D.R. Horton to reduce debt in 2019; subsidiary to tap capital markets

By Devika Patel

Knoxville, Tenn., Jan. 25 – D.R. Horton, Inc. executives said that company subsidiary Forestar Group Inc. plans to access the capital markets in the upcoming year.

“Subject to market conditions, Forestar plans to access the capital markets in fiscal 2019 to provide additional capital for long-term growth,” executive vice president and chief financial officer Bill W. Wheat said on the company’s first quarter ended Dec. 31, 2018 earnings conference call on Friday.

D.R. Horton’s top executive also said that reducing leverage is a “top” priority for the company.

“Our continued top cash flow priorities are to consolidate market share by investing in our home building business and strategic acquisitions, reduce homebuilding leverage and return capital to our shareholders through dividends and share repurchases,” president and chief executive officer David V. Auld said on the call.

The company had a strong first quarter, and its first quarter home sales revenues increased 7% to $3.4 billion on 11,500 homes closed, up from $3.2 billion on 10,788 homes closed in the prior year quarter.

This is in contrast to national new home sales data reported Friday.

Sales of new homes in all four major U.S. regions dropped in the last two months of 2018. The year-over-year trend was especially drastic in the Northeast, where new-home sales fell by 16.1% in December, according to data released by Redfin, which covers more than 150 U.S. markets.

In both the Midwest and West, new-home sales fell by 13.4%; sales fell by 10.3% in the South.

Of all four regions, sales of new homes have been in negative territory the longest in the Northeast. That region hasn’t experienced growth since January 2017, according to Redfin.

“All around the country homebuyers were backing off at the end of last year due to high prices and high mortgage interest rates, and 2018 tax reform made it even more expensive to buy high-priced homes in high-tax states like Massachusetts, Connecticut and New York,” Redfin chief economist Daryl Fairweather said in a press release.

“New homes tend to be pricier than existing homes, which is one reason sales of new homes dropped off so much in the Northeast,” Fairweather said.

The recent decline in mortgage rates, continued job growth and a decline in the cost of building materials could result in sales of new homes increasing up in the coming months, Redfin stated.

The price of materials came down 1.8% in December.

Cash and cash equivalents were $737 million as of Dec. 31, 2018, compared to $1,473,100,000 as of Sept. 30, 2018.

The homebuilder is based in Fort Worth.

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