The most recent four quarters continue this remarkable trend. In the fiscal year ended Sept. 30, 2000, D.R. Horton Inc. posted record numbers in every category—revenues, closings and net profits. Home building revenues for fiscal 2000 increased 16% to a record $3.7 billion from $3.11 billion a year earlier. Homes closed climbed to 19,144 from 18,395 in fiscal 1999. Net income rose 23% to a record $191.7 million. The company’s backlog of homes under contract at year-end was 7,388 ($1.5 million) compared to 7309 homes at the same time last year.
But the numbers tell only part of the story at this national homebuilder, which won Professional Builder’s 1999 Builder of the Year Award.
D.R. Horton Inc. reflects the same can-do customer orientation that company founder and current chairman Don Horton practiced when building his first house in 1978. Custom homes account for a significant share of the company’s overall units, and Horton has added production and attached housing to the product mix through acquisition and green field start-ups.
Along with the company’s product diversification effort has been a geographic expansion, primarily though acquisition. Since April 1994, D.R. Horton (or one of its companies) has acquired 14 different builders, including Torrey Homes, builder of this year’s “Show Village” house.
“Our acquisition strategy is simple: We want to be the number one builder in every market we serve,” said Richard Beckwitt, D.R. Horton board member and former president. “The way to accomplish this is to grow with the best and give them the tools and resources to achieve more.”
For every company it acquires, Horton looks at 20 possibilities. Executive managers exercise great care before expanding into new markets.
D.R. Horton Inc. realizes that those at the local level must achieve their goals if the corporation is to succeed. According to CEO, President and Vice Chairman Don Tomnitz, success is possible when both groups set goals together and when the company provides the necessary resources, services and support for success.
“We have what we call ‘Hortonisms’ in the company,” Tomnitz said, “and one of the favorites we all talk about is, ‘Tell me what you’re going to do and then go do it.’ It sounds so simple but this is really our expectation. I’m not looking for excuses, I’m looking for performance.”
While performance is expected, how it is done is a local decision. No one at corporate headquarters in Arlington, Texas, tells any division president or regional president how to achieve their numbers. “Home building remains a local business,” Horton said. “We can’t know the particulars of every market the way those in that location do.”
“Another Hortonism is BSCM,” Tomnitz said. “We want our division managers—-very day, week after week—to spend their time building, selling, closing homes and making money. We always tell them if 90 percent of whatever’s coming across your desk isn’t related to BSCM, you’re doing the wrong things.’”
The final piece of the puzzle that creates D.R. Horton’s track record of growth is a devotion to risk management and expense control. The company closely manages the three big risk factors in home building: land, money and numbers.
“Walk through the builder graveyard and all the tombstones read “long and wrong on land,” Horton said. “These companies aren’t bad builders; they owned too much land at the wrong time in the cycle.”D.R. Horton Inc. likes to get in and out of land transactions in three years, and the company typically owns half of its land holdings and options the other half.
Money, borrowing, and the issuance of public and private debt are other areas under the watchful eye of the company’s board and operating committee.
The final leg of the risk stool is numbers, and two stand out: sales and costs. Should the overall economy tighten and buyer preferences change, careful tracking of the numbers helps division managers make product and price adjustments.
Managing costs while increasing value is the single goal that unites the Horton business family. “We’re as different a group of people as you can imagine united under one umbrella,” Tomnitz said, “but we all believe in the same goal.”
“And we’re all ready for more,” Horton added.
Copyright © 2001 Cahners Business Information [1], A Division of Reed Elsevier, Inc.
