ | 10.7 | | | $ | 1,007.8 | |]

| Restricted cash | [added: |] 9.3 | | | | [removed: 9.5] [added: 7.2] | | | [added: | — | | | | 16.5 | | |]

| Construction in progress and finished homes | [added: |] 4,606.0 | | | | [removed: 4,034.7] [added: —] | | | [added: | — | | | | 4,606.0 | | |]

| Residential land and lots — developed and under development | [added: |] 4,519.7 | | | | [removed: 4,135.2] [added: —] | | | [added: | — | | | | 4,519.7 | | |]

| Land held for development | [added: |] 101.0 | | | | [removed: 137.8] [added: —] | | | [added: | — | | | | 101.0 | | |]

| Land held for sale | [added: |] 10.4 | | | | [removed: 33.2] [added: —] | | | [added: | — | | | | 10.4 | | |]

| | [added: |] 9,237.1 | | | | [removed: 8,340.9] [added: —] | | | [added: | — | | | | 9,237.1 | | |]

| Deferred income taxes, net of valuation allowance of [removed: $11.2] [added: $17.7] million and [removed: $10.3] [added: $11.2] million at September 30, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively | [removed: 365.0] [added: 194.0] | | | | [removed: 476.3] [added: 365.0] | | |

| Property and equipment, net | [added: |] 194.4 | | | | [removed: 139.5] [added: 3.0] | | | [added: | 127.6 | | | | 325.0 | | |]

| Other assets | [added: |] 518.7 | | | | [removed: 456.2] [added: 42.2] | | | [added: | 5.0 | | | | 565.9 | | |]

| Goodwill | [added: |] 80.0 | | | | [added: — | | | | — | | | |] 80.0 | | |

| [added: | | Homebuilding | | | |] Financial Services [removed: and Other:] | | | | [added: Other (1)] | | | | [added: Consolidated | | |]

| Cash and cash equivalents [added: (a)] | [removed: 34.8] [added: $] | [added: 1,473.1] | | | [removed: 31.4] [added: $] | [added: 1,473.1] | | [added: | $ | — | | | $ | — | | | $ | 1,473.1 | |]

| Mortgage loans held for sale | [added: | — | | | |] 587.3 | | | | [removed: 654.0] [added: —] | | | [added: | 587.3 | | |]

| Property and equipment, net | [removed: 130.6] [added: 401.1] | | | | [removed: 55.9] [added: 325.0] | | |

| Other assets | [removed: 54.4 | | | | 43.4] [added: 51.6] | | |

| Total assets | $ | [removed: 12,184.6] [added: 14,114.6] | | | $ | [removed: 11,558.9] [added: 12,184.6] | |

| Accounts payable | [added: |] $ | 575.6 | | | $ | [removed: 537.0] [added: 1.5] | | [added: | $ | 3.3 | | | $ | 580.4 | |]

| Accrued expenses and other liabilities | [removed: 933.1 | | | | 917.1] [added: 49.4] | | |

| Notes payable | [added: |] 2,451.6 | | | | [removed: 2,798.3] [added: 420.0] | | | [added: | — | | | | 2,871.6 | | |]

| Accounts payable and other liabilities | [removed: 56.7] [added: $] | [added: 590.8] | | | [removed: 40.5] [added: $] | [added: 1,000.4] | | [added: | $ | 210.1 | | | $ | (49.1 | ) | | $ | 1,752.2 | |]

| Mortgage repurchase [removed: facility] [added: facility, maturing 2019] | [removed: 420.0] [added: 637.7] | | | | [removed: 473.0] [added: 420.0] | | |

| Total liabilities | [removed: 4,437.0] [added: 4,955.7] | | | | [removed: 4,765.9] [added: 4,437.0] | | |

| Common stock, $.01 par value, 1,000,000,000 shares authorized, [removed: 384,036,150] [added: 388,120,243] shares issued and [removed: 374,986,079] [added: 376,261,635] shares outstanding at September 30, [removed: 2017] [added: 2018] and [removed: 380,123,258] [added: 384,036,150] shares issued and [removed: 372,923,187] [added: 374,986,079] shares outstanding at September 30, [removed: 2016] [added: 2017] | [removed: 3.8] [added: 3.9] | | | | 3.8 | | |

| Additional paid-in capital | [removed: 2,992.2] [added: 3,085.0] | | | | [removed: 2,865.8] [added: 2,992.2] | | |

| Retained earnings | [removed: 4,946.0] [added: 6,217.9] | | | | [removed: 4,057.2] [added: 4,946.0] | | |

| Treasury stock, [removed: 9,050,071] [added: 11,858,608] shares and [removed: 7,200,071] [added: 9,050,071] shares at September 30, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively, at cost | [removed: (194.9] [added: (322.4] | | ) | | [removed: (134.3] [added: (194.9] | | ) |

| Stockholders’ equity | [removed: 7,747.1] [added: 8,984.4] | | | | [removed: 6,792.5] [added: 7,747.1] | | |

| Noncontrolling interests | [removed: 0.5] [added: 174.5] | | | | 0.5 | | |

| Total equity | [removed: 7,747.6] [added: 9,158.9] | | | | [removed: 6,793.0] [added: 7,747.6] | | |

| Total liabilities and equity | $ | [removed: 12,184.6] [added: 14,114.6] | | | $ | [removed: 11,558.9] [added: 12,184.6] | |

| | Year Ended September 30, | | | | | | | [removed: | | | |]

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| Revenues: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | |]

| Home sales | [added: |] $ | 13,653.2 | | | $ | [removed: 11,783.1] [added: —] | | | $ | [removed: 10,469.4] [added: —] | | [added: | $ | 13,653.2 | |]

| Land/lot sales and other | [added: |] 88.3 | | | | [removed: 78.7] [added: —] | | | | [removed: 89.6] [added: —] | | | [added: | 88.3 | | |]

| | [removed: 13,741.5] [added: $] | [added: 15,623.8] | | | [removed: 11,861.8] [added: $] | [added: 13,741.5] | | | [removed: 10,559.0] [added: $] | [added: 11,861.8] | |

| | 2018 | | | | 2017 | | |

| Construction in progress and finished homes | 5,086.3 | | | | 4,606.0 | | |

| Residential land and lots — developed and under development | 5,172.4 | | | | 4,519.7 | | |

| Land held for development | 96.1 | | | | 101.0 | | |

| Land held for sale | 40.2 | | | | 10.4 | | |

| | 10,395.0 | | | | 9,237.1 | | |

| Investment in unconsolidated entities | 11.0 | | | | — | | |

| Other assets | 701.9 | | | | 565.9 | | |

| Accounts payable | $ | 624.7 | | | $ | 580.4 | |

| Accrued expenses and other liabilities | 1,127.5 | | | | 985.0 | | |

| Notes payable | 3,203.5 | | | | 2,871.6 | | |

| Cost of sales | 12,398.1 | | | | 11,042.8 | | | | 9,502.6 | | |

| Equity in earnings of unconsolidated entities | (2.8 | | ) | | — | | | | — | | |

| Gain on sale of assets | (18.8 | | ) | | — | | | | (4.5 | | ) |

| Other (income) expense | (45.3 | | ) | | (25.5 | | ) | | (21.7 | | ) |

| Net income attributable to noncontrolling interests | 2.0 | | | | — | | | | — | | |

| Net income attributable to D.R. Horton, Inc. | $ | 1,460.3 | | | $ | 1,038.4 | | | $ | 886.3 | |

| Comprehensive income attributable to noncontrolling interests | 2.0 | | | | — | | | | — | | |

| Comprehensive income attributable to D.R. Horton, Inc. | $ | 1,460.3 | | | $ | 1,038.4 | | | $ | 884.9 | |

| Weighted average number of common shares | 376.6 | | | | 374.3 | | | | 371.0 | | |

| Adjusted weighted average number of common shares | 383.4 | | | | 378.9 | | | | 375.1 | | |

| Cash paid for shares withheld for taxes | — | | | | (5.9 | | ) | | — | | | | — | | | | — | | | | — | | | | (5.9 | | ) |

| Cash paid for shares withheld for taxes | — | | | | (5.1 | | ) | | — | | | | — | | | | — | | | | — | | | | (5.1 | | ) |

| Net income | — | | | | — | | | | 1,460.3 | | | | — | | | | — | | | | 2.0 | | | | 1,462.3 | | |

| Exercise of stock options (2,547,139 shares) | 0.1 | | | | 43.3 | | | | — | | | | — | | | | — | | | | — | | | | 43.4 | | |

| Cash paid for shares withheld for taxes | — | | | | (10.3 | | ) | | — | | | | — | | | | — | | | | — | | | | (10.3 | | ) |

| Repurchases of common stock (2,808,537 shares) | — | | | | — | | | | — | | | | (127.5 | | ) | | — | | | | — | | | | (127.5 | | ) |

| Balances at September 30, 2018 (376,261,635 shares) | $ | 3.9 | | | $ | 3,085.0 | | | $ | 6,217.9 | | | $ | (322.4 | ) | | $ | — | | | $ | 174.5 | | | $ | 9,158.9 | |

| Net income | $ | 1,462.3 | | | $ | 1,038.4 | | | $ | 886.3 | |

| Equity in earnings of unconsolidated entities | (2.8 | | ) | | — | | | | — | | |

| Distributions of earnings of unconsolidated entities | 2.0 | | | | — | | | | — | | |

| Gain on sale of assets | (18.8 | | ) | | — | | | | (4.5 | | ) |

| Proceeds from sale of assets | 292.9 | | | | — | | | | — | | |

| Expenditures related to multi-family rental properties | (70.2 | | ) | | (54.6 | | ) | | (8.0 | | ) |

| Return of investment in unconsolidated entities | 17.5 | | | | — | | | | — | | |

| Payments related to business acquisitions, net of cash acquired | (159.2 | | ) | | (4.1 | | ) | | (82.2 | | ) |

| Repayment of notes payable | (2,181.7 | | ) | | (1,192.3 | | ) | | (544.8 | | ) |

| Advances (payments) on mortgage repurchase facility, net | 217.7 | | | | (53.0 | | ) | | (4.9 | | ) |

| Cash paid for shares withheld for taxes | (10.3 | | ) | | (5.1 | | ) | | (5.9 | | ) |

| Distributions to noncontrolling interests, net | (3.2 | | ) | | — | | | | — | | |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Homebuilding: | | | | | | | |

| | 11,377.5 | | | | 10,774.2 | | |

| | 807.1 | | | | 784.7 | | |

| | 3,960.3 | | | | 4,252.4 | | |

| | 476.7 | | | | 513.5 | | |

| Homebuilding: | | | | | | | | | | | |

| | 11,042.8 | | | | 9,502.6 | | | | 8,535.7 | | |

| Gross profit: | | | | | | | | | | | |

| Home sales | 2,725.4 | | | | 2,380.1 | | | | 2,075.8 | | |

| | 2,698.7 | | | | 2,359.2 | | | | 2,023.3 | | |

| Homebuilding pre-tax income | 1,489.3 | | | | 1,264.4 | | | | 1,018.3 | | |

| Revenues | 349.5 | | | | 295.6 | | | | 265.0 | | |

| General and administrative expense | 251.2 | | | | 220.0 | | | | 183.0 | | |

| Interest and other (income) expense | (14.5 | | ) | | (13.5 | | ) | | (23.1 | | ) |

| Financial services and other pre-tax income | 112.8 | | | | 89.1 | | | | 105.1 | | |

| Cash dividends declared per common share | $ | 0.40 | | | $ | 0.32 | | | $ | 0.25 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Balances at September 30, 2014 (364,586,694 shares) | $ | 3.7 | | | $ | 2,613.7 | | | $ | 2,630.5 | | | $ | (134.3 | ) | | $ | 2.2 | | | $ | 3.9 | | | $ | 5,119.7 | |

| Net income | — | | | | — | | | | 750.7 | | | | — | | | | — | | | | — | | | | 750.7 | | |

| Exercise of stock options (3,636,655 shares) | 0.1 | | | | 60.0 | | | | — | | | | — | | | | — | | | | — | | | | 60.1 | | |

| Other comprehensive income, net of tax | — | | | | — | | | | — | | | | — | | | | (0.8 | | ) | | — | | | | (0.8 | | ) |

| Proceeds from the sale of property and equipment to a related party | — | | | | — | | | | 56.0 | | |

| Repayment of notes payable | (1,245.3 | | ) | | (549.7 | | ) | | (1,456.2 | | ) |

| Excess income tax benefit from employee stock awards | 14.3 | | | | 10.0 | | | | 12.3 | | |

| (1) | The current year balance includes $15.3 million related to the Company’s multi-family rental properties at September 30, 2017. |

| (2) | The prior year balance of $8.3 million, previously included in buildings and improvements, has been reclassified to conform to the current year presentation. |

The benefits of tax deductions in excess of recognized compensation expense are reported in the consolidated statements of cash flows as a financing cash flow.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” which simplifies the subsequent measurement of inventory, excluding inventory measured using the last-in, first-out or retail inventory methods.

The guidance specifies that inventory currently measured at the lower of cost or market, where market could be determined with different methods, should now be measured at the lower of cost or net realizable value.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation,” which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations - Clarifying the Definition of a Business,” which clarifies the definition of a business for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

The combined assets of all of the Company’s subsidiaries engaged in other business activities totaled $143.3 million and $54.9 million at September 30, 2017 and 2016, respectively, and the combined pre-tax loss of these subsidiaries was $11.7 million, $9.0 million and $0 in fiscal 2017, 2016 and 2015, respectively.

| Homebuilding revenues | 13,741.5 | | | | 11,861.8 | | | | 10,559.0 | | |

| East | $ | 10.5 | | | $ | 12.3 | | | $ | 14.3 | |

| Midwest | 1.0 | | | | — | | | | — | | |

| Southeast | 2.4 | | | | 0.7 | | | | 8.8 | | |

| South Central | 1.6 | | | | 1.0 | | | | 1.4 | | |

| Southwest | 1.4 | | | | 6.0 | | | | — | | |

Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures as of September 30, [removed: 2017] [added: 2018] were effective in providing reasonable assurance that information required to be disclosed in the reports the Company files, furnishes, submits or otherwise provides the Securities and Exchange Commission (SEC) under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed in reports filed by the Company under the Exchange Act is accumulated and communicated to the Company’s management, including the CEO and CFO, in such a manner as to allow timely decisions regarding the required disclosure.

There have been no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, [removed: 2017] [added: 2018] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of September 30, [removed: 2017.][added: 2018.]

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of September 30, [removed: 2017,] [added: 2018,] as stated in their report included herein.

The information required by this item is set forth under the captions “Proposal One — Election of Directors,” “Corporate Governance and Board Matters,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Requesting Documents from the Company” in the registrant’s definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders and incorporated herein by reference.

The information required by this item is set forth under the caption “Executive Compensation” in the registrant’s definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders and incorporated herein by reference.

The following table summarizes our equity compensation plans as of September 30, [removed: 2017:][added: 2018.]

| (3) | Amount includes [removed: 3,215,080] [added: 3,100,740] shares reserved for issuance under the Company’s Employee Stock Purchase Plan. Under the Employee Stock Purchase Plan, employees purchased [removed: 111,527] [added: 114,340] shares of common stock in fiscal [removed: 2017.] [added: 2018.] |

The remaining information required by this item is set forth under the caption “Beneficial Ownership of Common Stock” in the registrant’s definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders and incorporated herein by reference.

| Equity compensation plans approved by stockholders | 11,644,881 | | (1) | | $ | 17.25 | | (2) | | 21,555,619 | | (3) |

| Total | 11,644,881 | | | | $ | 17.25 | | | | 21,555,619 | | |

| Equity compensation plans approved by stockholders | 13,747,130 | | (1) | | $ | 16.92 | | (2) | | 22,223,307 | | (3) |

| Total | 13,747,130 | | | | $ | 16.92 | | | | 22,223,307 | | |

The information required by this item is set forth under the captions “Certain Relationships and Related Person Transactions” and “Corporate Governance and Board Matters” in the registrant’s definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders and incorporated herein by reference.

The information required by this item is set forth under the caption “Independent Registered Public Accountants” in the registrant’s definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders and incorporated herein by reference.

| 2.1 | | | [Agreement and Plan of Merger dated June 29, 2017 by and among the Registrant, Force Merger Sub, Inc. and Forestar Group Inc. [removed: (10)](http://www.sec.gov/Archives/edgar/data/882184/000119312517217553/d371231dex21.htm)] [added: (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated June 29, 2017, filed with the SEC on June 29, 2017).](http://www.sec.gov/Archives/edgar/data/882184/000119312517217553/d371231dex21.htm)] |

| 3.1 | | | [Certificate of Amendment of the Amended and Restated Certificate of Incorporation, as amended, of the Registrant, dated January 31, 2006, and the Amended and Restated Certificate of Incorporation, as amended, of the Registrant dated March 18, 1992 [removed: (3)](http://www.sec.gov/Archives/edgar/data/882184/000095013406001675/d32551exv3w1.htm)] [added: (incorporated by reference from Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2005, filed with the SEC on February 2, 2006).](http://www.sec.gov/Archives/edgar/data/882184/000095013406001675/d32551exv3w1.htm)] |

| 3.2 | | | [Amended and Restated Bylaws [removed: (4)](http://www.sec.gov/Archives/edgar/data/882184/000119312517337236/d489193dex31.htm)] [added: (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, dated November 2, 2017, filed with the SEC on November 8, 2017).](http://www.sec.gov/Archives/edgar/data/882184/000119312517337236/d489193dex31.htm)] |

| 4.2 | | | [Senior Debt Securities Indenture, dated as of May 1, 2012, between Registrant and American Stock Transfer & Trust Company, LLC, as Trustee [removed: (36)](http://www.sec.gov/Archives/edgar/data/882184/000119312512198160/d343547dex41.htm)] [added: (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated May 1, 2012, filed with the SEC on May 4, 2012).](http://www.sec.gov/Archives/edgar/data/882184/000119312512198160/d343547dex41.htm)] |

| 4.3 | | | [Second Supplemental Indenture, dated as of September 14, 2012, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, LLC, as Trustee, relating to the 4.375% Senior Notes due 2022 issued by the Registrant [removed: (38)](http://www.sec.gov/Archives/edgar/data/882184/000119312512393218/d412364dex41.htm)] [added: (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated September 14, 2012, filed with the SEC on September 17, 2012).](http://www.sec.gov/Archives/edgar/data/882184/000119312512393218/d412364dex41.htm)] |

| 4.4 | | | [removed: [Third] [added: [Fourth] Supplemental Indenture, dated as of February 5, 2013, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, LLC, as Trustee, relating to the [removed: 3.625%] [added: 4.750%] Senior Notes due [removed: 2018] [added: 2023] issued by the Registrant [removed: (2)](http://www.sec.gov/Archives/edgar/data/882184/000119312513046290/d484515dex41.htm)] [added: (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated February 5, 2013, filed with the SEC on February 8, 2013).](http://www.sec.gov/Archives/edgar/data/882184/000119312513046290/d484515dex42.htm)] |

| [removed: 4.5] [added: 4.6] | | | [removed: [Fourth] [added: [Sixth] Supplemental Indenture, dated as of [removed: February] [added: August] 5, 2013, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, LLC, as Trustee, relating to the [removed: 4.750%] [added: 5.750%] Senior Notes [removed: due] [added: Due] 2023 issued by the Registrant [removed: (13)](http://www.sec.gov/Archives/edgar/data/882184/000119312513046290/d484515dex42.htm)] [added: (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated August 5, 2013, filed with the SEC on August 8, 2013).](http://www.sec.gov/Archives/edgar/data/882184/000119312513324904/d581912dex41.htm)] |

| [removed: 4.6] [added: 4.5] | | | [Fifth Supplemental Indenture, dated as of February 5, 2013, among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, LLC, as trustee [removed: (14)](http://www.sec.gov/Archives/edgar/data/882184/000119312513046290/d484515dex43.htm)] [added: (incorporated by reference from Exhibit 4.3 to the Registrant’s Current Report on Form 8-K dated February 5, 2013, filed with the SEC on February 8, 2013).](http://www.sec.gov/Archives/edgar/data/882184/000119312513046290/d484515dex43.htm)] |

| 4.7 | | | [removed: [Sixth] [added: [Seventh] Supplemental Indenture, dated as of [removed: August 5, 2013,] [added: February 24, 2014,] among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, LLC, as [removed: Trustee,] [added: trustee,] relating to the [removed: 5.750%] [added: 3.750%] Senior Notes Due [removed: 2023] [added: 2019] issued by the Registrant [removed: (29)](http://www.sec.gov/Archives/edgar/data/882184/000119312513324904/d581912dex41.htm)] [added: (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated February 24, 2014, filed with the SEC on February 25, 2014).](http://www.sec.gov/Archives/edgar/data/882184/000119312514067216/d680530dex41.htm)] |

| 4.8 | | | [removed: [Seventh] [added: [Eighth] Supplemental Indenture, dated as of February [removed: 24, 2014,] [added: 9, 2015,] among the Registrant, the Guarantors named therein and American Stock Transfer & Trust Company, LLC, as trustee, relating to the [removed: 3.750%] [added: 4.000%] Senior Notes Due [removed: 2019] [added: 2020] issued by the Registrant [removed: (39)](http://www.sec.gov/Archives/edgar/data/882184/000119312514067216/d680530dex41.htm)] [added: (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated February 9, 2015, filed with the SEC on February 9, 2015).](http://www.sec.gov/Archives/edgar/data/882184/000119312515039209/d869050dex41.htm)] |

| 4.9 | | | [removed: [Eighth] [added: [Ninth] Supplemental Indenture, dated as of [removed: February 9, 2015,] [added: December 5, 2017,] among the Registrant, the Guarantors named [removed: therein and] [added: therein,] American Stock Transfer & Trust Company, LLC, as [added: original] trustee, [added: and Branch Banking and Trust Company, as series trustee,] relating to the [removed: 4.000%] [added: 2.550%] Senior Notes Due 2020 issued by the Registrant [removed: (45)](http://www.sec.gov/Archives/edgar/data/882184/000119312515039209/d869050dex41.htm)] [added: (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated December 5, 2017, filed with the SEC on December 5, 2017).](http://www.sec.gov/Archives/edgar/data/882184/000119312517360835/d367203dex41.htm)] |

| 10.1 | | | [Form of Indemnification Agreement between the Registrant and each of its directors](http://www.sec.gov/Archives/edgar/data/882184/0000882184-98-000050.txt) [and executive officers and schedules of substantially identical documents [removed: (5)](http://www.sec.gov/Archives/edgar/data/882184/000095013401501950/d87419ex10-4.txt)] [added: (incorporated by reference from Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 1995, filed with the SEC on November 22, 1995 (file number 1-14122); Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, filed with the SEC on August 6, 1998; and Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, filed with the SEC on May 15, 2001).](http://www.sec.gov/Archives/edgar/data/882184/000095013401501950/d87419ex10-4.txt)] |

| 10.2 | † | | [D.R. Horton, Inc. 1991 Stock Incentive Plan, as amended and restated [removed: (6)](http://www.sec.gov/Archives/edgar/data/882184/000088218402000006/exhibit102.txt)] [added: (incorporated by reference from Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 13, 2002).](http://www.sec.gov/Archives/edgar/data/882184/000088218402000006/exhibit102.txt)] |

| 10.3 | † | | [Amendment No. 1 to 1991 Stock Incentive Plan, as amended and restated [removed: (7)](http://www.sec.gov/Archives/edgar/data/882184/000088218402000006/exhibit103.txt)] [added: (incorporated by reference from Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August 13, 2002).](http://www.sec.gov/Archives/edgar/data/882184/000088218402000006/exhibit103.txt)] |

| 10.4 | † | | Form of Non-Qualified Stock Option Agreement under the D.R. Horton, Inc. 1991 Stock Incentive Plan (Term Vesting) [removed: (8)] [added: (incorporated by reference from Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 (Registration No. 3-81856), filed with the SEC on July 22, 1994).] |

| 10.5 | † | | [D.R. Horton, Inc. 2006 Stock Incentive Plan [removed: (19)](http://www.sec.gov/Archives/edgar/data/882184/000095013406001675/d32551exv10w6.htm)] [added: (incorporated by reference from Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2005, filed with the SEC on February 2, 2006).](http://www.sec.gov/Archives/edgar/data/882184/000095013406001675/d32551exv10w6.htm)] |

| 10.6 | † | | [D.R. Horton, Inc. 2006 Stock Incentive Plan, as amended and restated [removed: (33)](http://www.sec.gov/Archives/edgar/data/882184/000095012311005585/d79260exv10w1.htm)] [added: (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January 20, 2011, filed with the SEC on January 26, 2011).](http://www.sec.gov/Archives/edgar/data/882184/000095012311005585/d79260exv10w1.htm)] |

| 10.7 | † | | [D.R. Horton, Inc. 2006 Stock Incentive Plan, as amended and restated, effective as of December 11, 2014 [removed: (44)](http://www.sec.gov/Archives/edgar/data/882184/000119312515019980/d857731dex101.htm)] [added: (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January 22, 2015, filed with the SEC on January 26, 2015).](http://www.sec.gov/Archives/edgar/data/882184/000119312515019980/d857731dex101.htm)] |

| 10.8 | † | | [Form of Non-Qualified Stock Option Agreement under the D.R. Horton, Inc. 2006 Stock Incentive Plan (Employee - Term Vesting 2006 Form) [removed: (20)](http://www.sec.gov/Archives/edgar/data/882184/000095013406008928/d35727exv10w2.htm)] [added: (incorporated by reference from Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on May 8, 2006).](http://www.sec.gov/Archives/edgar/data/882184/000095013406008928/d35727exv10w2.htm)] |

| 10.9 | † | | [Form of Non-Qualified Stock Option Agreement under the D.R. Horton, Inc. 2006 Stock Incentive Plan (Director - Term Vesting 2006 Form) [removed: (21)](http://www.sec.gov/Archives/edgar/data/882184/000095013406008928/d35727exv10w3.htm)] [added: (incorporated by reference from Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on May 8, 2006).](http://www.sec.gov/Archives/edgar/data/882184/000095013406008928/d35727exv10w3.htm)] |

| 10.10 | † | | [Form of Non-Qualified Stock Option Agreement (Employee-Term Vesting 2008 Form) pursuant to the Registrant’s 2006 Stock Incentive Plan [removed: (22)](http://www.sec.gov/Archives/edgar/data/882184/000119312508032689/dex102.htm)] [added: (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 11, 2008, filed with the SEC on February 15, 2008).](http://www.sec.gov/Archives/edgar/data/882184/000119312508032689/dex102.htm)] |

| 10.11 | † | | [Form of Non-Qualified Stock Option Agreement (Outside Director-Term Vesting 2008 Form) pursuant to the Registrant’s 2006 Stock Incentive Plan [removed: (24)](http://www.sec.gov/Archives/edgar/data/882184/000119312508032689/dex103.htm)] [added: (incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated February 11, 2008, filed with the SEC on February 15, 2008).](http://www.sec.gov/Archives/edgar/data/882184/000119312508032689/dex103.htm)] |

| 10.12 | † | | [Form of Restricted Stock Unit Agreement pursuant to the Registrant’s 2006 Stock Incentive Plan [removed: (34)](http://www.sec.gov/Archives/edgar/data/882184/000095012310091822/d76661exv10w1.htm)] [added: (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 30, 2010, filed with the SEC on October 6, 2010).](http://www.sec.gov/Archives/edgar/data/882184/000095012310091822/d76661exv10w1.htm)] |

| 10.13 | † | | [Form of Restricted Stock Unit Agreement pursuant to the Registrant’s 2006 Stock Incentive Plan, as amended and restated [removed: (1)](http://www.sec.gov/Archives/edgar/data/882184/000119312511314518/d256830dex102.htm)] [added: (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November 9, 2011, filed with the SEC on November 16, 2011).](http://www.sec.gov/Archives/edgar/data/882184/000119312511314518/d256830dex102.htm)] |

| 10.14 | † | | [Form of Restricted Stock Unit Agreement (Outside Director) pursuant to the Registrant’s 2006 Stock Incentive Plan, as amended and restated [removed: (30)](http://www.sec.gov/Archives/edgar/data/882184/000088218413000012/a12312012exhibit104.htm)] [added: (incorporated by reference from Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2012, filed with the SEC on January 29, 2013).](http://www.sec.gov/Archives/edgar/data/882184/000088218413000012/a12312012exhibit104.htm)] |

| 10.15 | † | | [Form of Restricted Stock Unit Agreement (Employees) pursuant to the Registrant’s 2006 Stock Incentive Plan, as amended and restated [removed: (43)](http://www.sec.gov/Archives/edgar/data/882184/000119312514409217/d820272dex104.htm)] [added: (incorporated by reference from Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated November 5, 2014, filed with the SEC on November 12, 2014).](http://www.sec.gov/Archives/edgar/data/882184/000119312514409217/d820272dex104.htm)] |

| 10.16 | † | | [Form of Time-Based Restricted Stock Unit Agreement (Employees) pursuant to the Registrant’s 2006 Stock Incentive Plan, as amended and restated [removed: (48)](http://www.sec.gov/Archives/edgar/data/882184/000088218415000051/a3312015exhibit104.htm)] [added: (incorporated by reference from Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed with the SEC on April 24, 2015).](http://www.sec.gov/Archives/edgar/data/882184/000088218415000051/a3312015exhibit104.htm)] |

| 10.17 | † | | [Form of Stock Award Agreement pursuant to the Registrant’s 2006 Stock Incentive Plan [removed: (35)](http://www.sec.gov/Archives/edgar/data/882184/000095012310091822/d76661exv10w2.htm)] [added: (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated September 30, 2010, filed with the SEC on October 6, 2010).](http://www.sec.gov/Archives/edgar/data/882184/000095012310091822/d76661exv10w2.htm)] |

| 10.19 | † | | [D.R. Horton, Inc. Amended and Restated Deferred Compensation Plan [removed: (32)](http://www.sec.gov/Archives/edgar/data/882184/000136231008008261/c78340exv10w1.htm)] [added: (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 10, 2008, filed with the SEC on December 16, 2008).](http://www.sec.gov/Archives/edgar/data/882184/000136231008008261/c78340exv10w1.htm)] |

| 10.20 | † | | [D.R. Horton, Inc. Amended and Restated Supplemental Executive Retirement Plan No. 2 [removed: (31)](http://www.sec.gov/Archives/edgar/data/882184/000136231008008261/c78340exv10w2.htm)] [added: (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated December 10, 2008, filed with the SEC on December 16, 2008).](http://www.sec.gov/Archives/edgar/data/882184/000136231008008261/c78340exv10w2.htm)] |

| [removed: 10.24] [added: 10.23] | † | | [Summary of Executive Compensation Notification - Chairman, CEO and COO (fiscal [removed: 2017) (16)](http://www.sec.gov/Archives/edgar/data/882184/000119312516763102/d58026dex101.htm)] [added: 2018) (*)](https://www.sec.gov/Archives/edgar/data/882184/000088218418000120/a2018930-10kexhibit1023.htm)] |

| 10.25 | † | | [Summary of Executive Compensation Notification - [removed: Chairman, CEO and COO] [added: Other Executive Officer - CFO] (fiscal 2018) [removed: (*)](https://www.sec.gov/Archives/edgar/data/882184/000088218417000103/a2017930-10kexhibit1025.htm)] [added: (*)](https://www.sec.gov/Archives/edgar/data/882184/000088218418000120/a2018930-10kexhibit1025.htm)] |

| [removed: 10.26] [added: 10.24] | † | | [Summary of Executive Compensation Notification - Other Executive Officer - CFO (fiscal 2017) [removed: (17)](http://www.sec.gov/Archives/edgar/data/882184/000119312516763102/d58026dex102.htm)] [added: (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November 2, 2016, filed with the SEC on November 8, 2016).](http://www.sec.gov/Archives/edgar/data/882184/000119312516763102/d58026dex102.htm)] |

| 10.27 | † | | [Summary of [removed: Executive] [added: Director, Committee and Chairperson] Compensation [removed: Notification - Other Executive Officer - CFO] (fiscal 2018) [removed: (*)](https://www.sec.gov/Archives/edgar/data/882184/000088218417000103/a2017930-10kexhibit1027.htm)] [added: (*)](https://www.sec.gov/Archives/edgar/data/882184/000088218418000120/a2018930-10kexhibit1027.htm)] |

| [removed: 10.28] [added: 10.26] | † | | [Summary of Director, Committee and Chairperson Compensation (fiscal 2017) [removed: (18)](http://www.sec.gov/Archives/edgar/data/882184/000119312516763102/d58026dex103.htm)] [added: (incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated November 2, 2016, filed with the SEC on November 8, 2016).](http://www.sec.gov/Archives/edgar/data/882184/000119312516763102/d58026dex103.htm)] |

| [removed: 10.31] [added: 10.28] | | | [Grantor Trust Agreement, dated June 21, 2002, by and between the Registrant and Wachovia Bank, National Association, as Trustee [removed: (12)](http://www.sec.gov/Archives/edgar/data/882184/000093066102004301/dex1034.txt)] [added: (incorporated by reference from Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed with the SEC on December 13, 2002).](http://www.sec.gov/Archives/edgar/data/882184/000093066102004301/dex1034.txt)] |

| [removed: 10.32] [added: 10.29] | | | [Credit Agreement, dated September 7, 2012, among the Registrant, the Lenders named therein and The Royal Bank of Scotland PLC, as Administrative Agent [removed: (37)](http://www.sec.gov/Archives/edgar/data/882184/000119312512386201/d407372dex101.htm)] [added: (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 7, 2012, filed with the SEC on September 10, 2012).](http://www.sec.gov/Archives/edgar/data/882184/000119312512386201/d407372dex101.htm)] |

| [removed: 10.33] [added: 10.30] | | | [Amendment No.1 to Credit Agreement, dated November 1, 2012, among the Registrant, The Royal Bank of Scotland PLC, as Administrative Agent, and the Lenders named therein [removed: (23)](http://www.sec.gov/Archives/edgar/data/882184/000119312512451766/d433316dex101.htm)] [added: (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 1, 2012, filed with the SEC on November 5, 2012).](http://www.sec.gov/Archives/edgar/data/882184/000119312512451766/d433316dex101.htm)] |