Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


			Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)			63
Consolidated Balance Sheets			66
Consolidated Statements of Operations			67
Consolidated Statements of Total Equity			68
Consolidated Statements of Cash Flows			69
Notes to Consolidated Financial Statements			71

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of D.R. Horton, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of D.R. Horton, Inc. and subsidiaries (the Company) as of September 30, 2025 and 2024, the related consolidated statements of operations, total equity and cash flows for each of the three years in the period ended September 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control*—*Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 19, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the 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.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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			Estimation of reserves for construction defect matters

Description of the Matter			At September 30, 2025, the Company’s reserve for legal claims related to construction defect matters was $1.1 billion. As explained in Note L to the consolidated financial statements, the Company has established reserves for construction defect matters based on the estimated costs of pending legal claims and the estimated costs of anticipated future legal claims related to previously closed homes, and this liability is included within the accrued expenses and other liabilities account in the consolidated balance sheet. This reserve estimate is subject to a high degree of variability and ongoing revision as the circumstances of individual pending claims and historical data and trends change. Management applies judgment in determining the key assumptions used in calculating the reserve for construction defect matters. Auditing the reserve for construction defect matters is complex and especially challenging due to the judgmental nature of the key assumptions related to projections of the frequency of future claims and the costs to resolve claims in consideration of historical claims information. These assumptions are developed by management, are subjective in nature and have a significant effect on the determined amount of the reserve for construction defect matters.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for estimating the reserve for construction defect matters. We tested the Company’s controls that address the risk of material misstatement related to the measurement and valuation of the reserve for construction defect matters, including the key assumptions related to the projections of the frequency and costs of future claims, and the completeness and accuracy of data used in the model developed by management. To test the reserve for construction defect matters, our audit procedures included, among others, evaluating the methodology used, the key assumptions and the underlying data used by the Company in developing the reserve estimate. As management utilizes historical trends of frequency of claims incurred and the average cost to resolve claims relative to the types of products and markets where the Company operates in measuring the reserve estimate, we evaluated management’s methodology for determining the frequency and cost of future claims assumptions by comparing these key assumptions to trends observed in historical Company claims data and other available information. In addition, we involved an actuarial specialist to assist with our procedures. Our specialist developed a range of values for the reserve estimate based on independently selected assumptions, which we compared to management’s recorded amount to evaluate management’s estimate. We also performed sensitivity analyses to determine the effect of changes in assumptions, where appropriate. We also tested completeness and accuracy of underlying claims data used in management’s estimation calculations and performed recalculations to evaluate the accuracy of the model used by management to determine the estimate.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

Fort Worth, Texas

November 19, 2025

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of D.R. Horton, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited D.R. Horton, Inc. and subsidiaries’ internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control*—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, D.R. Horton, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2025, based on the COSO criteria*.**

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2025 and 2024, the related consolidated statements of operations, total equity and cash flows for each of the three years in the period ended September 30, 2025, and the related notes and our report dated November 19, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Fort Worth, Texas

November 19, 2025

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D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30,
	2025		2024
	(In millions)
ASSETS
Cash and cash equivalents	$	2,985.4	$	4,516.4
Restricted cash	47.9		27.6
Total cash, cash equivalents and restricted cash	3,033.3		4,544.0
Inventories:
Construction in progress and finished homes	7,648.5		8,875.8
Residential land and lots — developed and under development	14,695.8		12,948.1
Land held for development	218.3		160.6
Land held for sale	21.4		12.7
Rental properties	2,703.3		2,906.0
Total inventory	25,287.3		24,903.2
Mortgage loans held for sale	2,566.5		2,477.5
Deferred income taxes, net of valuation allowance of $14.6 million and $14.9 million at September 30, 2025 and 2024, respectively	44.5		167.5
Property and equipment, net	578.9		531.0
Other assets	3,797.2		3,317.6
Goodwill	163.5		163.5
Total assets	$	35,471.2	$	36,104.3
LIABILITIES
Accounts payable	$	1,221.9	$	1,345.5
Accrued expenses and other liabilities	3,541.6		3,016.7
Notes payable	5,965.5		5,917.7
Total liabilities	10,729.0		10,279.9
Commitments and contingencies (Note L)
EQUITY
Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued	—		—
Common stock, $.01 par value, 1,000,000,000 shares authorized, 404,031,443 shares issued and 294,475,153 shares outstanding at September 30, 2025 and 402,848,342 shares issued and 324,027,360 shares outstanding at September 30, 2024	4.0		4.0
Additional paid-in capital	3,576.1		3,490.7
Retained earnings	31,041.4		27,951.0
Treasury stock, 109,556,290 shares and 78,820,982 shares at September 30, 2025 and 2024, respectively, at cost	(10,431.1)		(6,132.9)
Stockholders’ equity	24,190.4		25,312.8
Noncontrolling interests	551.8		511.6
Total equity	24,742.2		25,824.4
Total liabilities and equity	$	35,471.2	$	36,104.3

See accompanying notes to consolidated financial statements.

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D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended September 30,
	2025		2024		2023
	(In millions, except per share data)
Revenues	$	34,250.4	$	36,801.4	$	35,460.4
Cost of sales	26,134.2		27,266.0		26,110.0
Selling, general and administrative expense	3,692.0		3,599.5		3,248.8
Other (income) expense	(315.7)		(348.8)		(213.1)
Income before income taxes	4,739.9		6,284.7		6,314.7
Income tax expense	1,119.0		1,478.7		1,519.5
Net income	3,620.9		4,806.0		4,795.2
Net income attributable to noncontrolling interests	35.7		49.6		49.5
Net income attributable to D.R. Horton, Inc.	$	3,585.2	$	4,756.4	$	4,745.7

Net income per share attributable to D.R. Horton, Inc.
Basic	$	11.62	$	14.44	$	13.93
Diluted	$	11.57	$	14.34	$	13.82

Weighted average shares outstanding
Basic	308.5		329.5		340.7
Diluted	309.9		331.6		343.3

See accompanying notes to consolidated financial statements.

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D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF TOTAL EQUITY


	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Non-controlling Interests		Total Equity
	(In millions, except common stock share data)
Balances at September 30, 2022 (343,953,023 shares)	$	4.0	$	3,349.5	$	19,185.3	$	(3,142.5)	$	389.3	$	19,785.6
Net income	—		—		4,745.7		—		49.5		4,795.2
Exercise of stock options (603,823 shares)	—		14.4		—		—		—		14.4
Stock issued under employee benefit plans (1,425,493 shares)	—		16.0		—		—		—		16.0
Cash paid for shares withheld for taxes	—		(56.1)		—		—		—		(56.1)
Stock-based compensation expense	—		111.2		—		—		—		111.2
Cash dividends declared ($1.00 per share)	—		—		(341.2)		—		—		(341.2)
Repurchases of common stock (11,133,774 shares)	—		—		—		(1,187.3)		—		(1,187.3)
Change of ownership interest in Forestar	—		(2.8)		—		—		2.9		0.1
Balances at September 30, 2023 (334,848,565 shares)	$	4.0	$	3,432.2	$	23,589.8	$	(4,329.8)	$	441.7	$	23,137.9
Net income	—		—		4,756.4		—		49.6		4,806.0
Exercise of stock options (219,663 shares)	—		5.2		—		—		—		5.2
Stock issued under employee benefit plans (1,426,426 shares)	—		20.4		—		—		—		20.4
Cash paid for shares withheld for taxes	—		(83.9)		—		—		—		(83.9)
Stock-based compensation expense	—		118.1		—		—		—		118.1
Cash dividends declared ($1.20 per share)	—		—		(395.2)		—		—		(395.2)
Repurchases of common stock (12,467,294 shares)	—		—		—		(1,803.1)		—		(1,803.1)
Change of ownership interest in Forestar	—		(1.3)		—		—		20.3		19.0
Balances at September 30, 2024 (324,027,360 shares)	$	4.0	$	3,490.7	$	27,951.0	$	(6,132.9)	$	511.6	$	25,824.4
Net income	—		—		3,585.2		—		35.7		3,620.9
Stock issued under employee benefit plans (1,183,101 shares)	—		22.5		—		—		—		22.5
Cash paid for shares withheld for taxes	—		(64.2)		—		—		—		(64.2)
Stock-based compensation expense	—		131.0		—		—		—		131.0
Cash dividends declared ($1.60 per share)	—		—		(494.8)		—		—		(494.8)
Repurchases of common stock (30,735,308 shares)	—		—		—		(4,298.2)		—		(4,298.2)
Change of ownership interest in Forestar	—		(3.9)		—		—		4.5		0.6
Balances at September 30, 2025 (294,475,153 shares)	$	4.0	$	3,576.1	$	31,041.4	$	(10,431.1)	$	551.8	$	24,742.2

See accompanying notes to consolidated financial statements.

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended September 30,
	2025		2024		2023
	(In millions)
OPERATING ACTIVITIES
Net income	$	3,620.9	$	4,806.0	$	4,795.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	101.3		87.1		91.6
Stock-based compensation expense	131.0		118.1		111.2
Deferred income taxes	123.2		19.0		(45.9)
Inventory and land option charges	158.1		78.8		80.3
Changes in operating assets and liabilities:
Decrease in construction in progress and finished homes	1,228.8		141.3		861.8
Increase in residential land and lots — developed, under development, held for development and held for sale	(1,884.3)		(2,576.5)		(1,226.4)
Decrease (increase) in rental properties	195.4		(214.6)		(151.8)
(Increase) decrease in other assets	(248.2)		(331.4)		23.8
(Increase) decrease in mortgage loans held for sale	(89.0)		42.4		(133.9)
Increase (decrease) in accounts payable, accrued expenses and other liabilities	83.7		19.6		(101.8)
Net cash provided by operating activities	3,420.9		2,189.8		4,304.1
INVESTING ACTIVITIES
Expenditures for property and equipment	(137.4)		(165.3)		(148.6)
Proceeds from sale of assets	22.9		19.4		52.0
Payments related to business acquisitions, net of cash acquired	(53.1)		(40.4)		(212.9)
Other investing activities	(1.1)		(4.3)		(0.7)
Net cash used in investing activities	(168.7)		(190.6)		(310.2)
FINANCING ACTIVITIES
Proceeds from notes payable	3,272.0		2,086.3		711.0
Repayment of notes payable	(3,142.8)		(1,055.8)		(1,823.9)
(Repayment) borrowings on mortgage repurchase facilities, net	(125.5)		(135.8)		51.3
Proceeds from stock associated with certain employee benefit plans	18.5		20.6		25.5
Cash paid for shares withheld for taxes	(64.2)		(83.9)		(56.1)
Cash dividends paid	(494.8)		(395.2)		(341.2)
Repurchases of common stock	(4,281.6)		(1,787.5)		(1,178.5)
Net proceeds from issuance of Forestar common stock	—		19.7		—
Net other financing activities	55.5		(23.7)		(54.8)
Net cash used in financing activities	(4,762.9)		(1,355.3)		(2,666.7)
Net (decrease) increase in cash, cash equivalents and restricted cash	(1,510.7)		643.9		1,327.2
Cash, cash equivalents and restricted cash at beginning of year	4,544.0		3,900.1		2,572.9
Cash, cash equivalents and restricted cash at end of year	$	3,033.3	$	4,544.0	$	3,900.1

D.R. HORTON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)



	Year Ended September 30,
	2025		2024		2023
	(In millions)
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net	$	1,020.5	$	1,669.7	$	1,442.0
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Notes payable issued for inventory	$	5.5	$	43.4	$	54.5
Reduction of notes payable upon deconsolidation of variable interest entity	$	—	$	(127.8)	$	—
Stock issued under employee incentive plans	$	147.6	$	174.3	$	111.4

See accompanying notes to consolidated financial statements.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include the accounts of D.R. Horton, Inc. and all of its wholly owned, majority-owned and controlled subsidiaries, which are collectively referred to as the Company, unless the context otherwise requires. Noncontrolling interests represent the proportionate equity interests in consolidated entities that are not 100% owned by the Company. As of September 30, 2025, the Company owns a 62% controlling interest in Forestar Group Inc. (Forestar) and therefore is required to consolidate 100% of Forestar within its consolidated financial statements, and the 38% interest the Company does not own is accounted for as noncontrolling interests. All intercompany accounts, transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Revenue Recognition

Homebuilding revenue and related profit are generally recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the buyer. The Company’s performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Proceeds from home closings held for the Company’s benefit at title companies are included in homebuilding cash and cash equivalents in the consolidated balance sheets.

When the Company executes sales contracts with its homebuyers, or when it requires advance payment from homebuyers for custom changes, upgrades or options related to their homes, the cash deposits received are recorded as liabilities until the homes are closed or the contracts are cancelled. The Company either retains or refunds to the homebuyer deposits on cancelled sales contracts, depending upon the applicable provisions of the contract or other circumstances.

Forestar’s land and lot sales revenue and related profit are generally recognized at the time of the closing of a sale, when title to and possession of the property are transferred to a third-party buyer. Forestar’s revenues from land and lot sales to D.R. Horton are eliminated in the consolidated financial statements.

The Company rarely purchases unimproved land for resale, but periodically may elect to sell parcels of land that do not fit into its strategic operating plans. Revenue from land sales is typically recognized on the closing date, which is generally when performance obligations are satisfied.

The Company’s rental operations develop, construct, lease and sell residential multi-family and single-family rental properties. Revenue is recognized from the sale of these properties on the closing date, which is when performance obligations are satisfied. Rental income from these properties is recognized as other income.

Financial services revenues associated with the Company’s title operations are recognized as closing services are rendered and title insurance policies are issued, both of which generally occur simultaneously as each home is closed. Revenues associated with the Company’s mortgage operations primarily include net gains on the sale of mortgage loans and servicing rights. The Company typically elects the fair value option for its mortgage loan originations whereby mortgage loans held for sale are recorded at fair value based on either sale commitments or current market quotes and loan values are adjusted through revenues for subsequent changes in fair value until the loans are sold. Expected gains and losses from the sale of loans, adjusted for (i) estimated costs to complete and originate the loan and (ii) the estimated percentage of written loan commitments that will result in a closed mortgage loan, are included in the measurement of all

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

written loan commitments that are accounted for at fair value through revenues at the time of commitment. The Company sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers, typically within 60 days of origination. Interest income is earned from the date a mortgage loan is originated until the loan is sold.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an initial maturity of three months or less when purchased to be cash equivalents. Proceeds from home closings held for the Company’s benefit at title companies, which totaled $341.7 million and $304.9 million at September 30, 2025 and 2024, respectively, are included in homebuilding cash and cash equivalents in the consolidated balance sheets.

Cash balances of the Company’s captive insurance subsidiary, which are expected to be used to fund the subsidiary’s operations and pay future anticipated legal claims, were $68.5 million and $78.4 million at September 30, 2025 and 2024, respectively, and are included in cash and cash equivalents in the consolidated balance sheets.

Restricted Cash

The Company has cash that is restricted as to its use. Restricted cash related to homebuilding and land development operations includes customer deposits that are temporarily restricted in accordance with regulatory requirements. Restricted cash related to financial services is mortgagor related funds held by the Company for taxes and insurance on an interim basis until the loans are sold.

Inventories and Cost of Sales

Inventory includes the costs of direct land acquisition, land development and construction, capitalized interest, real estate taxes and direct overhead costs incurred during development and construction. Costs incurred after projects or homes are substantially complete, such as utilities, maintenance and cleaning, are charged to selling, general and administrative (SG&A) expense as incurred. All indirect overhead costs, such as compensation of sales personnel, division and region management, and the costs of advertising and builder’s risk insurance are charged to SG&A expense as incurred.

Land and development costs are typically allocated to individual residential lots on a pro-rata basis, and the costs of residential lots are transferred to construction in progress when home construction begins. Home construction costs are specifically identified and recorded to individual homes. Cost of sales for homes closed includes the specific construction costs of each home and all applicable land acquisition, land development and related costs (both incurred and estimated to be incurred) allocated to each residential lot based upon the total number of homes expected to be closed in each community. Cost of sales for lots sold includes all applicable land acquisition, land development and related costs (both incurred and estimated to be incurred) allocated to each residential lot in the community. Any changes to the estimated total development costs after the initial home or lot closings in a community are generally allocated on a pro-rata basis to the remaining homes or lots in the community associated with the relevant development activity. Development and construction costs incurred related to the rental operations are recorded as rental property inventory. Cost of sales related to the rental operations include the specific construction costs and all applicable land acquisition, land development and related costs for each rental project.

When a home is closed, the Company generally has not paid all of the incurred costs necessary to complete the home. A liability and a corresponding charge to cost of sales are recorded for the amount estimated to ultimately be paid related to completed homes that have been closed. Home construction budgets are compared to actual recorded costs to determine the additional costs remaining to be paid on each closed home.

The Company rarely purchases land for resale. However, when the Company owns land or communities under development that do not fit into its development and construction plans, and the Company determines that it will sell the asset, the project is accounted for as land held for sale if certain criteria are met. The Company records land held for sale at the lesser of its carrying value or fair value less estimated costs to sell.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At the end of each quarter, the Company reviews the performance and outlook for all of its communities and land inventories for indicators of potential impairment. If indicators of impairment are present for a community, the Company performs an impairment evaluation of the community, which includes an analysis to determine if the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. The Company’s estimate of undiscounted cash flows from communities analyzed may change and could result in a future need to record impairment charges to adjust the carrying value of these assets to their estimated fair value. There are several factors which could lead to changes in the estimates of undiscounted future cash flows for a given community. The most significant of these includes pricing and incentive levels realized by the community, the rate at which the homes are sold and the costs incurred to develop the lots and construct the homes. Pricing and incentive levels are often interrelated with sales pace in a community, such that a price reduction is typically expected to increase the sales pace. Further, both of these factors are heavily influenced by the competitive pressures facing a given community from both new and existing homes. If conditions in the broader economy, homebuilding industry or specific markets in which the Company operates worsen, and as the Company evaluates specific community pricing and incentives, construction and development plans, and its overall land sale strategies, it may be required to evaluate additional communities for potential impairment. This may result in impairment charges which could be significant.

When events or circumstances indicate that the carrying values on finished homes in substantially completed communities and completed rental properties are greater than the fair values less estimated costs to sell these homes, impairment charges are also recorded. The key assumptions relating to inventory valuations are impacted by local market and economic conditions and are inherently uncertain. Due to uncertainties in the estimation process, actual results could differ from such estimates. See Note C.

Capitalized Interest

The Company capitalizes interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. During periods in which the Company’s active inventory is lower than its debt level, a portion of the interest incurred is reflected as interest expense in the period incurred. During fiscal 2025, 2024 and 2023, the Company’s active inventory exceeded its debt level, and all interest incurred was capitalized to inventory. See Note E.

Land and Lot Purchase Contracts

The Company enters into land and lot purchase contracts to acquire land or lots for the construction of homes. Under these contracts, the Company will fund a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at a future point in time with predetermined terms. Under the terms of many of the purchase contracts, the deposits are not refundable in the event the Company elects to terminate the contract. Land purchase contract deposits and capitalized pre-acquisition costs are expensed to cost of sales when the Company believes it is probable that it will not acquire the property under contract and will not be able to recover these costs through other means. See Notes C and L.

Variable Interests

Land purchase contracts can result in the creation of a variable interest in the entity holding the land parcel under contract. No variable interest entities were consolidated in the Company’s balance sheets at September 30, 2025 or 2024 because, with regard to each entity, the Company determined it did not control the activities that most significantly impact the variable interest entity’s economic performance.

The maximum exposure to losses related to the Company’s unconsolidated variable interest entities is limited to the amounts of the Company’s related deposits. At September 30, 2025 and 2024, the deposits related to these contracts totaled $2.1 billion and $1.9 billion, respectively, and are included in other assets in the consolidated balance sheets.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Repairs and maintenance costs are expensed as incurred. Depreciation generally is recorded using the straight-line method over the estimated useful life of the asset. The depreciable life of model home furniture is 2 years, depreciable lives of other furniture and equipment typically range from 2 to 5 years, and depreciable lives of buildings and improvements typically range from 5 to 30 years. See Note F.

Business Acquisitions

The Company accounts for acquisitions of businesses by allocating the purchase price of the business to the various assets acquired and liabilities assumed at their respective fair values. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Significant judgment is often required in estimating the fair value of assets acquired, particularly intangible assets. These estimates and assumptions are based on historical experience, information obtained from the management of the acquired companies and the Company’s estimates of significant assumptions that a market participant would use when determining fair value. While the Company believes the estimates and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. There were no material business acquisitions made in fiscal 2025.

In October 2025, the Company acquired the homebuilding operations of SK Builders for approximately $80 million in cash. SK Builders operates in and around Greenville, South Carolina. The assets acquired included approximately 160 homes in inventory, 260 lots and a sales order backlog of 110 homes. The Company also obtained control of approximately 1,320 additional lots through land purchase contracts.

Goodwill

The Company records goodwill associated with its acquisitions of businesses when the purchase price of the business exceeds the fair value of the identifiable net assets acquired. Goodwill balances are evaluated for potential impairment on at least an annual basis by performing a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of an operating segment with goodwill is less than its carrying amount. If the qualitative assessment indicates that additional impairment testing is required, then a quantitative assessment is performed to determine the operating segment’s fair value. The estimated fair value is determined by discounting the future cash flows of the operating segment to present value. If the carrying value of the operating segment exceeds its fair value, the Company records a goodwill impairment by the amount that an operating segment’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. As a result of the qualitative assessments performed in fiscal 2025, 2024 and 2023, no impairment charges were indicated or recorded.

The Company’s goodwill balances by reporting segment were as follows:


	September 30,
	2025		2024
	(In millions)
Northwest	$	2.2	$	2.2
Southwest	—		—
South Central	15.9		15.9
Southeast	6.0		6.0
East	60.5		60.5
North	49.7		49.7
Forestar	29.2		29.2
Total goodwill	$	163.5	$	163.5

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Warranty Claims

The Company typically provides its homebuyers with a ten-year limited warranty for major defects in structural elements such as framing components and foundation systems, a two-year limited warranty on major mechanical systems and a one-year limited warranty on other construction components of the home. Since the Company subcontracts its construction work to subcontractors who typically provide it with an indemnity and a certificate of insurance prior to receiving payments for their work, claims relating to workmanship and materials are generally the primary responsibility of the subcontractors. Warranty liabilities have been established by charging cost of sales for each home delivered. The amounts charged are based on management’s estimate of the warranty-related costs expected to be incurred in the future. The Company’s warranty liability is based upon historical warranty cost experience in each market in which it operates. See Note L.

Legal Claims and Insurance

The Company records expenses and liabilities for legal claims related to construction defect matters, personal injury claims, employment matters, land development issues, contract disputes and other matters. The amounts recorded for these contingencies are based on the estimated costs of pending claims and the estimated costs of anticipated future claims related to previously closed homes. The Company estimates and records receivables under its applicable insurance policies for these legal claims when recovery is probable. However, because the self-insured retentions under these policies are significant, the Company anticipates it will largely be self-insured. Additionally, the Company may have the ability to recover a portion of its losses from its subcontractors and their insurance carriers when the Company has been named as an additional insured on their insurance policies. See Note L.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense was approximately $108.2 million, $72.3 million and $64.7 million in fiscal 2025, 2024 and 2023, respectively, and is included in SG&A expense in the consolidated statements of operations.

Income Taxes

The Company’s income tax expense is calculated using the asset and liability method, under which deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement amounts of assets and liabilities and their respective tax bases and attributable to net operating losses and tax credit carryforwards. When assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of sufficient taxable income in future periods and in the jurisdictions in which those temporary differences become deductible. The Company records a valuation allowance when it determines it is more likely than not that a portion of the deferred tax assets will not be realized. The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company’s deferred tax assets and liabilities. See Note H.

Interest and penalties related to unrecognized tax benefits are recognized in the financial statements as a component of income tax expense. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a quarterly basis. The evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in increases or decreases in the Company’s income tax expense in the period in which the change is made. The Company had no unrecognized tax benefits at September 30, 2025 or 2024.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Earnings Per Share

Basic earnings per share are based on the weighted average number of shares of common stock outstanding during each year. Diluted earnings per share are based on the weighted average number of shares of common stock and dilutive securities outstanding during each year. See Note I.

Stock-Based Compensation

The Company’s stockholders formally authorize shares of its common stock to be available for future grants of stock-based compensation awards. From time to time, the Compensation Committee of the Company’s Board of Directors (Compensation Committee) authorizes the grant of stock-based compensation to its employees and directors from these available shares. At September 30, 2025, all outstanding stock-based compensation awards were in the form of restricted stock units. Grants of restricted stock units vest over a certain number of years as determined by the Compensation Committee. Restricted stock units outstanding at September 30, 2025 have a remaining vesting period up to 4.1 years. Compensation expense for restricted stock unit awards is based on the fair value of the award (the Company’s stock price on the date of grant) and is recognized on a straight-line basis over the remaining vesting period. See Note K.

Fair Value Measurements

The Financial Accounting Standards Board’s authoritative guidance for fair value measurements establishes a three-level hierarchy based upon the inputs to the valuation model of an asset or liability. When available, the Company uses quoted market prices in active markets to determine fair value. The Company considers the principal market and nonperformance risk associated with the Company’s counterparties when determining the fair value measurements, if applicable. Fair value measurements are used for the Company’s mortgage loans held for sale, mortgage servicing rights, interest rate lock commitments and other derivative instruments on a recurring basis and are used for inventories, other mortgage loans and real estate owned on a nonrecurring basis, when events and circumstances indicate that the carrying value is not recoverable. See Note N.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, “Segment Reporting - Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment’s profit or loss and assets. The Company adopted this standard for the annual reporting period ended September 30, 2025, with retrospective disclosure of prior periods presented. See Note B for the related disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. The standard is effective for the Company’s annual periods beginning in fiscal 2026. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,” which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. The standard is effective for the Company’s annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its disclosures.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE B – SEGMENT INFORMATION

The Company’s operating segments are its 92 homebuilding divisions, its rental operations, its majority-owned Forestar residential lot development operations, its financial services operations and its other business activities. The Company’s reporting segments are its homebuilding reporting segments, its Forestar lot development segment, its financial services segment and its rental operations segment. The accounting policies of the reporting segments are described throughout Note A.

Homebuilding

The homebuilding operating segments are aggregated into six reporting segments. The reporting segments and the states in which the Company has homebuilding operations are as follows:


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

Homebuilding is the Company’s core business, generating 92% of consolidated revenues in fiscal 2025 and 2024 and 90% of consolidated revenues in fiscal 2023. The Company’s homebuilding divisions are primarily engaged in the acquisition and development of land and the construction and sale of residential homes, with operations in 126 markets across 36 states. Most of the revenue generated by the Company’s homebuilding operations is from the sale of completed homes and to a lesser extent from the sale of land and lots.

Rental

The Company’s rental segment consists of single-family and multi-family rental operations. The single-family rental operations construct and lease single-family homes within a community and market each community for a bulk sale of rental homes. The multi-family rental operations develop, construct, lease and sell residential rental properties, the majority of which are apartment communities.

Forestar

The Forestar segment is a residential lot development company with operations in 64 markets across 23 states. The Company’s homebuilding divisions acquire finished lots from Forestar in accordance with the master supply agreement between the two companies. Forestar’s segment results are presented on their historical cost basis, consistent with the manner in which management evaluates segment performance.

Financial Services

The Company’s financial services segment provides mortgage financing and title agency services to homebuyers in many of the Company’s homebuilding markets. The segment generates the substantial majority of its revenues from originating and selling mortgages and collecting fees for title insurance agency and closing services. The Company sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers, typically within 60 days of origination.

Other

In addition to its homebuilding, rental, Forestar and financial services operations, the Company engages in other business activities through its subsidiaries. The Company conducts insurance-related operations, owns water rights and other water-related assets and owns non-residential real estate including ranch land and improvements. The results of these operations are immaterial for separate reporting and therefore are grouped together and presented in the Eliminations and Other column in the tables that follow.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s Chief Executive Officer, Chief Operating Officer and Chief Financial Officer are its Chief Operating Decision Makers (CODMs). The CODMs evaluate segment performance primarily based on revenues, pre-tax income and inventories for all reporting segments. Revenues, pre-tax income and inventories at the segment level are compared to forecasted results to evaluate the performance of each segment and assist in decision making regarding capital allocation between segments. The tables that follow present financial information pertaining to the Company’s reporting segments.


	September 30, 2025
	Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
	(In millions)
Assets
Cash and cash equivalents	$	2,210.5	$	140.8	$	379.2	$	244.5	$	10.4	$	2,985.4
Restricted cash	25.5		2.5		—		19.9		—		47.9
Inventories:
Construction in progress and finished homes	7,743.7		—		—		—		(95.2)		7,648.5
Residential land and lots — developed and under development	12,513.1		—		2,465.1		—		(282.4)		14,695.8
Land held for development	38.3		—		180.0		—		—		218.3
Land held for sale	21.4		—		—		—		—		21.4
Rental properties	—		2,710.4		—		—		(7.1)		2,703.3
	20,316.5		2,710.4		2,645.1		—		(384.7)		25,287.3
Mortgage loans held for sale	—		—		—		2,566.5		—		2,566.5
Deferred income taxes, net	125.7		(42.2)		—		—		(39.0)		44.5
Property and equipment, net	543.0		0.6		8.1		4.3		22.9		578.9
Other assets	3,344.1		38.9		104.6		220.6		89.0		3,797.2
Goodwill	134.3		—		—		—		29.2		163.5
	$	26,699.6	$	2,851.0	$	3,137.0	$	3,055.8	$	(272.2)	$	35,471.2
Liabilities
Accounts payable	$	1,016.8	$	230.6	$	71.0	$	0.7	$	(97.2)	$	1,221.9
Accrued expenses and other liabilities	3,122.1		34.7		494.3		294.7		(404.2)		3,541.6
Notes payable	3,154.4		600.0		802.8		1,408.3		—		5,965.5
	$	7,293.3	$	865.3	$	1,368.1	$	1,703.7	$	(501.4)	$	10,729.0

(1)Amounts include the balances of the Company’s other businesses and the elimination of intercompany transactions.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	September 30, 2024
	Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
	(In millions)
Assets
Cash and cash equivalents	$	3,623.0	$	157.6	$	481.2	$	242.3	$	12.3	$	4,516.4
Restricted cash	4.8		2.2		—		20.6		—		27.6
Inventories:
Construction in progress and finished homes	8,986.1		—		—		—		(110.3)		8,875.8
Residential land and lots — developed and under development	11,011.7		—		2,126.1		—		(189.7)		12,948.1
Land held for development	20.5		—		140.1		—		—		160.6
Land held for sale	12.7		—		—		—		—		12.7
Rental properties	—		2,902.4		—		—		3.6		2,906.0
	20,031.0		2,902.4		2,266.2		—		(296.4)		24,903.2
Mortgage loans held for sale	—		—		—		2,477.5		—		2,477.5
Deferred income taxes, net	211.6		(14.7)		—		—		(29.4)		167.5
Property and equipment, net	500.2		1.1		7.1		4.0		18.6		531.0
Other assets	2,976.5		74.5		85.6		212.3		(31.3)		3,317.6
Goodwill	134.3		—		—		—		29.2		163.5
	$	27,481.4	$	3,123.1	$	2,840.1	$	2,956.7	$	(297.0)	$	36,104.3
Liabilities
Accounts payable	$	1,046.1	$	474.2	$	85.9	$	0.8	$	(261.5)	$	1,345.5
Accrued expenses and other liabilities	2,552.0		67.8		452.8		234.6		(290.5)		3,016.7
Notes payable	2,926.8		750.7		706.4		1,533.8		—		5,917.7
	$	6,524.9	$	1,292.7	$	1,245.1	$	1,769.2	$	(552.0)	$	10,279.9

(1)Amounts include the balances of the Company’s other businesses and the elimination of intercompany transactions.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Year Ended September 30, 2025
	Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
	(In millions)
Revenues
Home sales	$	31,432.0	$	—	$	—	$	—	$	—	$	31,432.0
Land/lot sales and other	83.5		—		1,662.4		—		(1,409.1)		336.8
Rental property sales	—		1,640.4		—		—		—		1,640.4
Financial services	—		—		—		841.2		—		841.2
	31,515.5		1,640.4		1,662.4		841.2		(1,409.1)		34,250.4
Cost of sales
Home sales (2)	24,664.9		—		—		—		(227.3)		24,437.6
Land/lot sales and other	50.1		—		1,291.7		—		(1,132.5)		209.3
Rental property sales	—		1,333.4		—		—		(4.2)		1,329.2
Inventory and land option charges	144.2		7.3		7.2		—		(0.6)		158.1
	24,859.2		1,340.7		1,298.9		—		(1,364.6)		26,134.2
Selling, general and administrative expense	2,623.1		245.2		154.4		651.4		17.9		3,692.0
Other (income) expense (3)	(101.7)		(115.5)		(10.2)		(88.9)		0.6		(315.7)
Income before income taxes	$	4,134.9	$	170.0	$	219.3	$	278.7	$	(63.0)	$	4,739.9
Summary Cash Flow Information
Depreciation and amortization	$	93.4	$	2.0	$	3.5	$	1.8	$	0.6	$	101.3
Cash provided by (used in) operating activities	$	3,407.6	$	105.5	$	(197.7)	$	173.2	$	(67.7)	$	3,420.9

(1)Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.

(2)Amount in the Eliminations and Other column represents the recognition of profit on lots sold from Forestar to the homebuilding segment. Intercompany profit is eliminated in the consolidated financial statements when Forestar sells lots to the homebuilding segment and is recognized in the consolidated financial statements when the homebuilding segment closes homes on the lots to homebuyers.

(3)Other (income) expense primarily includes interest income but also consists of various other types of ancillary income, gains, expenses and losses not directly associated with sales of homes, land and lots.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Year Ended September 30, 2024
	Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
	(In millions)
Revenues
Home sales	$	33,903.6	$	—	$	—	$	—	$	—	$	33,903.6
Land/lot sales and other	58.2		—		1,509.4		—		(1,237.4)		330.2
Rental property sales	—		1,685.1		—		—		—		1,685.1
Financial services	—		—		—		882.5		—		882.5
	33,961.8		1,685.1		1,509.4		882.5		(1,237.4)		36,801.4
Cost of sales
Home sales (2)	25,952.1		—		—		—		(262.9)		25,689.2
Land/lot sales and other	40.0		—		1,145.9		—		(989.8)		196.1
Rental property sales	—		1,315.9		—		—		(14.0)		1,301.9
Inventory and land option charges	68.9		5.8		4.1		—		—		78.8
	26,061.0		1,321.7		1,150.0		—		(1,266.7)		27,266.0
Selling, general and administrative expense	2,553.3		236.2		118.5		672.4		19.1		3,599.5
Other (income) expense (3)	(107.6)		(101.5)		(29.2)		(101.1)		(9.4)		(348.8)
Income before income taxes	$	5,455.1	$	228.7	$	270.1	$	311.2	$	19.6	$	6,284.7
Summary Cash Flow Information
Depreciation and amortization	$	79.4	$	2.4	$	3.0	$	1.8	$	0.5	$	87.1
Cash provided by (used in) operating activities	$	2,239.0	$	(231.0)	$	(158.6)	$	281.6	$	58.8	$	2,189.8

(1)Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Year Ended September 30, 2023
	Homebuilding		Rental		Forestar		Financial Services		Eliminations and Other (1)		Consolidated
	(In millions)
Revenues
Home sales	$	31,641.0	$	—	$	—	$	—	$	—	$	31,641.0
Land/lot sales and other	102.2		—		1,436.9		—		(1,126.7)		412.4
Rental property sales	—		2,605.5		—		—		—		2,605.5
Financial services	—		—		—		801.5		—		801.5
	31,743.2		2,605.5		1,436.9		801.5		(1,126.7)		35,460.4
Cost of sales
Home sales (2)	24,201.3		—		—		—		(248.5)		23,952.8
Land/lot sales and other	53.8		—		1,108.9		—		(959.9)		202.8
Rental property sales	—		1,886.8		—		—		(12.7)		1,874.1
Inventory and land option charges	60.7		6.7		24.0		—		(11.1)		80.3
	24,315.8		1,893.5		1,132.9		—		(1,232.2)		26,110.0
Selling, general and administrative expense	2,239.9		290.2		97.7		594.9		26.1		3,248.8
Other (income) expense (3)	(78.8)		(102.4)		(15.3)		(76.7)		60.1		(213.1)
Income before income taxes	$	5,266.3	$	524.2	$	221.6	$	283.3	$	19.3	$	6,314.7
Summary Cash Flow Information
Depreciation and amortization	$	64.0	$	2.4	$	3.0	$	2.1	$	20.1	$	91.6
Cash provided by operating activities	$	3,078.4	$	739.2	$	364.1	$	13.2	$	109.2	$	4,304.1

(1)Amounts include the results of the Company’s other businesses and the elimination of intercompany transactions.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenues, expenses and pre-tax income of the Company’s homebuilding segment are disaggregated into the individual homebuilding reporting segments in the tables below. Expenses maintained at the corporate level consist primarily of homebuilding interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly, and the expenses related to operating the Company’s corporate office. The amortization of capitalized interest and property taxes is allocated to each homebuilding segment based on the segment’s cost of sales, while expenses associated with the corporate office are allocated to each homebuilding segment based on the segment’s inventory balances.


Homebuilding Results by Reporting Segment		Year Ended September 30, 2025
	Northwest			Southwest			South Central			Southeast			East			North			Total
		(In millions)
Revenues
Home sales		$	2,685.7		$	4,573.7		$	6,885.4		$	6,939.4		$	6,131.1		$	4,216.7		$	31,432.0
Land/lot sales and other		0.5			21.6			13.9			31.8			6.9			8.8			83.5
		2,686.2			4,595.3			6,899.3			6,971.2			6,138.0			4,225.5			31,515.5
Cost of sales
Home sales		2,075.7			3,695.4			5,350.7			5,510.1			4,768.1			3,264.9			24,664.9
Land/lot sales and other		0.2			19.9			10.0			9.0			4.8			6.2			50.1
Inventory and land option charges		3.8			16.7			36.7			45.4			29.2			12.4			144.2
		2,079.7			3,732.0			5,397.4			5,564.5			4,802.1			3,283.5			24,859.2
Selling, general and administrative expense		220.0			361.9			558.3			587.8			522.1			373.0			2,623.1
Other (income) expense		(9.2)			(15.7)			(21.0)			(21.0)			(20.2)			(14.6)			(101.7)
Income before income taxes		$	395.7		$	517.1		$	964.6		$	839.9		$	834.0		$	583.6		$	4,134.9


Homebuilding Results by Reporting Segment		Year Ended September 30, 2024
	Northwest			Southwest			South Central			Southeast			East			North			Total
		(In millions)
Revenues
Home sales		$	2,744.6		$	4,913.3		$	7,639.6		$	8,853.4		$	6,070.9		$	3,681.8		$	33,903.6
Land/lot sales and other		17.1			1.4			12.5			23.4			2.2			1.6			58.2
		2,761.7			4,914.7			7,652.1			8,876.8			6,073.1			3,683.4			33,961.8
Cost of sales
Home sales		2,121.2			3,862.5			5,765.4			6,790.5			4,534.8			2,877.7			25,952.1
Land/lot sales and other		14.8			0.1			8.1			15.9			0.6			0.5			40.0
Inventory and land option charges		4.4			12.7			11.4			18.4			11.9			10.1			68.9
		2,140.4			3,875.3			5,784.9			6,824.8			4,547.3			2,888.3			26,061.0
Selling, general and administrative expense		211.1			354.1			557.0			634.4			484.6			312.1			2,553.3
Other (income) expense		(10.6)			(18.2)			(21.2)			(23.8)			(18.4)			(15.4)			(107.6)
Income before income taxes		$	420.8		$	703.5		$	1,331.4		$	1,441.4		$	1,059.6		$	498.4		$	5,455.1

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Homebuilding Results by Reporting Segment		Year Ended September 30, 2023
	Northwest			Southwest			South Central			Southeast			East			North			Total
		(In millions)
Revenues
Home sales		$	2,574.1		$	4,246.7		$	7,598.1		$	8,756.5		$	5,323.9		$	3,141.7		$	31,641.0
Land/lot sales and other		8.3			36.1			14.5			4.3			1.4			37.6			102.2
		2,582.4			4,282.8			7,612.6			8,760.8			5,325.3			3,179.3			31,743.2
Cost of sales
Home sales		2,003.6			3,451.2			5,721.6			6,485.5			3,992.7			2,546.7			24,201.3
Land/lot sales and other		7.1			28.8			10.7			(5.1)			0.2			12.1			53.8
Inventory and land option charges		6.6			11.3			7.6			14.6			8.4			12.2			60.7
		2,017.3			3,491.3			5,739.9			6,495.0			4,001.3			2,571.0			24,315.8
Selling, general and administrative expense		182.2			315.3			500.9			574.7			399.5			267.3			2,239.9
Other (income) expense		(8.2)			(13.1)			(16.5)			(20.0)			(11.2)			(9.8)			(78.8)
Income before income taxes		$	391.1		$	489.3		$	1,388.3		$	1,711.1		$	935.7		$	350.8		$	5,266.3

The Company’s total inventories are disaggregated into the individual reporting segments in the table below. Inventories are the only assets included in the measure of segment assets used by the Company’s chief operating decision makers.


Inventories by Reporting Segment	September 30,
2025			2024			2023
	(In millions)
Homebuilding
Northwest	$	1,891.8		$	1,935.2		$	1,907.5
Southwest	3,068.5			3,278.9			3,133.0
South Central	3,931.9			3,728.0			3,810.5
Southeast	4,061.8			4,284.5			3,958.5
East	4,397.7			3,978.2			3,024.7
North	2,637.6			2,551.2			2,078.0
Corporate and unallocated (1)	327.2			275.0			243.6
Total Homebuilding	20,316.5			20,031.0			18,155.8
Rental	2,710.4			2,902.4			2,708.4
Forestar	2,645.1			2,266.2			1,790.3
Eliminations and other (2)	(384.7)			(296.4)			(281.2)
Consolidated inventories	$	25,287.3		$	24,903.2		$	22,373.3

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

(2)Amounts include the balances of the Company’s other businesses and the elimination of intercompany transactions.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE C – INVENTORIES

At the end of each quarter, the Company reviews the performance and outlook for all of its communities and land inventories for indicators of potential impairment and performs detailed impairment evaluations and analyses when necessary. As of September 30, 2025, the Company performed detailed impairment evaluations of communities and land inventories and determined that communities with a combined carrying value of $74.8 million were impaired. As a result, impairment charges of $8.5 million were recorded during the three months ended September 30, 2025 to reduce the carrying value of the related inventories to fair value. During fiscal 2025, impairment charges totaled $33.0 million compared to $14.0 million and $19.0 million in fiscal 2024 and 2023, respectively.

During fiscal 2025, 2024 and 2023, earnest money and pre-acquisition cost write-offs related to land purchase contracts that the Company has terminated or expects to terminate were $125.1 million, $64.8 million and $61.3 million, respectively. Inventory impairments and land option charges are included in cost of sales in the consolidated statements of operations.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE D – NOTES PAYABLE

The Company’s notes payable at their carrying amounts consist of the following:


	September 30,
	2025		2024
	(In millions)
Homebuilding
Revolving credit facility	$	—	$	—
2.5% senior notes due 2024	—		500.0
2.6% senior notes due 2025	—		499.0
1.3% senior notes due 2026 (1)	598.8		597.7
1.4% senior notes due 2027 (1)	498.2		497.4
4.85% senior notes due 2030 (1)	495.5		—
5.0% senior notes due 2034 (1)	687.7		686.5
5.5% senior notes due 2035 (1)	693.6		—
Other notes	180.6		146.2
	3,154.4		2,926.8
Rental
Revolving credit facility	600.0		745.0
Other notes	—		5.7
	600.0		750.7
Forestar
Revolving credit facility	—		—
3.85% senior notes due 2026	—		398.4
5.0% senior notes due 2028 (2)	298.7		298.1
6.5% senior notes due 2033 (2)	494.2		—
Other notes	9.9		9.9
	802.8		706.4
Financial Services
Mortgage repurchase facilities:
Committed facility	1,103.5		1,229.3
Uncommitted facility	304.8		304.5
	1,408.3		1,533.8
Total notes payable	$	5,965.5	$	5,917.7

(1)Debt issuance costs that were deducted from the carrying amounts of the homebuilding senior notes totaled $18.9 million and $11.7 million at September 30, 2025 and 2024, respectively.

(2)Debt issuance costs that were deducted from the carrying amount of Forestar’s senior notes totaled $7.2 million and $3.5 million at September 30, 2025 and 2024, respectively.

As of September 30, 2025, maturities of consolidated notes payable, assuming the mortgage repurchase facility is not extended or renewed, are $1.6 billion in fiscal 2026, $604.7 million in fiscal 2027, $1.4 billion in fiscal 2028, $17.5 million in fiscal 2029, none in fiscal 2030 and $2.4 billion thereafter.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Homebuilding

The Company has a senior unsecured homebuilding revolving credit facility that was amended in December 2024 to increase its capacity from $2.19 billion to $2.23 billion. The facility includes an uncommitted accordion feature that allows for an increase in its size to $3.0 billion, subject to certain conditions and availability of additional bank commitments. In June 2025, the Company utilized this accordion feature, increasing the facility’s size to $2.305 billion through an additional commitment. Of the total commitments, $2.04 billion mature on December 18, 2029, and $265 million mature on October 28, 2027. The facility also provides for the issuance of letters of credit with a sublimit equal to 100% of the total revolving credit commitments. Letters of credit issued under the facility reduce the available borrowing capacity. At September 30, 2025, there were no borrowings outstanding and $231.2 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $2.07 billion.

The Company’s homebuilding revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if the leverage ratio exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens.

D.R. Horton has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in July 2024, registering debt and equity securities that the Company may issue from time to time in amounts to be determined. In February 2025, the Company issued $700 million principal amount of 5.5% senior notes due October 15, 2035, and in May 2025, the Company issued $500 million principal amount of 4.85% senior notes due October 15, 2030. The indenture governing the senior notes imposes restrictions on the creation of secured debt and liens.

In October 2024, the Company repaid $500 million principal amount of its 2.5% senior notes at maturity. In September 2025, the Company redeemed $500 million principal amount of its 2.6% senior notes due October 15, 2025 for $505.9 million, which included $5.9 million of accrued and unpaid interest.

The key terms of the Company’s homebuilding senior notes outstanding as of September 30, 2025 are summarized below.


Notes Payable	Principal Amount	Date Issued	Date Due	Redeemable Prior to Maturity (1)	Effective Interest Rate (2)
	(In millions)
1.3% senior notes	$600	August 2021	October 15, 2026	Yes	1.5%
1.4% senior notes	$500	October 2020	October 15, 2027	Yes	1.6%
4.85% senior notes	$500	May 2025	October 15, 2030	Yes	5.1%
5.0% senior notes	$700	August 2024	October 15, 2034	Yes	5.2%
5.5% senior notes	$700	February 2025	October 15, 2035	Yes	5.6%

(1)The Company may redeem the notes in whole at any time or in part from time to time, at a redemption price equal to the greater of 100% of their principal amount or the present value of the remaining scheduled payments discounted to the redemption date, plus accrued and unpaid interest. The 1.3% senior notes and the 4.85% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is one month prior to the final maturity date of the notes. The 1.4% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is two months prior to the final maturity of the notes. The 5.0% senior notes and the 5.5% senior notes are redeemable at a redemption price of 100% of their principal amount, plus accrued and unpaid interest, on or after the date that is three months prior to the final maturity of the notes.

(2)Interest is payable semi-annually on each of the series of senior notes. The annual effective interest rate is calculated after giving effect to the amortization of debt issuance costs and the discount, if applicable.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

All series of homebuilding senior notes and borrowings under the homebuilding revolving credit facility are senior obligations and rank pari passu in right of payment to all existing and future unsecured indebtedness and senior to all existing and future indebtedness expressly subordinated to them. The homebuilding senior notes and borrowings under the homebuilding revolving credit facility are guaranteed by entities that hold approximately 75% of the Company’s assets at September 30, 2025. Upon the occurrence of both a change of control of the Company and a ratings downgrade event, as defined in the indenture governing its senior notes, the Company would be required in certain circumstances to offer to repurchase these notes at 101% of their principal amount, along with accrued and unpaid interest. Also, a change of control as defined in the revolving credit facility would constitute an event of default under the revolving credit facility, which could result in the acceleration of any borrowings outstanding under the facility and the termination of the commitments thereunder.

At September 30, 2025, the Company was in compliance with all of the covenants, limitations and restrictions of its homebuilding revolving credit facility and public debt obligations. The Company’s homebuilding revolving credit facility and homebuilding senior notes are guaranteed by D.R. Horton, Inc.’s significant wholly owned homebuilding subsidiaries.

In July 2024, the Board of Directors authorized the repurchase of up to $500 million of the Company’s debt securities. The authorization has no expiration date. All of the $500 million authorization was remaining at September 30, 2025.

Rental

The Company’s rental subsidiary, DRH Rental, has a $1.05 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $2.0 billion, subject to certain conditions and availability of additional bank commitments. Availability under the rental revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental’s real estate assets and unrestricted cash. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. The maturity date of the facility is October 10, 2027. At September 30, 2025, there were $600 million of borrowings outstanding at a 6.2% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $450 million.

The rental revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require DRH Rental to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. At September 30, 2025, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.

The rental revolving credit facility is guaranteed by DRH Rental’s wholly owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. The rental revolving credit facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, Forestar or financial services operations.

Forestar

As of September 30, 2025, Forestar had a senior unsecured revolving credit facility that was amended in December 2024 to increase its capacity from $410 million to $640 million and to raise the uncommitted accordion feature that could increase the size of the facility to $1.0 billion, subject to certain conditions and availability of additional bank commitments. The amendment also extended the maturity date of the facility. Of the total commitments, $575 million mature on December 18, 2029, and $65 million mature on October 28, 2026. In October 2025, Forestar utilized the accordion feature and increased the size of its revolving credit facility to $665 million through an additional $25 million commitment that matures on December 18, 2029. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of Forestar’s real estate

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At September 30, 2025, there were no borrowings outstanding and $51.1 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $588.9 million.

As of September 30, 2025, Forestar had $800 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, which represent unsecured obligations of Forestar. The key terms of Forestar’s senior notes are summarized below.


Notes Payable	Principal Amount	Date Issued	Date Due	Redeemable Prior to Maturity (1)	Effective Interest Rate (2)
	(In millions)
5.0% senior notes	$300	February 2020	March 1, 2028	Yes	5.2%
6.5% senior notes	$500	March 2025	March 15, 2033	Yes	6.7%

(1)Forestar’s senior notes may be redeemed prior to maturity, subject to certain limitations and premiums defined in the indenture agreements.

(2)Interest is payable semi-annually on each of the series of senior notes. The annual effective interest rate is calculated after giving effect to the amortization of debt issuance costs.

The net proceeds from the 6.5% senior notes issued in March 2025 were primarily used to fund Forestar’s tender offer to purchase any and all of its outstanding $400 million principal amount of 3.85% senior notes due 2026 (of which $329.4 million aggregate principal amount was tendered). The repurchase price of $333.4 million included accrued and unpaid interest of $4.2 million. In September 2025, Forestar redeemed the remaining $70.6 million principal amount of its 3.85% senior notes for $71.6 million, which included $1.0 million of accrued and unpaid interest. In fiscal 2025, Forestar recognized a $1.2 million loss on extinguishment of debt related to the repurchase and redemption of the notes.

Forestar’s revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.

At September 30, 2025, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations. Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. They are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, rental or financial services operations.

In April 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities. The authorization has no expiration date. All of the $30 million authorization was remaining at September 30, 2025.

Financial Services

The Company’s mortgage subsidiary, DHI Mortgage, has two mortgage repurchase facilities, one of which is committed and the other of which is uncommitted, that provide financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to counterparties upon receipt of funds from the counterparties. DHI Mortgage then has the right and obligation to repurchase the loans upon their sale to third-party purchasers in the secondary market or within specified time frames in accordance with the terms of the mortgage repurchase facilities.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In May 2025, the committed mortgage repurchase facility was amended to reduce its capacity to $1.4 billion and extend its maturity date to May 6, 2026. The capacity of the facility can be increased to $2.0 billion subject to the availability of additional commitments. At September 30, 2025, DHI Mortgage had an obligation of $1.1 billion under the committed mortgage repurchase facility at a 5.8% annual interest rate.

At September 30, 2025, the uncommitted mortgage repurchase facility had a borrowing capacity of $500 million, of which DHI Mortgage had an obligation of $304.8 million at a 5.4% annual interest rate.

At September 30, 2025, $2.23 billion of mortgage loans held for sale with a collateral value of $2.19 billion were pledged under the committed mortgage repurchase facility, and $332.6 million of mortgage loans held for sale with a collateral value of $312.9 million were pledged under the uncommitted mortgage repurchase facility.

The facilities contain financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity. At September 30, 2025, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.

The mortgage repurchase facilities are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of the Company’s homebuilding, rental or Forestar operations.

NOTE E – CAPITALIZED INTEREST

The following table summarizes the Company’s interest costs incurred, capitalized and expensed during the years ended September 30, 2025, 2024 and 2023.


	Year Ended September 30,
	2025		2024		2023
	(In millions)
Capitalized interest, beginning of year	$	355.1	$	286.4	$	237.4
Interest incurred (1)	241.7		203.7		203.5
Interest charged to cost of sales	(158.1)		(135.0)		(154.5)
Capitalized interest, end of year	$	438.7	$	355.1	$	286.4

(1)Interest incurred in fiscal 2025, 2024 and 2023 includes interest on the Company's mortgage repurchase facilities of $33.9 million, $58.6 million and $45.9 million, respectively, Forestar interest of $45.5 million, $32.7 million and $32.8 million, respectively, and interest on the rental revolving credit facility of $59.2 million, $61.9 million and $56.0 million, respectively.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE F – PROPERTY AND EQUIPMENT

The Company’s property and equipment balances and the related accumulated depreciation at September 30, 2025 and 2024 are summarized below.


	September 30,
	2025		2024
	(In millions)
Homebuilding
Buildings and improvements	$	524.4	$	483.2
Model home furniture	189.8		171.2
Office furniture and equipment	135.5		111.1
Land	59.2		57.7
Accumulated depreciation	(365.9)		(323.0)
Total homebuilding	543.0		500.2
Rental, net	0.6		1.1
Forestar, net	8.1		7.1
Financial services, net	4.3		4.0
Other businesses and eliminations, net	22.9		18.6
Property and equipment, net	$	578.9	$	531.0

Depreciation expense was $90.9 million, $78.5 million and $82.9 million in fiscal 2025, 2024 and 2023, respectively.

NOTE G – MORTGAGE LOANS

Mortgage Loans Held for Sale and Related Derivatives

Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. The Company typically sells the servicing rights for the majority of loans when the loans are sold. Servicing rights retained are typically sold within six months of loan origination. At September 30, 2025, mortgage loans held for sale of $2.57 billion had an aggregate outstanding principal balance of $2.67 billion. At September 30, 2024, mortgage loans held for sale of $2.48 billion had an aggregate outstanding principal balance of $2.49 billion.

During the years ended September 30, 2025, 2024 and 2023, mortgage loans originated totaled $23.7 billion, $24.0 billion and $21.2 billion, respectively, and mortgage loans sold totaled $23.5 billion, $24.0 billion and $21.0 billion, respectively. The Company had gains on sales of loans and servicing rights of $566.3 million, $589.9 million and $538.4 million during the years ended September 30, 2025, 2024 and 2023, respectively. Net gains on sales of loans and servicing rights are included in revenues in the consolidated statements of operations. During fiscal 2025, approximately 71% of the Company’s mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 27% were sold to one other major financial entity.

To manage the interest rate risk inherent in its mortgage operations, the Company hedges its risk using derivative instruments, generally forward sales of mortgage-backed securities (MBS), which are referred to as “hedging instruments” in the following discussion. The Company does not enter into or hold derivatives for trading or speculative purposes.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Newly originated loans that have been closed but not committed to third-party purchasers are hedged to mitigate the risk of changes in their fair value. Hedged loans are committed to third-party purchasers typically within three days after origination. The notional amounts of the hedging instruments used to hedge mortgage loans held for sale may vary in relationship to the underlying loan amounts, depending on the movements in the value of each hedging instrument relative to the value of the underlying mortgage loans. The fair value change related to hedging instruments generally offsets the fair value change in the mortgage loans held for sale. The net fair value change, which for the years ended September 30, 2025, 2024 and 2023 was not significant, is recognized in revenues in the consolidated statements of operations. At September 30, 2025 and 2024, the Company’s mortgage loans held for sale that were not committed to third-party purchasers totaled $2.3 billion and $1.9 billion, respectively.

The Company also uses hedging instruments as part of a program to offer below market interest rate financing to its homebuyers. At September 30, 2025 and 2024, the Company had MBS totaling $677.5 million and $637.9 million, respectively, that did not yet have interest rate lock commitments (IRLCs) or closed loans created or assigned. The Company recorded an asset of $1.9 million and $2.4 million at September 30, 2025 and 2024, respectively, for the fair value of such MBS position.

Loan Commitments and Related Derivatives

The Company is party to IRLCs, which are extended to borrowers who have applied for loan funding and meet defined credit and underwriting criteria. At September 30, 2025 and 2024, the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value, totaled $2.1 billion and $2.0 billion, respectively.

The Company manages interest rate risk related to its IRLCs through the use of best-efforts whole loan delivery commitments and hedging instruments. These instruments are considered derivatives in an economic hedge and are accounted for at fair value with gains and losses recognized in revenues in the consolidated statements of operations. At September 30, 2025 and 2024, the notional amount of best-efforts whole loan delivery commitments totaled $27.4 million and $11.5 million, respectively, and the notional amount of hedging instruments related to the remaining IRLCs totaled $1.93 billion and $1.90 billion, respectively.

Other Mortgage Loans and Loss Reserves

Mortgage loans are sold with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements. These representations and warranties primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate underwriting of the loan and in some cases, a required minimum number of payments to be made by the borrower. The Company generally does not retain any other continuing interest related to mortgage loans sold in the secondary market. The majority of other mortgage loans consist of loans repurchased due to these limited recourse obligations. Typically, these loans are impaired, and some result in real estate owned through the foreclosure process. At September 30, 2025 and 2024, the Company’s total other mortgage loans and real estate owned, before the related loss reserves, totaled $15.7 million and $18.9 million, respectively.

The Company has recorded reserves for estimated losses on other mortgage loans, real estate owned and future loan repurchase obligations due to the limited recourse provisions, all of which are recorded as reductions of revenue. The loss reserve for loan repurchase and settlement obligations is estimated based on historical experience, analysis of the volume of mortgages originated, discussions with mortgage purchasers and current housing and credit market conditions, as well as known and projected mortgage loan repurchase requests. The loss reserves for other mortgage loans, real estate owned and estimated future loan repurchase obligations totaled $16.2 million and $12.3 million at September 30, 2025 and 2024, respectively.

Other mortgage loans and real estate owned, net of the related loss reserves, are included in other assets, while loan repurchase obligations are included in accrued expenses and other liabilities in the Company’s consolidated balance sheets.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE H – INCOME TAXES

Income Tax Expense

The components of the Company’s income tax expense are as follows:


	Year Ended September 30,
	2025		2024		2023
	(In millions)
Current tax expense:
Federal	$	821.4	$	1,200.9	$	1,293.0
State	174.4		258.8		272.4
	995.8		1,459.7		1,565.4
Deferred tax expense (benefit):
Federal	104.8		15.5		(39.0)
State	18.4		3.5		(6.9)
	123.2		19.0		(45.9)
Total income tax expense	$	1,119.0	$	1,478.7	$	1,519.5

The Company’s effective tax rate was 23.6%, 23.5% and 24.1% in fiscal 2025, 2024 and 2023, respectively. The effective tax rates for all years include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient home tax credits.

Reconciliation of Expected Income Tax Expense

Differences between income tax expense and tax computed by applying the federal statutory rate of 21% to income before income taxes during each year is due to the following:


	Year Ended September 30,
	2025		2024		2023
	(In millions)
Income taxes at federal statutory rate	$	995.4	$	1,319.8	$	1,326.1
Increase (decrease) in tax resulting from:
State income taxes, net of federal benefit	154.1		205.8		208.1
Valuation allowance	(0.3)		0.1		(3.1)
Tax credits	(39.5)		(70.4)		(44.4)
Excess tax benefit from stock-based compensation	(16.0)		(42.7)		(25.6)
Tax contingencies	—		(1.4)		(1.5)
Other	25.3		67.5		59.9
Total income tax expense	$	1,119.0	$	1,478.7	$	1,519.5

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred Income Taxes

Deferred tax assets and liabilities reflect the tax consequences of temporary differences between the financial statement bases of assets and liabilities and their tax bases, tax losses and credit carryforwards. Components of deferred income taxes are summarized as follows:


	September 30,
	2025		2024
	(In millions)
Deferred tax assets:
Inventory costs	$	39.6	$	87.3
Inventory impairments	13.4		8.7
Warranty and construction defect costs	356.2		316.2
Net operating loss carryforwards	36.5		38.9
Tax credit carryforwards	22.1		6.9
Incentive compensation plans	105.0		93.7
Other	21.2		14.0
Total deferred tax assets	594.0		565.7
Valuation allowance	(14.6)		(14.9)
Total deferred tax assets, net of valuation allowance	579.4		550.8
Deferred tax liabilities:
Deferral of profit on home closings	327.6		226.4
Depreciation of fixed assets	76.7		44.8
Deferral of income	31.9		29.3
Undistributed earnings of subsidiary	90.7		77.4
Other	8.0		5.4
Total deferred tax liabilities	534.9		383.3
Deferred income taxes, net	$	44.5	$	167.5

The Company has $25.4 million of tax benefits for a federal net operating loss (NOL) carryforward. The utilization of the federal NOL is subject to IRC Section 382 limitations; however, it is expected that all of the federal NOL will be utilized within the carryforward period. D.R. Horton has $10.4 million of tax benefits for state NOL carryforwards that expire at various times depending on the tax jurisdiction. Of this amount, $5.5 million of the tax benefits expire over the next ten years and the remaining $4.9 million expire from fiscal years 2036 to 2045. Forestar has $0.7 million of tax benefits for state NOL carryforwards that expire at various times depending on the tax jurisdiction. Forestar has $16.5 million of federal corporate alternative minimum tax credit carryforwards that do not expire.

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

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Valuation Allowance

The Company has a valuation allowance of $14.6 million and $14.9 million at September 30, 2025 and 2024, respectively, related to deferred tax assets for state NOL and tax credit carryforwards that are expected to expire before being realized. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to the remaining state NOL and tax credit carryforwards. Any reversal of the valuation allowance in future periods will impact the Company’s effective tax rate.

Unrecognized Tax Benefits

Unrecognized tax benefits are the differences between tax positions taken or expected to be taken in a tax return and the benefits recognized in the financial statements. The Company had no unrecognized tax benefits and no accrued interest or penalties related to unrecognized tax benefits at September 30, 2025 or 2024. The Company classifies interest expense and penalties on income taxes as income tax expense.

Regulations and Legislation

D.R. Horton is subject to federal income tax and state income tax in multiple jurisdictions. The statute of limitations for the majority of D.R. Horton’s tax jurisdictions remains open for examination for fiscal years 2022 through 2025. D.R. Horton is not currently under audit for federal income taxes. D.R. Horton is under audit by various states; however, the Company is not aware of any significant findings by the state taxing authorities.

Forestar is subject to federal income tax and state income tax in multiple jurisdictions. The statute of limitations for the majority of Forestar’s tax jurisdictions remains open for examination for fiscal years 2022 through 2025. Forestar is not currently under audit for federal income taxes. Forestar is under audit by various states; however, Forestar is not aware of any significant findings by the state taxing authorities.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law (the new law). The new law terminates the energy efficient home tax credit for homes closing after June 30, 2026 and enacts certain other tax provisions that will impact the Company’s financial statements. The Company’s tax benefits related to the energy efficient home tax credit were $39.5 million and $70.4 million in fiscal 2025 and 2024, respectively. None of the other tax provisions enacted by the new law have a significant impact on the Company’s financial statements.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE I – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share.


	Year Ended September 30,
	2025		2024		2023
	(In millions, except per share data)
Numerator:
Net income attributable to D.R. Horton, Inc.	$	3,585.2	$	4,756.4	$	4,745.7
Denominator:
Denominator for basic earnings per share — weighted average shares	308.5		329.5		340.7
Effect of dilutive securities:
Employee stock awards	1.4		2.1		2.6
Denominator for diluted earnings per share — adjusted weighted average shares	309.9		331.6		343.3
Basic net income per share attributable to D.R. Horton, Inc.	$	11.62	$	14.44	$	13.93
Diluted net income per share attributable to D.R. Horton, Inc.	$	11.57	$	14.34	$	13.82

NOTE J – STOCKHOLDERS’ EQUITY

D.R. Horton has an automatically effective universal shelf registration statement, filed with the SEC in July 2024, registering debt and equity securities that it may issue from time to time in amounts to be determined. At September 30, 2025, the Company had 404,031,443 shares of common stock issued and 294,475,153 shares outstanding. No shares of preferred stock were issued or outstanding.

In April 2025, the Board of Directors authorized the repurchase of up to $5.0 billion of the Company’s common stock, replacing the previous authorization. The authorization has no expiration date. During fiscal 2025, the Company repurchased 30.7 million shares of its common stock at a total cost, including commissions and excise taxes, of $4.3 billion, of which $2.6 billion was repurchased under the previous authorization. At September 30, 2025, there was $3.3 billion remaining on the repurchase authorization.

The Board of Directors approved and the Company paid quarterly cash dividends of $0.40 per share in fiscal 2025 and $0.30 per share in fiscal 2024. Cash dividends declared and paid in fiscal 2025 totaled $494.8 million. In October 2025, the Board approved a quarterly cash dividend of $0.45 per share, payable on November 20, 2025 to stockholders of record on November 13, 2025.

Forestar has an effective shelf registration statement, filed with the SEC in September 2024, registering $750 million of equity securities, of which $300 million is reserved for sales under its at-the-market equity offering (ATM) program that was entered into in November 2024. During fiscal 2025, there were no shares issued under the ATM program. At September 30, 2025, the full $750 million remained available for issuance under Forestar’s shelf registration statement, with $300 million reserved for sales under the ATM program.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE K – EMPLOYEE BENEFIT PLANS

The Company offers its employees a comprehensive compensation and benefits package, which includes a broad range of benefits, including medical, dental and vision healthcare insurance and paid parental leave. In addition to base pay, eligible employees may participate in the Company’s 401(k) plan, employee stock purchase plan, short-term incentive bonus program and/or its stock compensation plans as described below.

Deferred Compensation Plans

The Company has a 401(k) plan for all employees who have been with the Company for a period of six months or more. The Company matches portions of employees’ voluntary contributions. The Company recorded $44.3 million, $43.8 million and $40.2 million of expense for matching contributions in fiscal 2025, 2024 and 2023, respectively.

The Company’s Supplemental Executive Retirement Plan (SERP) is a non-qualified deferred compensation program that provides benefits payable to certain management employees upon retirement, death or termination of employment. Under the SERP, the Company accrues an unfunded benefit based on a percentage of the eligible employees’ salaries, as well as an interest factor based upon a predetermined formula. The Company’s liabilities related to the SERP were $64.2 million and $56.8 million at September 30, 2025 and 2024, respectively. The Company recorded $9.4 million, $8.9 million and $8.3 million of expense for this plan in fiscal 2025, 2024 and 2023, respectively.

The Company has a deferred compensation plan available to a select group of employees which allows participating employees to contribute compensation into the plan on a before tax basis and defer income taxation on the contributions until the funds are withdrawn from the plan. The participating employees designate investments for their contributions; however, the Company is not required to invest the contributions in the designated investments. The Company’s net liabilities related to the deferred compensation plan were $206.9 million and $184.5 million at September 30, 2025 and 2024, respectively. The Company records as SG&A expense the amount that the employee contributions would have earned had the funds been invested in the designated investments. The Company recorded $18.1 million, $36.5 million and $17.0 million of expense for this plan in fiscal 2025, 2024 and 2023, respectively.

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan provides eligible employees the opportunity to purchase common stock of the Company at a discounted price of 85% of the fair market value of the stock on the designated dates of purchase. The price to eligible employees may be further discounted depending on the average fair market value of the stock during the period and certain other criteria. Under the terms of the plan, the total fair market value of common stock that an eligible employee may purchase each year is limited to the lesser of 15% of the employee’s annual compensation or $25,000. Under the plan, employees purchased 159,460 shares for $18.1 million in fiscal 2025, 137,347 shares for $15.3 million in fiscal 2024 and 143,960 shares for $11.0 million in fiscal 2023. At September 30, 2025, the Company had 2.1 million shares of common stock reserved for issuance pursuant to the Employee Stock Purchase Plan.

Incentive Bonus Plan

The Company’s Incentive Bonus Plan provides for the Compensation Committee to award short-term performance bonuses to senior management based upon the level of achievement of certain criteria. For fiscal 2025, 2024 and 2023, the Compensation Committee approved awards whereby certain executive officers could earn performance bonuses based upon percentages of the Company’s pre-tax income. Compensation expense related to these plans was $22.5 million, $29.9 million and $35.4 million in fiscal 2025, 2024 and 2023, respectively.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock-Based Compensation

The Company’s Stock Incentive Plan provides for the granting of equity awards, such as stock options, performance stock units (PSUs) and restricted stock units (RSUs), to executive officers, other key employees and non-management directors. PSUs are earned by achieving key performance goals, and RSUs are earned through continued employment with the Company over a requisite time period. Each stock unit represents the contingent right to receive one share of the Company’s common stock if the performance criteria and/or vesting conditions are satisfied. The stock units have no dividend or voting rights until vested. At September 30, 2025, the Company had 22.1 million shares of common stock reserved for issuance and 20.2 million shares available for future grants under the Stock Incentive Plan.

Restricted Stock Unit (RSU) Equity Awards

During fiscal 2025, 2024 and 2023, RSUs were granted to the Company’s executive officers, other key employees and non-management directors (collectively, approximately 1,600, 1,470 and 1,380 recipients, respectively). These awards vest annually in equal installments over periods of three to five years.

The following table provides additional information related to RSU activity during fiscal 2025, 2024 and 2023. The number of RSUs vested includes shares of common stock withheld by the Company on behalf of employees to satisfy the tax withholding requirements.


	Year Ended September 30,
	2025			2024			2023
	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value		Number of Restricted Stock Units	Weighted Average Grant Date Fair Value		Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	2,309,737	$	95.28	2,966,925	$	70.85	3,466,094	$	57.50
Granted	608,835	156.12		663,860	147.79		877,131	93.44
Vested	(884,883)	79.17		(1,233,866)	65.51		(1,251,785)	50.61
Cancelled	(130,880)	112.49		(87,182)	85.12		(124,515)	61.95
Outstanding at end of year	1,902,809	$	121.06	2,309,737	$	95.28	2,966,925	$	70.85

The total fair value of shares vested on the vesting date during fiscal 2025, 2024 and 2023 was $114.8 million, $184.7 million and $115.2 million, respectively. For fiscal 2025, 2024 and 2023, compensation expense related to RSUs was $80.6 million, $77.3 million and $65.7 million, respectively. At September 30, 2025, there was $170.3 million of unrecognized compensation expense related to unvested RSU awards. This expense is expected to be recognized over a weighted average period of 2.6 years.

Performance Stock Unit (PSU) Equity Awards

During fiscal 2025, 2024 and 2023, PSUs that vest at the end of three-year performance periods were granted to the Company’s executive officers and other key employees. The number of units that ultimately vest depends on the Company’s relative position as compared to its peers in achieving certain performance criteria and can range from 0% to 300% of the number of units granted. Compensation expense related to these grants is based on the Company’s performance against a market index or its peer group, the elapsed portion of the performance period and the grant date fair value of the award. The performance criteria for the awards issued in fiscal 2023 were total shareholder return compared to the S&P 500 and return on investment, SG&A expense containment and homebuilding gross profit compared to homebuilding peers. The performance criteria for the awards issued in fiscal 2024 were total shareholder return compared to the S&P 500 and return on assets and operating margin compared to homebuilding peers. The performance criteria for the awards issued in fiscal 2025 were total shareholder return and return on assets compared to the S&P 500, pre-tax return on assets compared to homebuilding peers and earnings per share growth.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides additional information related to the PSUs outstanding at September 30, 2025.


Grant Date	Vesting Date	Target Number of Performance Stock Units	Grant Date Fair Value per Unit		Compensation Expense Year Ended September 30,
	2025	2024	2023
					(In millions)
October 2022	September 2025	600,000	$	79.97	$	7.8	$	10.0	$	11.6
October 2023 (1)	September 2026	277,779	146.72		13.1		13.1		—
October 2024	September 2027	327,717	176.39		19.3		—		—
					$	40.2	$	23.1	$	11.6

(1)The PSUs granted in October 2023 were subsequently modified in December 2023 to change the performance criteria to total shareholder return, return on assets and operating margin.

In October 2025, the Compensation Committee approved the issuance of the PSUs that vested in September 2025 in the form of 484,492 shares of common stock to satisfy the awards.

Stock Options

Stock options are granted at exercise prices which equal the market value of the Company’s common stock at the date of the grant. The Company has not granted stock options in recent years and there were no options outstanding as of September 30, 2025.

NOTE L – COMMITMENTS AND CONTINGENCIES

Warranty Claims

The Company typically provides its homebuyers with warranties for defects in structural elements, mechanical systems and other construction components of the home. Warranty liabilities are established by charging cost of sales for each home delivered based on management’s estimate of expected warranty-related costs and by accruing for existing warranty claims. The Company’s warranty liability is based upon historical warranty cost experience in each market in which it operates. The estimation of these costs is subject to variability due to uncertainties related to these factors. Due to the judgment required in establishing the liability for warranty claims, actual future costs could differ from current estimated amounts, and it is not possible for the Company to make a reasonable estimate of the possible loss or range of loss in excess of its warranty liability.

Changes in the Company’s warranty liability during fiscal 2025 and 2024 were as follows:


	September 30,
	2025		2024
	(In millions)
Warranty liability, beginning of year	$	566.9	$	512.4
Warranties issued	188.8		210.6
Changes in liability for pre-existing warranties	(68.5)		(36.0)
Settlements made	(121.0)		(120.1)
Warranty liability, end of year	$	566.2	$	566.9

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Legal Claims and Insurance

The Company is named as a defendant in various claims, complaints and other legal actions in the ordinary course of business. At any point in time, the Company is managing several hundred individual claims related to construction defect matters, personal injury claims, employment matters, land development issues, contract disputes and other matters. The Company has established reserves for these contingencies based on the estimated costs of pending claims and the estimated costs of anticipated future claims related to previously closed homes. The estimated liabilities for these contingencies were $1.1 billion and $949.6 million at September 30, 2025 and 2024, respectively, and are included in accrued expenses and other liabilities in the consolidated balance sheets. Approximately 98% and 97% of these reserves related to construction defect matters at September 30, 2025 and 2024, respectively. Expenses related to the Company’s legal contingencies were $240.1 million, $164.0 million and $139.7 million in fiscal 2025, 2024 and 2023, respectively.

The Company’s reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims. As of September 30, 2025, no individual existing claim was material to the Company’s financial statements. The Company has closed a significant number of homes during recent years and may be subject to future construction defect claims on these homes. Although regulations vary from state to state, construction defect issues can generally be reported for up to ten years after the home has closed in many states in which the Company operates. Historical data and trends regarding the frequency of claims incurred and the costs to resolve claims relative to the types of products and markets where the Company operates are used to estimate the construction defect liabilities for both existing and anticipated future claims. These estimates are subject to ongoing revision as the circumstances of individual pending claims and historical data and trends change. Adjustments to estimated reserves are recorded in the accounting period in which the change in estimate occurs.

Historical trends in construction defect claims have been inconsistent, and the Company believes they may continue to fluctuate. The Company also believes that fluctuations in housing market conditions can affect the frequency and cost of construction defect claims. If the ultimate resolution of construction defect claims resulting from the Company’s home closings in prior years varies from current expectations, it could significantly change the Company’s estimates regarding the frequency and timing of claims incurred and the costs to resolve existing and anticipated future claims, which would impact the construction defect reserves in the future. If the frequency of claims incurred or costs of existing and future legal claims significantly exceed the Company’s current estimates, they will have a significant negative impact on its future earnings and liquidity.

Changes in the Company’s legal claims reserves during fiscal 2025 and 2024 were as follows:


	September 30,
	2025		2024
	(In millions)
Reserves for legal claims, beginning of year	$	949.6	$	858.9
Increase in reserves	262.7		169.7
Payments	(68.7)		(79.0)
Reserves for legal claims, end of year	$	1,143.6	$	949.6

Prior to June 1, 2021, in the majority of states in which it operates, the Company has general liability insurance policies to provide risk transfer against a portion of the risk of loss from construction defect and other claims. The Company also contractually requires major subcontractors in most markets to have general liability insurance which includes construction defect coverage. The Company estimates and records receivables under these policies for known claims and anticipated future construction defect claims on previously closed homes and other legal claims and lawsuits incurred in the ordinary course of business when recovery is probable. However, because the self-insured retentions under these policies are significant and the limits of the policies are finite, the Company anticipates it may be in large part self-insured. After June 1, 2021, except for contractual risk transfer, the Company is almost exclusively self-insured for construction defect exposures. The Company’s estimated insurance receivables from estimated losses for pending legal claims and anticipated future claims related to previously closed homes totaled $167.0 million and $156.8 million at September 30, 2025 and 2024, respectively, and are included in other assets in the consolidated balance sheets.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In some states where the Company believes it is too difficult or expensive for its subcontractors to obtain general liability insurance, the Company has waived its normal subcontractor general liability insurance requirements to obtain lower costs from subcontractors. In these states, the Company purchases insurance policies from either third-party carriers or its wholly owned captive insurance subsidiary and names certain subcontractors as additional insureds. The policies issued by the captive insurance subsidiary and the policies issued on or after June 1, 2020 by third-party carriers essentially represent self-insurance of these risks by the Company.

The Company is self-insured for the deductible amounts under its workers’ compensation insurance policies. The deductibles vary by policy year, but in no years exceed $0.5 million per occurrence. The deductible for the 2024, 2025 and 2026 policy years is $0.5 million per occurrence.

The estimation of losses related to these reserves and the related estimates of recoveries from insurance policies are subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to the Company’s markets and the types of products built, claim frequency, claim settlement costs and patterns, insurance industry practices and legal interpretations, among others. Due to the high degree of judgment required in establishing reserves for these contingencies, actual future costs and recoveries from insurance could differ significantly from current estimated amounts, and it is not possible for the Company to make a reasonable estimate of the possible loss or range of loss in excess of its reserves.

Land and Lot Purchase Contracts

The Company enters into land and lot purchase contracts to acquire land or lots for the construction of homes. At September 30, 2025, the Company had total deposits of $2.33 billion, consisting of cash deposits of $2.17 billion and promissory notes and surety bonds of $157.5 million, related to contracts to purchase land and lots with a total remaining purchase price of approximately $26.0 billion. The majority of land and lots under contract are currently expected to be purchased within three years. Of these amounts, $200.2 million of the deposits related to contracts with Forestar to purchase land and lots with a remaining purchase price of $2.0 billion. A limited number of the homebuilding land and lot purchase contracts at September 30, 2025, representing $99.7 million of remaining purchase price, were subject to specific performance provisions that may require the Company to purchase the land or lots upon the land sellers meeting their respective contractual obligations. Of the $99.7 million remaining purchase price subject to specific performance provisions, $43.0 million related to contracts between the homebuilding segment and Forestar.

During fiscal 2025 and 2024, Forestar reimbursed the homebuilding segment $20.6 million and $27.5 million, respectively, for previously paid earnest money and $26.5 million and $22.9 million, respectively, for pre-acquisition and other due diligence costs related to land purchase contracts whereby the homebuilding segment assigned its rights under contract to Forestar.

Other Commitments

At September 30, 2025, the Company had outstanding surety bonds of $3.5 billion and letters of credit of $282.3 million to secure performance under various contracts. Of the total letters of credit, $231.2 million were issued under the homebuilding revolving credit facility and $51.1 million were issued under Forestar’s revolving credit facility.

The Company leases office space and equipment under non-cancelable operating leases. At September 30, 2025, the future minimum annual lease payments under these agreements are as follows (in millions):


Fiscal 2026	$	29.0
Fiscal 2027	19.3
Fiscal 2028	11.5
Fiscal 2029	6.8
Fiscal 2030	4.3
Thereafter	1.0
	$	71.9

Rent expense was $45.1 million, $44.3 million and $44.7 million for fiscal 2025, 2024 and 2023, respectively.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE M – OTHER ASSETS, ACCRUED EXPENSES AND OTHER LIABILITIES

The Company’s other assets at September 30, 2025 and 2024 were as follows:


	September 30,
	2025		2024
	(In millions)
Earnest money and refundable deposits	$	2,362.9	$	2,210.6
Water rights and other water-related assets	333.0		319.1
Pledged reimbursements asset (1)	251.4		—
Insurance receivables	167.0		156.8
Other receivables	164.0		147.1
Prepaid assets	134.5		117.9
Contract assets - insurance agency commissions	127.9		117.5
Lease right of use assets	63.0		51.4
Margin deposits related to hedging instruments	47.9		71.3
Interest rate lock commitments	42.7		44.5
Mortgage servicing rights	27.1		5.9
Mortgage hedging instruments and commitments	0.6		2.8
Other	75.2		72.7
	$	3,797.2	$	3,317.6

The Company’s accrued expenses and other liabilities at September 30, 2025 and 2024 were as follows:


	September 30,
	2025		2024
	(In millions)
Reserves for legal claims	$	1,143.6	$	949.6
Employee compensation and related liabilities	598.7		569.7
Warranty liability	566.2		566.9
Inventory related accruals	497.3		451.2
Pledged reimbursements liability (1)	251.4		—
Accrued property taxes	82.7		77.6
Customer deposits	81.5		99.7
Lease liabilities	65.6		53.3
Accrued interest	60.5		34.8
Mortgage hedging instruments and commitments	34.1		63.0
Federal and state income tax liabilities	19.0		27.7
Other	141.0		123.2
	$	3,541.6	$	3,016.7

(1)In certain projects, the Company has entered into agreements to be reimbursed for eligible infrastructure costs from municipal districts as funds are available to the district. The Company has pledged certain of these future reimbursements as collateral to a third party, and the third party issued bonds against this collateral. The Company received the cash proceeds from the third-party bond issuance. The Company has no future performance obligations related to the cash proceeds received, no obligations related to any future interest or principal payments to the third-party bondholders, and the third party has no recourse against the Company for the reimbursement of these funds. However, under the applicable accounting rules, since the Company pledged only certain reimbursements and not the entire amount, the Company recorded a non-cash transaction to increase assets and a related liability for the amount of the unpaid balance of the third-party bonds. The asset and liability will be reduced as the third-party bonds are repaid by the municipal district.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE N – FAIR VALUE MEASUREMENTS

Fair value measurements are used for the Company’s mortgage loans held for sale, mortgage servicing rights, IRLCs and other derivative instruments on a recurring basis and are used for inventories, other mortgage loans and real estate owned on a nonrecurring basis, when events and circumstances indicate that the carrying value is not recoverable. The fair value hierarchy and its application to these Company assets and liabilities is as follows:

Level 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities. The Company does not currently have any assets or liabilities measured at fair value using Level 1 inputs.
Level 2 – Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, or by model-based techniques in which all significant inputs are observable in the market. The Company’s assets and liabilities measured at fair value using Level 2 inputs on a recurring basis are as follows:

*◦*Mortgage loans held for sale - The fair value of these loans is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Closed mortgage loans are typically sold shortly after origination, which limits exposure to nonperformance by loan buyer counterparties to a short time period. In addition, the Company actively monitors the financial strength of its counterparties.

◦Loan sale commitments and hedging instruments - The fair values of best-efforts and mandatory loan sale commitments and derivative instruments such as forward sales of MBS that are utilized as hedging instruments are calculated by reference to quoted prices for similar assets. The Company mitigates exposure to nonperformance risk associated with derivative instruments by limiting the number of counterparties and actively monitoring their financial strength and creditworthiness. Further, the Company’s derivative contracts typically have short-term durations with maturities from one to four months. Accordingly, the Company’s risk of nonperformance relative to its derivative positions is not significant.

The Company’s assets measured at fair value using Level 2 inputs on a nonrecurring basis are a limited number of mortgage loans held for sale with some degree of impairment affecting their marketability and are reported at the lower of carrying value or fair value. When available, fair value is determined by reference to quoted prices in the secondary markets for such assets.

After consideration of nonperformance risk, no additional adjustments were made to the fair value measurements of mortgage loans held for sale or hedging instruments.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Level 3 – Valuation is typically derived from model-based techniques in which at least one significant input is unobservable and based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability.

The Company’s assets measured at fair value using Level 3 inputs on a recurring basis are as follows:

*◦*Mortgage loans held for sale - For a limited number of mortgage loans held for sale with some degree of impairment affecting their marketability and for which reference to quoted prices in the secondary markets is not available, the fair value is calculated using an income approach whereby the net present value of the discounted cash flows is modeled using both a prepayment and a liquidation disposition. The cash flow is then adjusted based on the probability of each disposition.

◦Mortgage servicing rights - The fair value of mortgage servicing rights is derived utilizing a third-party model which calculates the present value of estimated future cash flows associated with the servicing asset. Key assumptions to the model include prepayment rate, discount rate and delinquency rate.

*◦*IRLCs - The fair value of IRLCs is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. These valuations do not contain adjustments for expirations as any expired commitments are excluded from the fair value measurement. The Company generally only issues IRLCs for products that meet specific purchaser guidelines. Should any purchaser become insolvent, the Company would not be required to close the transaction based on the terms of the commitment. Since not all IRLCs will become closed loans, the Company further adjusts its fair value measurements for the estimated amount of IRLCs that will not close.

The Company’s assets measured at fair value using Level 3 inputs that are typically reported at the lower of carrying value or fair value on a nonrecurring basis are as follows:

◦Inventory held and used - In assessing impairment indicators of its inventory held and used, the Company performs an analysis of the undiscounted cash flows estimated to be generated by those assets. The most significant factors used to estimate undiscounted future cash flows include pricing and incentive levels realized by the community, the rate at which the homes are sold and the costs incurred to develop the lots and construct the homes. Inventory held and used measured at fair value represents those communities for which the estimated undiscounted cash flows are less than their carrying amounts and therefore, the Company recorded impairments during the period to record the inventory at fair value calculated based on its discounted estimated future cash flows.

◦Inventory available for sale - The factors considered in determining fair values of the Company’s land held for sale primarily include actual sale contracts and recent offers received from outside third parties and may also include prices for land in recent comparable sales transactions and other market analysis. If the estimated fair value less the costs to sell an asset is less than the asset’s current carrying value, the asset is written down to its estimated fair value less costs to sell.

◦Certain mortgage loans held for sale - A limited number of mortgage loans held for sale have some degree of impairment affecting their marketability. For some of these loans, quoted prices in the secondary market are not available and therefore, a cash flow valuation model is used to determine fair value.

◦Certain other mortgage loans and real estate owned - Other mortgage loans include performing and nonperforming mortgage loans, which often become real estate owned through the foreclosure process. The fair values of other mortgage loans and real estate owned are determined based on the Company’s assessment of the value of the underlying collateral or the value of the property, as applicable. The Company uses different methods to assess the value of the properties, which may include broker price opinions, appraisals or cash flow valuation models.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2025 and 2024, and the changes in the fair value of the Level 3 assets during fiscal 2025 and 2024.


		Fair Value at September 30, 2025
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Mortgage loans held for sale (1)	Mortgage loans held for sale	$	—	$	2,504.7	$	8.6	$	2,513.3
Mortgage servicing rights (2)	Other assets	—		—		27.1		27.1
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments (4)	Other assets and other liabilities	—		—		42.4		42.4
Mortgage hedging instruments and commitments (5)	Other assets and other liabilities	—		(33.5)		—		(33.5)


		Fair Value at September 30, 2024
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
		(In millions)
Mortgage loans held for sale (1)	Mortgage loans held for sale	$	—	$	2,421.2	$	10.6	$	2,431.8
Mortgage servicing rights (2)	Other assets	—		—		5.9		5.9
Derivatives not designated as hedging instruments (3):
Interest rate lock commitments (4)	Other assets	—		—		44.5		44.5
Mortgage hedging instruments and commitments (5)	Other assets and other liabilities	—		(60.2)		—		(60.2)


	Level 3 Assets and Liabilities at Fair Value for the Year Ended September 30, 2025
	Balance at September 30, 2024		Net realized and unrealized gains (losses)		Purchases / Originations		Sales and Settlements		Principal Reductions		Net transfers to (out of) Level 3		Balance at September 30, 2025
	(In millions)
Mortgage loans held for sale (1)	$	10.6	$	3.0	$	—	$	(22.6)	$	—	$	17.6	$	8.6
Mortgage servicing rights (2)	5.9		0.8		50.8		(30.4)		—		—		27.1
Interest rate lock commitments (4)	44.5		(2.1)		—		—		—		—		42.4
	Level 3 Assets and Liabilities at Fair Value for the Year Ended September 30, 2024
	Balance at September 30, 2023		Net realized and unrealized gains (losses)		Purchases / Originations		Sales and Settlements		Principal Reductions		Net transfers to (out of) Level 3		Balance at September 30, 2024
	(In millions)
Mortgage loans held for sale (1)	$	11.6	$	0.1	$	—	$	(0.9)	$	—	$	(0.2)	$	10.6
Mortgage servicing rights (2)	11.1		(1.0)		19.2		(23.4)		—		—		5.9
Interest rate lock commitments (4)	(31.6)		76.1		—		—		—		—		44.5

(1)The Company typically elects the fair value option upon origination for mortgage loans held for sale. Interest income earned on mortgage loans held for sale is based on contractual interest rates and included in other income. Mortgage loans held for sale valued using Level 3 inputs at September 30, 2025 and 2024 include $8.6 million and $10.6 million, respectively, of loans for which the Company elected the fair value option upon origination and did not sell into the secondary market. Mortgage loans held for sale totaling $17.6 million were transferred to Level 3 during fiscal 2025 due to significant unobservable inputs used in determining the fair value of these loans. Mortgage loans held for sale totaling $0.2 million were transferred from Level 3 to Level 2 during fiscal 2024 due to significant observable inputs used in determining the fair value of these loans. The fair value of these mortgage loans held for sale is generally calculated considering pricing in the secondary market and adjusted for the value of the underlying collateral, including interest rate risk, liquidity risk and prepayment risk. The Company plans to sell these loans as market conditions permit.

(2)Although the majority of the Company’s mortgage loans are sold on a servicing-released basis, when the servicing rights are retained, the Company records them at fair value using third-party valuations. The valuation at the time the servicing asset is retained is reflected in the purchases/originations column with subsequent changes in value classified as realized and unrealized gains (losses). The key assumptions used in the valuation, which are generally unobservable inputs, are mortgage prepayment rates, discount rates and delinquency rates, which were 6%, 11% and 5%, respectively, at September 30, 2025 and 13%, 11% and 9% at September 30, 2024.

(3)Fair value measurements of these derivatives represent changes in fair value, as calculated by reference to quoted prices for similar assets and are reflected in the balance sheet as other assets or accrued expenses and other liabilities. Changes in the fair value of these derivatives are included in revenues in the consolidated statements of operations. The net fair value change in fiscal 2025 and 2024 recognized in revenues in the consolidated statements of operations was not significant.

D.R. HORTON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(4)The fair value of interest rate lock commitments at September 30, 2025 reflects a $42.7 million change in fair value in other assets and a $0.3 million change in fair value in other liabilities. The fair value of interest rate lock commitments at September 30, 2024 reflects a $44.5 million change in fair value in other assets.

(5)The fair value of mortgage hedging instruments and commitments at September 30, 2025 reflects a $0.6 million change in fair value in other assets and a $34.1 million change in fair value in other liabilities. The fair value of mortgage hedging instruments and commitments at September 30, 2024 reflects a $2.8 million change in fair value in other assets and a $63.0 million change in fair value in other liabilities.

The following table summarizes the Company’s assets measured at fair value on a nonrecurring basis at September 30, 2025 and 2024.


		Fair Value at September 30,
		2025				2024
	Balance Sheet Location	Level 2		Level 3		Level 2		Level 3
		(In millions)
Inventory held and used (1) (2)	Inventories	$	—	$	66.3	$	—	$	68.1
Mortgage loans held for sale (1) (3)	Mortgage loans held for sale	8.5		19.3		9.5		7.0
Other mortgage loans (1) (4)	Other assets	—		—		1.3		9.8
Real estate owned (1) (4)	Other assets	—		—		—		0.4

(1)The fair values included in the table above represent only those assets whose carrying values were adjusted to fair value as a result of impairment at September 30, 2025 and 2024, respectively.

(2)In performing its impairment analysis of communities, discount rates ranging from 10% to 16% were used in the periods of impairment.

(3)These mortgage loans have some degree of impairment affecting their marketability and are valued at the lower of carrying value or fair value. When available, quoted prices in the secondary market are used to determine fair value (Level 2); otherwise, a cash flow valuation model is used to determine fair value (Level 3).

(4)The fair values of other mortgage loans and real estate owned were determined based on the value of the underlying collateral.

For the financial assets and liabilities that the Company does not reflect at fair value, the following tables present both their respective carrying value and fair value at September 30, 2025 and 2024.


	Carrying Value			Fair Value at September 30, 2025
			Level 1			Level 2			Level 3			Total
	(In millions)
Cash and cash equivalents (1)	$	2,985.4		$	2,985.4		$	—		$	—		$	2,985.4
Restricted cash (1)	47.9			47.9			—			—			47.9
Notes payable (2) (3)	5,965.5			—			3,811.1			2,198.8			6,009.9


	Carrying Value			Fair Value at September 30, 2024
			Level 1			Level 2			Level 3			Total
	(In millions)
Cash and cash equivalents (1)	$	4,516.4		$	4,516.4		$	—		$	—		$	4,516.4
Restricted cash (1)	27.6			27.6			—			—			27.6
Notes payable (2) (3)	5,917.7			—			3,413.7			2,440.6			5,854.3

(1)The fair values of cash, cash equivalents and restricted cash approximate their carrying values due to their short-term nature and are classified as Level 1 within the fair value hierarchy.

(2)The fair value of the senior notes is determined based on quoted prices, which is classified as Level 2 within the fair value hierarchy.

(3)The fair values of other notes and borrowings on the revolving credit facilities and the mortgage repurchase facilities approximate carrying value due to their short-term nature or floating interest rate terms, as applicable, and are classified as Level 3 within the fair value hierarchy.

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