FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


(Mark One)
  x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ---ACT OF 1934
For the Quarterly Period Ended    June 30, 2002
                               --------------------

                                       OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ---ACT OF 1934
For the Transition Period From                     To
                               -------------------    -------------------


Commission file number   1-14122
                       -----------


                                D.R. Horton, Inc.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            DELAWARE                                      75-2386963
--------------------------------           ------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

  1901 Ascension Blvd., Suite 100, Arlington, Texas               76006
-------------------------------------------------------------------------------
      (Address of principal executive offices)                  (Zip Code)

                                 (817) 856-8200
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


-------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                  Yes X   No
                                    -----  -----


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

     Common stock, $.01 par value -- 146,490,625 shares as of August 8, 2002
                                    -------------

                         This report contains 30 pages.










                                      INDEX

                                D.R. HORTON, INC.





PART I.        FINANCIAL INFORMATION.                                                       Page
-------        ----------------------                                                       ----

                                                                                    
ITEM 1.        Financial Statements.
               Consolidated Balance Sheets-- June 30, 2002 and September 30, 2001.             3
               Consolidated Statements of Income-- Three Months and Nine Months Ended
                   June 30, 2002 and 2001.                                                     4
               Consolidated Statements of Cash Flows-- Nine Months Ended June 30,
                   2002 and 2001.                                                              5
               Notes to Consolidated Financial Statements.                                  6-18
ITEM 2.        Management's Discussion and Analysis of Results of Operations and
                   Financial Condition.                                                    19-27
ITEM 3.        Quantitative and Qualitative Disclosures about Market Risk.                    28

PART II.       OTHER INFORMATION.
--------       -----------------
ITEM 6         Exhibits and Reports on Form 8-K.                                              29

SIGNATURES.                                                                                   30
----------












ITEM 1.  FINANCIAL STATEMENTS

                       D.R. HORTON, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS




                                                                           June 30,     September 30,
                                                                            2002            2001
                                                                       --------------  --------------
                                                                              (In thousands)
                                                                         (Unaudited)
                                        ASSETS

                                                                                  
Homebuilding:
Cash .................................................................   $   42,758      $  232,305
Inventories:
  Finished homes and construction in progress ........................    2,069,731       1,424,101
  Residential lots - developed and under development .................    2,301,671       1,377,452
  Land held for development ..........................................       10,251           2,824
                                                                         ----------      ----------
                                                                          4,381,653       2,804,377
Property and equipment (net) .........................................       73,338          53,096
Earnest money deposits and other assets ..............................      347,331         181,659
Excess of cost over net assets acquired ..............................      586,390         136,223
                                                                         ----------      ----------
                                                                          5,431,470       3,407,660
                                                                         ----------      ----------
Financial Services:
Cash .................................................................       13,169           6,975
Mortgage loans held for sale .........................................      288,478         222,818
Other assets .........................................................       17,611          14,737
                                                                         ----------      ----------
                                                                            319,258         244,530
                                                                         ----------      ----------
                                                                         $5,750,728      $3,652,190
                                                                         ==========      ==========

                                  LIABILITIES
Homebuilding:
Accounts payable and other liabilities ...............................   $  625,225      $  498,576
Notes payable ........................................................    2,750,333       1,701,689
                                                                         ----------      ----------
                                                                          3,375,558       2,200,265
                                                                         ----------      ----------

Financial Services:
Accounts payable and other liabilities ...............................       10,847          10,173
Notes payable to financial institutions ..............................      204,630         182,641
                                                                         ----------      ----------
                                                                            215,477         192,814
                                                                         ----------      ----------
                                                                          3,591,035       2,393,079
                                                                         ----------      ----------
Minority interests ...................................................       20,370           8,864
                                                                         ----------      ----------

                              STOCKHOLDERS' EQUITY

Preferred stock, $.10 par value, 30,000,000 shares authorized,
  no shares issued ...................................................         --              --
Common stock, $.01 par value, 200,000,000 shares authorized,
  146,445,994 shares at June 30, 2002 and 76,901,511 shares at
  September 30, 2001, issued and outstanding .........................        1,464             769
Additional capital ...................................................    1,349,142         704,842
Unearned compensation ................................................       (6,963)           --
Retained earnings ....................................................      795,680         544,636
                                                                         ----------      ----------
                                                                          2,139,323       1,250,247
                                                                         ----------      ----------
                                                                         $5,750,728      $3,652,190
                                                                         ==========      ==========




          See accompanying notes to consolidated financial statements.

                                       -3-





                       D.R. HORTON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME




                                                         Three Months             Nine Months
                                                        Ended June  30,          Ended June 30,
                                                   ------------------------ -----------------------
                                                       2002         2001        2002       2001
                                                   ------------ ----------- ----------- -----------

                                                          (In thousands, except per share data)
                                                           -----------------------------------
                                                                       (Unaudited)
                                                                       -----------
                                                                            
Homebuilding:
Revenues
  Home sales .....................................   $1,750,189  $1,090,242  $4,410,284  $2,799,894
  Land/lot sales .................................       29,426      11,724      80,499      68,033
                                                     ----------  ----------  ----------  ----------
                                                      1,779,615   1,101,966   4,490,783   2,867,927
                                                     ----------  ----------  ----------  ----------
Cost of sales
  Home sales .....................................    1,416,050     872,095   3,573,790   2,244,754
  Land/lot sales .................................       25,938      10,712      70,048      54,791
                                                     ----------  ----------  ----------  ----------
                                                      1,441,988     882,807   3,643,838   2,299,545
                                                     ----------  ----------  ----------  ----------
Gross profit
  Home sales .....................................      334,139     218,147     836,494     555,140
  Land/lot sales .................................        3,488       1,012      10,451      13,242
                                                     ----------  ----------  ----------  ----------
                                                        337,627     219,159     846,945     568,382

Selling, general and administrative expense ......      177,020     109,085     444,931     295,084
Interest expense .................................        1,465       2,089       5,224       6,618
Other expense ....................................        3,842       5,040       3,988      14,038
                                                     ----------  ----------  ----------  ----------
                                                        155,300     102,945     392,802     252,642
                                                     ----------  ----------  ----------  ----------
Financial Services:
Revenues .........................................       28,864      19,015      77,651      47,553
Selling, general and administrative expense ......       18,220      12,540      48,261      32,507
Interest expense .................................        1,155       1,575       3,490       3,582
Other (income) ...................................       (4,714)     (2,240)    (10,576)     (4,869)
                                                     ----------  ----------  ----------  ----------
                                                         14,203       7,140      36,476      16,333
                                                     ----------  ----------  ----------  ----------
  INCOME BEFORE INCOME TAXES .....................      169,503     110,085     429,278     268,975
Provision for income taxes .......................       63,563      41,282     160,979     100,866
                                                     ----------  ----------  ----------  ----------
Income before cumulative effect of change in
  accounting principle ...........................      105,940      68,803     268,299     168,109
Cumulative effect of change in accounting
  principle, net of income taxes of $1,282 .......         --          --          --         2,136
                                                     ----------  ----------  ----------  ----------
  NET INCOME .....................................   $  105,940  $   68,803  $  268,299  $  170,245
                                                     ==========  ==========  ==========  ==========

Basic earnings per common share:
  Income before cumulative effect of change
    in accounting principle ......................   $     0.72  $     0.61  $     2.06  $     1.49
  Cumulative effect of change in accounting
    principle, net of income taxes ...............         --          --          --          0.02
                                                     ----------  ----------  ----------  ----------
  Net income .....................................   $     0.72  $     0.61  $     2.06  $     1.51
                                                     ==========  ==========  ==========  ==========

Diluted earnings per common share:
  Income before cumulative effect of change in
    in accounting principle ......................   $     0.67  $     0.60  $     1.94  $     1.46
  Cumulative effect of change in accounting
    principle, net of income taxes ...............         --          --          --          0.02
                                                     ----------  ----------  ----------  ----------
  Net income .....................................   $     0.67  $     0.60  $     1.94  $     1.48
                                                     ==========  ==========  ==========  ==========

Cash dividends per share .........................   $     0.06  $     0.05  $     0.17  $     0.14
                                                     ==========  ==========  ==========  ==========


          See accompanying notes to consolidated financial statements.

                                       -4-





                       D.R. HORTON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS





                                                                                     Nine Months
                                                                                    Ended June 30,
                                                                                 -------------------
                                                                                  2002         2001
                                                                                 ------       ------
                                                                                   (In thousands)
                                                                                     (Unaudited)
                                                                                    
OPERATING ACTIVITIES
  Net income ..............................................................   $  268,299   $  170,245
  Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
  Depreciation and amortization ...........................................       18,621       18,463
  Amortization of debt premiums and fees ..................................        5,991        2,645
  Changes in operating assets and liabilities:
    Increase in inventories ...............................................     (311,773)    (416,639)
    Increase in earnest money deposits and other assets ...................      (38,274)     (33,649)
    Increase in mortgage loans held for sale ..............................      (65,660)     (50,616)
    (Decrease) increase in accounts payable and other liabilities .........     (110,590)      26,608
                                                                              ----------   ----------

NET CASH USED IN OPERATING ACTIVITIES .....................................     (233,386)    (282,943)
                                                                              ----------   ----------

INVESTING ACTIVITIES
  Net purchases of property and equipment .................................      (28,155)     (21,807)
  Distributions from (investments in) venture capital entities ............          250       (1,970)
  Net cash paid for acquisitions ..........................................     (152,662)     (49,009)
                                                                              ----------   ----------

NET CASH USED IN INVESTING ACTIVITIES .....................................     (180,567)     (72,786)
                                                                              ----------   ----------

FINANCING ACTIVITIES
  Proceeds from notes payable .............................................    2,439,106      891,420
  Repayment of notes payable ..............................................   (2,451,496)    (920,630)
  Issuance of senior and senior subordinated notes payable ................      247,928      393,904
  Proceeds from issuance of common stock associated with certain
    employee benefit plans ................................................       12,380        9,798
  Payment of cash dividends ...............................................      (17,318)      (9,885)
                                                                              ----------   ----------

NET CASH PROVIDED BY FINANCING ACTIVITIES .................................      230,600      364,607
                                                                              ----------   ----------

(DECREASE) INCREASE IN CASH ...............................................     (183,353)       8,878
  Cash at beginning of period .............................................      239,280       72,525
                                                                              ----------   ----------
  Cash at end of period ...................................................   $   55,927   $   81,403
                                                                              ==========   ==========













          See accompanying notes to consolidated financial statements.

                                       -5-




                       D.R. HORTON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                  June 30, 2002


NOTE A - BASIS OF PRESENTATION

The  accompanying  unaudited,  consolidated  financial  statements  include  the
accounts of D.R. Horton, Inc. and its subsidiaries (the "Company"). Intercompany
accounts and transactions have been eliminated in consolidation.  The statements
have been prepared in accordance with generally accepted  accounting  principles
for  interim  financial  information  and  the  instructions  to Form  10-Q  and
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of management,  all adjustments considered
necessary for a fair presentation have been included.  Operating results for the
three-month  and  nine-month  periods  ended June 30,  2002 are not  necessarily
indicative of the results that may be expected for the year ending September 30,
2002.

Business - The Company is a national  builder  that is engaged  primarily in the
construction  and sale of single  housing  in the  United  States.  The  Company
designs,  builds and sells single-family houses on lots developed by the Company
and  on  finished  lots  which  it  purchases,   ready  for  home  construction.
Periodically,  the Company sells land or lots it has developed. The Company also
provides title agency and mortgage brokerage services to its home buyers.

NOTE B - CHANGES IN ACCOUNTING PRINCIPLES

Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities", was issued in June 1998, and was
later amended by SFAS 137 and 138, which were issued in June 1999 and June 2000,
respectively.  Pursuant to the implementation  requirements of SFAS No. 133, the
Company  adopted it on October 1, 2000,  the first day of the  Company's  fiscal
year ending September 30, 2001. The Company's  interest rate swaps, the terms of
which are more fully  described in Item 3, were not  designated  as hedges under
the provisions of SFAS No. 133. The Statement requires such swaps to be recorded
in the  consolidated  balance  sheet at fair value.  Changes in their fair value
must be recorded in the  consolidated  statements  of income.  Accordingly,  the
Company  recorded  a  cumulative  effect  of a change  in  accounting  principle
amounting to $2.1 million, net of income taxes of $1.3 million, as an adjustment
to net  income in the nine  months  ended June 30,  2001.  The fair value of the
Company's  interest  rate  swaps at June  30,  2002 and  September  30,  2001 is
recorded  in  homebuilding  other  assets,  and the  changes in their fair value
during  the  three  months  and nine  months  ended  June 30,  2002 and 2001 are
recorded in homebuilding other income.

SFAS No. 133 was also implemented on October 1, 2000 for the hedging  activities
of the Company's  financial  services segment.  The effects of doing so were not
significant.

In June 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 141,
"Business  Combinations",  and SFAS No.  142,  "Goodwill  and  Other  Intangible
Assets".  Under Statement No. 142, goodwill and intangible assets deemed to have
indefinite  lives  will no longer be  amortized  but will be  subject  to annual
impairment  tests.  Other  intangible  assets will continue to be amortized over
their useful lives.  The Company  early-adopted  the new rules on accounting for
goodwill and other  intangible  assets  beginning  October 1, 2001.  The Company
performed the required  impairment tests at October 31, 2001 and determined that
no  goodwill  or  other  intangible  asset  impairments   exist.  The  following
summarizes the pro forma impact of the  non-amortization  approach for the three
months and nine  months  ended  June 30,  2001 as if these  Statements  had been
adopted on October 1, 2000:



                                                  Three Months Ended   Nine Months Ended
                                                     June 30, 2001       June 30, 2001
                                                   -----------------  ------------------
                                                   (In thousands, except per share data)
                                                                 
Net income, as previously reported ...............   $        68,803   $       170,245
Amortization of goodwill, net of income taxes
  of $789 and $2,328, respectively ...............             1,316             3,880
                                                     ---------------   ---------------
Net income, as adjusted ..........................   $        70,119   $       174,125
                                                     ===============   ===============
Net income per share, as adjusted:
    Basic ........................................   $          0.62   $          1.54
                                                     ===============   ===============
    Diluted ......................................   $          0.61   $          1.52
                                                     ===============   ===============

                                                        -6-

                       D.R. HORTON, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
                                  June 30, 2002



NOTE C - SEGMENT INFORMATION

The Company's financial reporting segments consist of homebuilding and financial
services.  The Company's  homebuilding  operations comprise the most substantial
part of its business,  with  approximately 98% of consolidated  revenues for the
three  months and nine  months  ended June 30, 2002 and 2001.  The  homebuilding
segment generates the majority of its revenues from the sale of completed homes,
with a lesser  amount  from the sale of land and lots.  The  financial  services
segment  generates  its revenues  from  originating  and selling  mortgages  and
collecting fees for title insurance agency and closing services.

NOTE D - EARNINGS PER SHARE

Basic  earnings  per share for the three  months and nine months  ended June 30,
2002 and 2001 is based on the weighted  average number of shares of common stock
outstanding.  Diluted earnings per share is based on the weighted average number
of shares of common stock and dilutive securities outstanding.

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





                                                                     Three Months Ended          Nine Months Ended
                                                                           June 30,                    June 30,
                                                                    ----------------------     ---------------------
                                                                       2002          2001         2002          2001
                                                                    ---------     --------     ---------     -------

                                                                                   (In thousands)
                                                                                                
Numerator:
     Net income...............................................       $105,940      $68,803      $268,299     $170,245
Effect of dilutive securities:
     Interest expense and amortization of issuance costs
        associated with zero coupon convertible senior
        notes, net of applicable income taxes.................          1,054          --          2,096          --
                                                                     --------      -------      --------     --------
     Numerator for diluted earnings per share after
        assumed conversions...................................       $106,994      $68,803      $270,395     $170,245
                                                                     ========      =======      ========     ========

Denominator:
     Denominator for basic earnings per share--
        weighted average shares...............................        146,331      113,390       130,174      112,994
Effect of dilutive securities:
     Zero coupon convertible senior notes.....................         10,000           --         6,667           --
     Employee stock options...................................          2,626        1,958         2,422        1,874
                                                                     --------      -------     ---------     --------
     Denominator for diluted earnings per share--
        adjusted weighted average shares and
        assumed conversions...................................        158,957      115,348       139,263      114,868
                                                                     ========      =======     =========     ========


In March 2002, the Company's Board of Directors  declared a three-for-two  stock
split  (effected  as a 50% stock  dividend),  payable on April 9, 2002 to common
stockholders  of record on March 26, 2002.  All average share amounts  presented
above have been  restated  to reflect  the  effects of the  three-for-two  stock
split.

 On February 5, 2002,  each of the  Company's  381,113  zero coupon  convertible
 senior notes  outstanding  first became  eligible for  conversion  into 26.2391
 shares of the  Company's  common  stock.  These  convertible  senior  notes are
 convertible on any date as of which the average  closing price of the Company's
 common  stock for the twenty  preceding  trading  days  exceeds  the  specified
 threshold of 110% of the accreted value of each note, divided by the conversion
 rate.  The  twenty-day  average  closing  price of the  Company's  common stock
 exceeded the  specified  threshold  on June 30,  2002,  which had the effect of
 increasing the denominator for diluted  earnings per share by 10 million shares
 for the three months  ended June 30, 2002 and 6.67 million  shares for the nine

                                       -7-




                       D.R. HORTON, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
                                  June 30, 2002

 months ended June 30, 2002.  Also, the numerator for diluted earnings per share
 was increased by  tax-effected  interest  expense and  amortization of issuance
 costs  associated  with the  convertible  senior notes for the three months and
 nine months ended June 30, 2002.

NOTE E - DEBT

The Company's homebuilding notes payable consist of the following:




                                                                                 June 30,        September 30,
                                                                                  2002               2001
                                                                               -----------        -----------
                                                                                       (In thousands)

                                                                                         
Unsecured:
      Revolving credit facility due 2006...............................         $  255,000         $       --
      8.375% Senior notes due 2004, net................................            149,240            148,943
      10.5% Senior notes due 2005, net.................................            199,528            199,439
      10% Senior notes due 2006, net...................................            147,752            147,600
      9% Senior notes due 2008, net....................................            102,565                 --
      8% Senior notes due 2009, net....................................            383,392            383,257
      9.375% Senior notes due 2009, net................................            246,609                 --
      9.75% Senior subordinated notes due 2010, net....................            148,974            148,917
      9.375% Senior subordinated notes due 2011, net...................            199,704            199,688
      7.875% Senior notes due 2011, net................................            198,406            198,319
      10.5% Senior subordinated notes due 2011, net....................            153,672                 --
      8.5% Senior notes due 2012, net..................................            247,961                 --
      Zero coupon convertible senior notes due 2021, net...............            207,465            202,509
Other secured..........................................................            110,065             73,017
                                                                                ----------         ----------
                                                                                $2,750,333         $1,701,689
                                                                                ==========         ==========


On January 31, 2002,  the Company  refinanced its existing  unsecured  revolving
credit facility with a new, replacement facility.  The new $805 million facility
includes $125 million which may be used for letters of credit.  The new facility
matures in January 2006, and is guaranteed by substantially all of the Company's
wholly-owned  subsidiaries  other  than  its  financial  services  subsidiaries.
Borrowings bear daily interest at rates based upon the London Interbank  Offered
Rate (LIBOR) plus a spread  based upon the  Company's  ratio of debt to tangible
net worth. In addition to stated interest rates,  the revolving  credit facility
requires  the  Company to pay certain  fees.  The new credit  facility  contains
covenants  which are  essentially  the same as those that existed  under the old
facility.

The revolving credit facility and the indentures related to the Company's Senior
and Senior  Subordinated  Notes contain covenants which,  taken together,  limit
amounts  of  debt  that  may  be  incurred,   investments  in  inventory,  stock
repurchases,  cash dividends and other restricted  payments,  asset dispositions
and creation of liens, and require certain levels of tangible net worth. At June
30, 2002,  these  covenants limit the additional  homebuilding  debt the Company
could incur to $1,251.3  million,  which included $464.9 million available under
the revolving credit facility.

On February  21,  2002,  the Company  assumed the  outstanding  debt of Schuler
Homes, Inc.  ("Schuler") as part of Schuler's merger into the Company. The debt
assumed included the 9% senior notes due 2008, the 9.375% senior notes due 2009
and the 10.5% senior subordinated notes due 2011, all of which were recorded by
the Company at their market values as of February 21, 2002.  The Company repaid
$20.2  million,   in  principal  amount,  of  the  Schuler  senior  and  senior
subordinated  notes  as  part of the  Company's  change  of  control  offer  in
connection with the merger.

On April 11,  2002,  the Company  issued $250  million of 8.5% Senior notes due
2012. The net proceeds from this offering were used to repay  borrowings  under
the  unsecured  revolving  credit  facility.  These  notes  are  guaranteed  by
substantially  all of the Company's  wholly-owned  subsidiaries  other than its
financial services subsidiaries.

                                       -8-




                       D.R. HORTON, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
                                  June 30, 2002


NOTE F - INTEREST

The  Company   capitalizes   interest  during   development  and  construction.
Capitalized  interest is charged to cost of sales as the related  inventory  is
delivered to the home buyer. Homebuilding interest costs are:



                                                         Three Months Ended            Nine Months Ended
                                                               June 30,                     June 30,
                                                       -------------------------    -------------------------
                                                          2002          2001           2002           2001
                                                       ---------    ------------    ----------    -----------
                                                                         (In thousands)

                                                                                      
Capitalized interest, beginning of period........      $ 124,652     $    85,579    $   96,910    $    66,092
Interest incurred - homebuilding.................         58,349          34,133       141,596         94,861
Interest expensed:
      Directly - homebuilding....................        (1,465)         (2,089)       (5,224)        (6,618)
      Amortized to cost of sales.................       (37,811)        (24,012)      (89,557)       (60,724)
                                                       ---------     -----------     ---------    -----------
Capitalized interest, end of period..............      $ 143,725     $    93,611     $ 143,725    $    93,611
                                                       =========     ===========     =========    ===========


NOTE G - ACQUISITIONS

On February 21, 2002,  Schuler  Homes,  Inc.  merged with and into D.R.  Horton,
Inc.,  with D.R.  Horton the surviving  corporation.  At the time of the merger,
Schuler's  assets  amounted to $1,364.4  million,  mostly  inventory.  The total
merger  consideration  consisted  of the issuance of  20,079,532  shares of D.R.
Horton, Inc. common stock, valued at $30.93 per share (the average closing price
of D.R.  Horton  common stock for a period of ten trading days from  December 4,
2001 to  December  17,  2001);  the  payment  of  $168.7  million  in cash;  the
assumption of $802.2 million of Schuler's debt, $238.2 million of which was paid
at closing; the assumption of trade payables and other liabilities  amounting to
$209.1  million;  and the  assumption  of $10.8  million of  obligations  to the
Schuler entities' minority interest holders. Also, D.R. Horton issued options to
purchase  approximately  527,000  shares of D.R.  Horton common stock to Schuler
employees to replace  outstanding  Schuler stock options.  The fair value of the
options  issued was $10.4  million and was recorded as additional  capital.  The
fair value of the unvested  options  issued was $7.8 million and was recorded as
unearned  compensation  The unearned  compensation  is being  amortized over the
remaining vesting period of the stock options.

The merger was  treated as a purchase of Schuler by D.R.  Horton for  accounting
purposes.  Under this method,  Schuler assets acquired and  liabilities  assumed
were recorded on the  Company's  balance sheet at their fair market values as of
February 21, 2002.

Schuler's  results of  operations  for the three months ended June 30, 2002 and
from February 22, 2002 to June 30, 2002, are included in the Company's  results
of  operations  for the three  months  and nine  months  ended  June 30,  2002,
respectively.

The following  unaudited pro forma  combined  condensed  financial data for the
nine-month  periods  ending  June  30,  2002  and  2001  are  derived  from the
historical financial statements of D.R. Horton, Inc., Schuler, Fortress-Florida
(acquired  in May 2001),  and Emerald  Builders  (acquired  in July 2001).  The
unaudited pro forma combined condensed financial data give effect to the merger
with Schuler and the  acquisitions of  Fortress-Florida  and Emerald as if they
had occurred at the beginning of each period  presented.  Pro forma adjustments
to the historical financial data reflect those that we deem appropriate and are
factually  supported based upon currently available  information.  The only pro
forma adjustment that significantly  affected the combined historical financial
data for the nine-month  periods ended June 30, 2001 and 2002 was the pro forma
effect of recording Schuler's inventories at fair value at the beginning of the
nine months ended June 30, 2001. Such pro forma  adjustment  would have reduced
net income for that period by $15.8 million.

                                       -9-




                       D.R. HORTON, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
                                  June 30, 2002


NOTE G - ACQUISITIONS - (Continued)

 The unaudited pro forma  combined  condensed  financial data have been included
 for  comparative  purposes  only and do not purport to show what the  operating
 results  would  have been if the merger  had been  consummated  as of the dates
 indicated  and should not be construed as  representative  of future  operating
 results.



                                                                                Nine Months
                                                                               Ended June 30,
                                                                      --------------------------------
                                                                            2002            2001
                                                                      ---------------  ---------------





                                                                                  
Revenues...........................................................    $    5,143,436   $    4,312,414
                                                                       --------------   --------------

Income before cumulative effect of change in accounting
     principle.....................................................           300,592          234,339
Cumulative effect of change in accounting principle,
     net of income taxes...........................................               --             2,136
                                                                       --------------   --------------
     Net income....................................................    $      300,592   $      236,475
                                                                       ==============   ==============

Basic earnings per common share:
     Income before cumulative effect of change in
          accounting principle.....................................    $         2.01   $         1.62
     Cumulative effect of change in accounting principle,
          net of income taxes......................................               --              0.02
                                                                       --------------   --------------
     Net income....................................................    $         2.01   $         1.64
                                                                       ==============   ==============

Diluted earnings per common share:
     Income before cumulative effect of change in
           accounting principle....................................    $         1.91   $         1.61
     Cumulative effect of change in accounting principle,
           net of income taxes.....................................               --              0.01
                                                                       --------------   --------------
     Net income....................................................    $         1.91   $         1.62
                                                                       ==============   ==============


















                                      -10-




                       D.R. HORTON, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
                                  June 30, 2002

NOTE H - SUMMARIZED FINANCIAL INFORMATION

The 7.875%,  8%,  8.375%,  8.5%, 9%,  9.375%,  10% and 10.5% Senior Notes,  the
9.375%,  9.75%  and  10.5%  Senior  Subordinated  Notes,  and the  Zero  Coupon
Convertible Senior Notes are fully and unconditionally  guaranteed,  on a joint
and several  basis,  by all of the Company's  direct and indirect  subsidiaries
(Guarantor  Subsidiaries),  other  than  financial  services  subsidiaries  and
certain  other  inconsequential   subsidiaries   (collectively,   Non-Guarantor
Subsidiaries).  Each of the Guarantor Subsidiaries is wholly-owned.  In lieu of
providing  separate  financial  statements  for  the  Guarantor   Subsidiaries,
consolidated  condensed  financial  statements  are presented  below.  Separate
financial   statements   and  other   disclosures   concerning   the  Guarantor
Subsidiaries are not presented because  management has determined that they are
not material to investors.



                                                     Consolidating Balance Sheet
                                                             June 30, 2002
                                                                                     Non-Guarantor
                                                                                     Subsidiaries
                                                                               -----------------------
                                                     D.R.        Guarantor     Financial                 Intercompany
                                                 Horton, Inc.   Subsidiaries    Services     Other       Eliminations     Total
                                               --------------- --------------  ---------- ------------  -------------- ------------
                                                                                      (In thousands)
                       ASSETS
                                                                                                     
Homebuilding:
Cash and cash equivalents.....................    $       --    $    32,208    $     --    $    10,550   $        --    $    42,758
Advances to/investments in affiliates.........      4,238,009       217,422          --            615     (4,456,046)          --
Inventories...................................        676,894     3,617,996          --         87,136           (373)    4,381,653
Property and equipment (net)..................          9,932        57,710          --          5,696            --         73,338
Earnest money deposits and other assets.......         88,113       250,352          --         12,824         (3,958)      347,331
Excess of cost over net assets acquired (net).            --        586,390          --            --             --        586,390
                                                  -----------   -----------    ---------   -----------   ------------   -----------
                                                    5,012,948     4,762,078          --        116,821     (4,460,377)    5,431,470
                                                  -----------   -----------    ---------   -----------   ------------   -----------
Financial services:
Cash and cash equivalents.....................            --            --        13,169           --             --         13,169
Mortgage loans held for sale..................            --            --       288,478           --             --        288,478
Other assets..................................            --            --        17,611           --             --         17,611
                                                  -----------   -----------    ---------   -----------   ------------   -----------
                                                          --            --       319,258           --             --        319,258
                                                  -----------   -----------    ---------   -----------   ------------   -----------
Total Assets                                      $ 5,012,948   $ 4,762,078    $ 319,258   $   116,821   $ (4,460,377)  $ 5,750,728
                                                  ===========   ===========    =========   ===========   ============   ===========


                LIABILITIES & EQUITY
Homebuilding:
Accounts payable and other liabilities........    $   190,379   $   427,614    $     --    $     7,252   $        (20)  $   625,225
Advances from parent/affiliates...............            --      3,103,400          --         50,424     (3,153,824)          --
Notes payable.................................      2,683,246        30,199          --         40,826         (3,938)    2,750,333
                                                  -----------   -----------    ---------   -----------   ------------   -----------
                                                    2,873,625     3,561,213          --         98,502     (3,157,782)    3,375,558
                                                  -----------   -----------    ---------   -----------   ------------   -----------
Financial services:
Accounts payable and other liabilities........            --            --        10,847           --             --         10,847
Advances from parent/affiliates...............            --            --        36,760           --         (36,760)          --
Notes payable.................................            --            --       204,630           --             --        204,630
                                                  -----------   -----------    ---------    ----------   ------------   -----------
                                                          --            --       252,237           --         (36,760)      215,477
                                                  -----------   -----------    ---------    ----------   ------------   -----------
Total Liabilities                                   2,873,625     3,561,213      252,237        98,502     (3,194,542)    3,591,035
                                                  -----------   -----------    ---------    ----------   ------------   -----------

Minority interests............................            --            --            18        20,352            --         20,370
                                                  -----------   -----------    ---------    ----------   ------------   -----------
Common stock..................................          1,464            45            6         6,155         (6,206)        1,464
Additional capital............................      1,349,142       352,295        2,885        28,434       (383,614)    1,349,142
Retained earnings.............................        795,680       848,525       64,112       (36,622)      (876,015)      795,680
Unearned compensation.........................         (6,963)          --           --            --             --         (6,963)
                                                  -----------   -----------    ---------    ----------   ------------   -----------
                                                    2,139,323     1,200,865       67,003        (2,033)    (1,265,835)    2,139,323
                                                  -----------   -----------    ---------    ----------   ------------   -----------
Total Liabilities & Equity                        $ 5,012,948   $ 4,762,078    $ 319,258    $  116,821   $ (4,460,377)  $ 5,750,728
                                                  ===========   ===========    =========    ==========   ============   ===========

                                      -11-


                       D.R. HORTON, INC. AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

NOTE H - SUMMARIZED FINANCIAL INFORMATION (Continued)





                                                     Consolidating Balance Sheet
                                                          September 30, 2001
                                                                                    Non-Guarantor
                                                                                    Subsidiaries
                                                                                --------------------
                                                       D.R.         Guarantor   Financial              Intercompany
                                                   Horton, Inc.    Subsidiaries  Services    Other     Eliminations      Total
                                                  --------------  ------------- ----------- --------  --------------  ------------
                                                                                    (In thousands)
                       ASSETS
                                                                                                   
Homebuilding:
   Cash and cash equivalents...................... $        --    $   230,481   $     --    $  1,824   $        --    $   232,305
   Advances to/investments in affiliates..........    2,493,783        74,241         --         --      (2,568,024)          --
   Inventories....................................      564,593     2,212,933         --      27,230           (379)    2,804,377
   Property and equipment (net)...................        8,114        39,823         --       5,159            --         53,096
   Earnest money deposits and other assets........       39,978       140,436         --      10,793         (9,548)      181,659
   Excess of cost over net assets acquired (net)..          --        136,223         --         --             --        136,223
                                                   ------------   -----------   ---------   --------   ------------   -----------
                                                      3,106,468     2,834,137         --      45,006     (2,577,951)    3,407,660
                                                   ------------   -----------   ---------   --------   ------------   -----------

Financial services:
   Cash and cash equivalents......................          --            --        6,975        --             --          6,975
   Mortgage loans held for sale...................          --            --      222,818        --             --        222,818
   Other assets...................................          --            --       14,737        --             --         14,737
                                                   ------------   -----------   ---------   --------   ------------   -----------
                                                            --            --      244,530        --             --        244,530
                                                   ------------   -----------   ---------   --------   ------------   -----------
     Total Assets                                  $  3,106,468   $ 2,834,137   $ 244,530   $ 45,006   $ (2,577,951)  $ 3,652,190
                                                   ============   ===========   =========   ========   ============   ===========

                LIABILITIES & EQUITY
Homebuilding:
   Accounts payable and other liabilities......... $    191,596   $   304,486   $     --    $  2,552   $        (58)  $   498,576
   Advances from parent/affiliates................          --      1,944,796         --      28,367     (1,973,163)          --
   Notes payable..................................    1,664,625        37,064         --       9,489         (9,489)    1,701,689
                                                   ------------   -----------   ---------   --------   ------------   -----------
                                                      1,856,221     2,286,346         --      40,408     (1,982,710)    2,200,265
                                                   ------------   -----------   ---------   --------   ------------   -----------
Financial services:
   Accounts payable and other liabilities.........          --            --       10,173        --             --         10,173
   Advances from parent/affiliates................          --            --       13,748        --         (13,748)          --
   Notes payable..................................          --            --      182,641        --             --        182,641
                                                   ------------   -----------   ---------   --------   ------------   -----------
                                                            --            --      206,562        --         (13,748)      192,814
                                                   ------------   -----------   ---------   --------   ------------   -----------
   Total Liabilities                                  1,856,221     2,286,346     206,562     40,408     (1,996,458)    2,393,079
                                                   ------------   -----------   ---------   --------   ------------   -----------

   Minority interests.............................          --            --           10      8,854            --          8,864
                                                   ------------   -----------   ---------   --------   ------------   -----------

   Common stock...................................          769             1           6      6,155         (6,162)          769
   Additional capital.............................      704,842        84,612       2,299     10,129        (97,040)      704,842
   Retained earnings..............................      544,636       463,178      35,653    (20,540)      (478,291)      544,636
                                                   ------------   -----------   ---------   --------   ------------   -----------
                                                      1,250,247       547,791      37,958    ( 4,256)      (581,493)    1,250,247
                                                   ------------   -----------   ---------   --------   ------------   -----------
   Total Liabilities & Equity                      $  3,106,468   $ 2,834,137   $ 244,530   $ 45,006   $ (2,577,951)  $ 3,652,190
                                                   ============   ===========   =========   ========   ============   ===========



                                      -12-




                       D.R. HORTON, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Unaudited) - (Continued)

NOTE H - SUMMARIZED FINANCIAL INFORMATION (Continued)





                                               Consolidating Statement of Income
                                               Three Months Ended June 30, 2002
                                                                                  Non-Guarantor
                                                                                   Subsidiaries
                                                                               ----------------------
                                                    D.R.          Guarantor    Financial                Intercompany
                                                Horton, Inc.    Subsidiaries   Services      Other      Eliminations       Total
                                               -------------   --------------  ---------  -----------  --------------  ------------
                                                                                    (In thousands)
                                                                                                    
Homebuilding:
 Revenues:
      Home sales...............................  $ 239,827      $ 1,498,052     $    --    $  12,310    $       --     $ 1,750,189
      Land/lot sales...........................      2,106           27,320          --          --             --          29,426
                                                 ---------      -----------     --------   ---------    -----------    -----------
                                                   241,933        1,525,372          --       12,310            --       1,779,615
                                                 ---------      -----------     --------   ---------    -----------    -----------
 Cost of sales:
      Home sales...............................    184,347        1,221,525          --       10,237            (59)     1,416,050
      Land/lot sales...........................      2,129           23,809          --          --             --          25,938
                                                 ---------      -----------     --------   ---------    -----------    -----------
                                                   186,476        1,245,334          --       10,237            (59)     1,441,988
                                                 ---------      -----------     --------   ---------    -----------    -----------
 Gross profit:
      Home sales...............................     55,480          276,527          --        2,073             59        334,139
      Land/lot sales...........................        (23)           3,511          --          --             --           3,488
                                                 ---------      -----------     --------   ---------    -----------    -----------
                                                    55,457          280,038          --        2,073             59        337,627

 Selling, general and administrative expense...     43,885          129,788          --        1,465          1,882        177,020
 Interest expense..............................      1,018              446          --            1            --           1,465
 Other expense (income)........................   (158,949)          (2,035)         --         (132)       164,958          3,842
                                                 ---------      -----------     --------   ---------    -----------    -----------
                                                   169,503          151,839          --          739       (166,781)       155,300
                                                 ---------      -----------     --------   ---------    -----------    -----------
Financial services:
 Revenues......................................        --               --        28,864         --             --          28,864
 Selling, general and administrative expense...        --               --        20,102         --          (1,882)        18,220
 Interest expense..............................        --               --         1,155         --             --           1,155
 Other (income)................................        --               --        (4,714)        --             --          (4,714)
                                                 ---------      -----------     --------   ---------    -----------    -----------
                                                       --               --        12,321         --           1,882         14,203
                                                 ---------      -----------     --------   ---------    -----------    -----------
 Income before income taxes....................    169,503          151,839       12,321         739       (164,899)       169,503
 Provision for income taxes....................     63,563           56,939        4,621         276        (61,836)        63,563
                                                 ---------      -----------     --------   ---------    -----------    -----------
 Net income....................................  $ 105,940      $    94,900     $  7,700   $     463    $  (103,063)   $   105,940
                                                 =========      ===========     ========   =========    ===========    ===========



                                      -13-




                       D.R. HORTON, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Unaudited) - (Continued)

NOTE H - SUMMARIZED FINANCIAL INFORMATION (Continued)





                                               Consolidating Statement of Income
                                                Nine Months Ended June 30, 2002
                                                                                   Non-Guarantor
                                                                                   Subsidiaries
                                                                               --------------------
                                                         D.R.      Guarantor   Financial            Intercompany
                                                     Horton, Inc. Subsidiaries  Services    Other   Eliminations     Total
                                                     ------------ ------------ ---------  --------- ------------  -----------
                                                                                  (In thousands)
                                                                                              
Homebuilding:
Revenues:
  Home sales .......................................   $  641,378  $3,720,591  $     --   $  48,315  $      --    $ 4,410,284
  Land/lot sales ...................................        3,566      76,933        --         --          --         80,499
                                                       ----------  ----------  ---------  ---------  ----------   -----------
                                                          644,944   3,797,524        --      48,315         --      4,490,783
                                                       ----------  ----------  ---------  ---------  ----------   -----------
Cost of sales:
  Home sales .......................................      502,674   3,031,487        --      39,903        (274)    3,573,790
  Land/lot sales ...................................        2,634      67,414        --         --          --         70,048
                                                       ----------  ----------  ---------  ---------  ----------   -----------
                                                          505,308   3,098,901        --      39,903        (247)    3,643,838
                                                       ----------  ----------  ---------  ---------  ----------   -----------
Gross profit:
  Home sales .......................................      138,704     689,104        --       8,412         274       836,494
  Land/lot sales ...................................          932       9,519        --         --          --         10,451
                                                       ----------  ----------  ---------  ---------  ----------   -----------
                                                          139,636     698,623        --       8,412         274       846,945

Selling, general and administrative expense ........      116,930     318,241        --        4,772      4,988       444,931
Interest expense ...................................        3,929       1,292        --           13        (10)        5,224
Other expense (income) .............................     (410,501)     (3,909)       --        6,257    412,141         3,988
                                                       ----------  ----------  ---------  ----------  ---------   -----------
                                                          429,278     382,999        --       (2,630)  (416,845)      392,802
                                                       ----------  ----------  ---------  ----------  ---------   -----------

Financial services:
Revenues ...........................................          --          --      77,651         --          --        77,651
Selling, general and administrative expense ........          --          --      53,249         --       (4,988)      48,261
Interest expense ...................................          --          --       3,490         --          --         3,490
Other (income) .....................................          --          --     (10,576)        --          --       (10,576)
                                                       ----------  ----------  ---------  ----------  ----------  -----------
                                                              --          --      31,488         --        4,988       36,476
                                                       ----------  ----------  ---------  ----------  ----------  -----------
Income before income taxes .........................      429,278     382,999     31,488      (2,630)   (411,857)     429,278
Provision for income taxes .........................      160,979     143,624     11,809        (987)   (154,446)     160,979
                                                       ----------  ----------  ---------  ----------  ----------  -----------
Net income .........................................   $  268,299  $  239,375  $  19,679  $   (1,643) $ (257,411) $   268,299
                                                       ==========  ==========  =========  ==========  ==========  ===========
















                                      -14-




                       D.R. HORTON, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Unaudited) - (Continued)

NOTE H - SUMMARIZED FINANCIAL INFORMATION (Continued)





                                               Consolidating Statement of Income
                                                Three Months Ended June 30, 2001
                                                                                  Non-Guarantor
                                                                                  Subsidiaries
                                                                             ---------------------
                                                       D.R.      Guarantor   Financial            Intercompany
                                                   Horton, Inc. Subsidiaries Services    Other    Eliminations    Total
                                                   ------------ ------------ --------- ---------- ------------ -----------
                                                                                (In thousands)
                                                                                            
Homebuilding:
Revenues:
  Home sales .....................................   $  199,313  $  887,058  $    --    $   3,871  $     --    $ 1,090,242
  Land/lot sales .................................        6,267       5,457       --         --          --         11,724
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                        205,580     892,515       --        3,871        --      1,101,966
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Cost of sales:
  Home sales .....................................      154,876     714,376       --        2,985        (142)     872,095
  Land/lot sales .................................        5,502       5,210       --         --          --         10,712
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                        160,378     719,586       --        2,985        (142)     882,807
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Gross profit:
  Home sales .....................................       44,437     172,682       --          886         142      218,147
  Land/lot sales .................................          765         247       --         --          --          1,012
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                         45,202     172,929       --          886         142      219,159

Selling, general and administrative expense ......       28,294      77,838       --        1,779       1,174      109,085
Interest expense .................................        2,043          44       --           14         (12)       2,089
Other expense (income) ...........................      (95,220)       (305)      --        6,895      93,670        5,040
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                        110,085      95,352       --       (7,802)    (94,690)     102,945
                                                     ----------  ----------  ---------  ---------  ----------  -----------

Financial services:
Revenues .........................................         --          --       19,015       --          --         19,015
Selling, general and administrative expense ......         --          --       13,714       --        (1,174)      12,540
Interest expense .................................         --          --        1,575       --          --          1,575
Other (income) ...................................         --          --       (2,240)      --          --         (2,240)
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                           --          --        5,966       --         1,174        7,140
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Income before income taxes .......................      110,085      95,352      5,966     (7,802)    (93,516)     110,085
Provision for income taxes .......................       41,282      35,757      2,237     (2,925)    (35,069)      41,282
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Net income .......................................   $   68,803  $   59,595  $   3,729  $  (4,877) $  (58,447) $    68,803
                                                     ==========  ==========  =========  =========  ==========  ===========




                                      -15-




                       D.R. HORTON, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Unaudited) - (Continued)

NOTE H - SUMMARIZED FINANCIAL INFORMATION (Continued)





                                              Consolidating Statement of Income
                                               Nine Months Ended June 30, 2001
                                                                                 Non-Guarantor
                                                                                  Subsidiaries
                                                                             --------------------
                                                       D.R.      Guarantor    Financial           Intercompany
                                                   Horton, Inc. Subsidiaries  Services    Other   Eliminations    Total
                                                   ------------ ------------ ---------- --------- ------------ -----------
                                                                                 (In thousands)
                                                                                            
Homebuilding:
Revenues:
  Home sales .....................................   $  474,816  $2,309,055  $    --    $  16,023  $     --    $ 2,799,894
  Land/lot sales .................................       22,876      45,157       --         --          --         68,033
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                        497,692   2,354,212       --       16,023        --      2,867,927
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Cost of sales:
  Home sales .....................................      377,190   1,856,010       --       11,953        (399)   2,244,754
  Land/lot sales .................................       17,776      37,015       --         --          --         54,791
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                        394,966   1,893,025       --       11,953        (399)   2,299,545
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Gross profit:
  Home sales .....................................       97,626     453,045       --        4,070         399      555,140
  Land/lot sales .................................        5,100       8,142       --         --          --         13,242
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                        102,726     461,187       --        4,070         399      568,382

Selling, general and administrative expense ......       70,449     215,610       --        6,100       2,925      295,084
Interest expense .................................        6,478         134       --          196        (190)       6,618
Other expense (income) ...........................     (243,176)     (1,517)      --       10,456     248,275       14,038
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                        268,975     246,960       --      (12,682)   (250,611)     252,642
                                                     ----------  ----------  ---------  ---------  ----------  -----------

Financial services:
Revenues .........................................         --          --       47,553       --          --         47,553
Selling, general and administrative expense ......         --          --       35,432       --        (2,925)      32,507
Interest expense .................................         --          --        3,582       --          --          3,582
Other (income) ...................................         --          --       (4,869)      --          --         (4,869)
                                                     ----------  ----------  ---------  ---------  ----------  -----------
                                                           --          --       13,408       --         2,925       16,333
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Income before income taxes .......................      268,975     246,960     13,408    (12,682)   (247,686)     268,975
Provision for income taxes .......................      100,866      92,610      5,028     (4,755)    (92,883)     100,866
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Income before cumulative effect of change
 in accounting principle .........................      168,109     154,350      8,380     (7,927)   (154,803)     168,109
Cumulative effect of change in accounting
 principle, net of income taxes ..................        2,136        --         --         --          --          2,136
                                                     ----------  ----------  ---------  ---------  ----------  -----------
Net income .......................................   $  170,245  $  154,350  $   8,380  $  (7,927) $ (154,803) $   170,245
                                                     ==========  ==========  =========  =========  ==========  ===========




                                      -16-




                       D.R. HORTON, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Unaudited) - (Continued)

NOTE H - SUMMARIZED FINANCIAL INFORMATION (Continued)





                                          Consolidating Statement of Cash Flows
                                             Nine Months Ended June 30, 2002
                                                                                    Non-Guarantor
                                                                                     Subsidiaries
                                                                                 --------------------
                                                           D.R.      Guarantor   Financial            Intercompany
                                                       Horton, Inc. Subsidiaries  Services    Other   Eliminations   Total
                                                       ------------ ------------ ---------- --------- ------------ ---------
                                                                                   (In thousands)
                                                                                               
OPERATING ACTIVITIES
Net income ...........................................   $  268,299  $  239,375  $  19,679  $ (1,643) $(257,411)  $  268,299
Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
 Depreciation and amortization .......................        3,065      14,075      1,102       379       --         18,621
 Amortization of debt premiums and fees ..............        5,991        --         --        --         --          5,991
 Changes in operating assets and liabilities:
  Increase in inventories ............................     (115,340)   (150,207)      --     (46,220)        (6)    (311,773)
  Increase in earnest money
   deposits and other assets .........................      (19,419)     (8,916)    (2,068)   (2,281)    (5,590)     (38,274)
  Increase in mortgage loans held for sale ...........         --          --      (65,660)     --         --        (65,660)
  Increase (decrease) in accounts payable
   and other liabilities .............................      (30,740)    (96,768)       682    16,198         38     (110,590)
                                                         ----------  ----------  ---------  --------  ---------   ----------
Net cash provided by (used in) operating
 activities ..........................................      111,856      (2,441)   (46,265)  (33,567)  (262,969)    (233,386)
                                                         ----------  ----------  ---------  --------  ---------   ----------
INVESTING ACTIVITIES
Net (purchases) dispositions of property and
 equipment ...........................................       (4,014)    (21,317)    (1,908)     (916)      --        (28,155)
Distributions from venture capital entities ..........         --          --         --         250       --            250
Net cash paid for acquisitions .......................         --      (152,662)      --        --         --       (152,662)
                                                         ----------  ----------  ---------  --------  ---------   ----------
Net cash provided by (used in) investing
 activities ..........................................       (4,014)   (173,979)    (1,908)     (666)      --       (180,567)
                                                         ----------  ----------  ---------  --------  ---------   ----------
FINANCING ACTIVITIES
Net change in notes payable ..........................      478,331    (266,436)    21,989    (3,897)     5,551      235,538
Increase (decrease) in intercompany payables .........     (581,235)    469,448     32,378    46,856     32,553         --
Proceeds from issuance of common stock
 associated with certain employee benefit plans ......       12,380        --         --        --         --         12,380
Cash dividends/distributions paid ....................      (17,318)   (224,865)      --        --      224,865      (17,318)
                                                         ----------  ----------  ---------  --------  ---------   ----------
Net cash provided by (used in) financing
 activities ..........................................     (107,842)    (21,853)    54,367    42,959    262,969      230,600
                                                         ----------  ----------  ---------  --------  ---------   ----------
Increase (decrease) in cash ..........................         --      (198,273)     6,194     8,726       --       (183,353)
Cash at beginning of period ..........................         --       230,481      6,975     1,824       --        239,280
                                                         ----------  ----------  ---------  --------  ---------   ----------
Cash at end of period ................................   $     --    $   32,208  $  13,169  $ 10,550  $    --     $   55,927
                                                         ==========  ==========  =========  ========  =========   ==========





                                      -17-




                       D.R. HORTON, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Unaudited) - (Continued)

NOTE H - SUMMARIZED FINANCIAL INFORMATION (Continued)







                                          Consolidating Statement of Cash Flows
                                              Nine Months Ended June 30, 2001
                                                                                    Non-Guarantor
                                                                                    Subsidiaries
                                                                                 --------------------
                                                           D.R.       Guarantor  Financial            Intercompany
                                                       Horton, Inc. Subsidiaries Services     Other   Eliminations   Total
                                                       ------------ ------------ ---------  --------- ------------ ---------
                                                                                    (In thousands)
                                                                                               
OPERATING ACTIVITIES
Net income ...........................................   $  170,245  $  154,350  $   8,380  $ (7,927) $(154,803)  $  170,245
Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
 Depreciation and amortization .......................        1,418      15,711        955       379       --         18,463
 Amortization of debt premiums and fees ..............        2,645        --         --        --         --          2,645
 Changes in operating assets and liabilities:
  (Increase) decrease in inventories .................     (141,521)   (269,505)      --      (5,683)        70     (416,639)
  (Increase) decrease in earnest money
   deposits and other assets .........................       (5,522)    (48,394)    (5,555)    5,323     20,499      (33,649)
  Increase in mortgage loans held for sale ...........         --          --      (50,616)     --         --        (50,616)
  Increase (decrease) in accounts payable
   and other liabilities .............................       15,490     (11,378)       569      (369)    22,296       26,608
                                                         ----------  ----------  ---------  --------  ---------   ----------
Net cash provided by (used in) operating
  activities .........................................       42,755    (159,216)   (46,267)   (8,277)  (111,938)    (282,943)
                                                         ----------  ----------  ---------  --------  ---------   ----------
INVESTING ACTIVITIES
Net purchases of property and equipment ..............       (7,213)    (12,333)    (1,860)     (401)      --        (21,807)
Net investments in venture capital entities ..........         --          --         --      (1,970)      --         (1,970)
Net cash paid for acquisitions .......................         --       (49,009)      --        --         --        (49,009)
                                                         ----------  ----------  ---------  --------  ---------   ----------
Net cash used in investing activities ................       (7,213)    (61,342)    (1,860)   (2,371)      --        (72,786)
                                                         ----------  ----------  ---------  --------  ---------   ----------
FINANCING ACTIVITIES
Net change in notes payable ..........................      357,174     (48,899)    56,420       356       (357)     364,694
Increase (decrease) in intercompany payables .........     (413,026)    449,761      6,444    10,526    (53,705)        --
Proceeds from issuance of common stock
 associated with certain employee benefit plans ......        9,798        --         --        --         --          9,798
Cash dividends/distributions paid ....................       (9,885)   (161,500)    (4,500)     --      166,000       (9,885)
                                                         ----------  ----------  ---------  --------  ---------   ----------
Net cash provided by (used in) financing
 activities ..........................................      (55,939)    239,362     58,364    10,882    111,938      364,607
                                                         ----------  ----------  ---------  --------  ---------   ----------
Increase (decrease) in cash ..........................      (20,397)     18,804     10,237       234       --          8,878
Cash at beginning of period ..........................       20,397      40,349     10,727     1,052       --         72,525
                                                         ----------  ----------  ---------  --------  ---------   ----------
Cash at end of period ................................   $     --    $   59,153  $  20,964  $  1,286  $    --     $   81,403
                                                         ==========  ==========  =========  ========  =========   ==========










                                      -18-





ITEM 2.              MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - CONSOLIDATED

D. R. Horton,  Inc.  and  subsidiaries  (the  "Company")  conduct  homebuilding
activities in 20 states and 44 markets through its 50  homebuilding  divisions.
Through its financial  services  segment,  the Company also  provides  mortgage
banking and title agency services in many of these same markets.

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Consolidated  revenues  for the three  months  ended June 30,  2002,  increased
61.3%, to $1,808.5 million,  from $1,121.0 million for the comparable period of
2001, due to increases in both  homebuilding and financial  services  revenues.
Approximately  $447  million  of the  increase  in  homebuilding  revenues  was
attributable to revenues generated by Fortress- Florida,  acquired in May 2001,
Emerald  Builders,  acquired  in July 2001,  and  Schuler  Homes,  acquired  in
February 2002.

Income before income taxes for the three months ended June 30, 2002,  increased
54.0%,  to $169.5  million,  from $110.1 million for the  comparable  period of
2001.  As a percentage  of revenues,  income  before income taxes for the three
months ended June 30, 2002, decreased 0.4 percentage points, to 9.4%, from 9.8%
for the  comparable  period of 2001,  primarily  due to the effects of purchase
accounting adjustments related to the Schuler acquisition.

The  consolidated  provision for income taxes increased 54.0%, to $63.6 million
for the three  months  ended June 30,  2002,  from $41.3  million  for the same
period of 2001,  due to the  corresponding  increase  in income  before  income
taxes. The effective income tax rate was 37.5% for both periods.

Nine Months Ended June 30, 2002 Compared to Nine Months Ended June 30, 2001

Consolidated revenues for the nine months ended June 30, 2002, increased 56.7%,
to $4,568.4  million,  from $2,915.5 million for the comparable period of 2001,
primarily due to increases in home sales revenues. Approximately $1,069 million
of the increase in homebuilding revenues was attributable to revenues generated
by Fortress-Florida, Emerald Builders and Schuler.

Income before  income taxes for the nine months ended June 30, 2002,  increased
59.6%,  to $429.3  million,  from $269.0 million for the  comparable  period of
2001.  As a percentage  of revenues,  income  before  income taxes for the nine
months ended June 30, 2002, increased 0.2 percentage points, to 9.4%, from 9.2%
for the comparable  period of 2001,  primarily due to the increase in financial
services pre-tax income as a percentage of consolidated revenues.

The consolidated  provision for income taxes increased 59.6%, to $161.0 million
for the nine  months  ended June 30,  2002,  from  $100.9  million for the same
period of 2001,  due to the  corresponding  increase  in income  before  income
taxes. The effective income tax rate was 37.5% for both periods.

The  cumulative  effect of a change in  accounting  principle was an increase in
income of $2.1 million, net of income taxes of $1.3 million, for the nine months
ended June 30,  2001.  This  accounting  change is the  result of the  Company's
October 1, 2000 adoption of SFAS No. 133, "Accounting for Derivative Instruments
and Hedging  Activities,"  which  requires the Company to recognize its interest
rate swap agreements in the consolidated balance sheet at fair value.


                                      -19-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - HOMEBUILDING

The  following  tables set forth certain  operating and financial  data for the
Company's homebuilding activities:




                                                                        Percentages of Homebuilding Revenues
                                                             -----------------------------------------------------------
                                                                Three Months Ended                 Nine Months Ended
                                                                     June 30,                           June 30,
                                                             ------------------------           ------------------------
                                                              2002              2001             2002              2001
                                                             ------            ------           ------             -----
                                                                                                      
Costs and expenses:
     Cost of sales.................................            81.0%             80.1%            81.2%             80.2%
     Selling, general and administrative expense...             9.9               9.9              9.9              10.3
     Interest expense..............................             0.1               0.2              0.1               0.2
                                                             ------            ------           ------             -----
Total costs and expenses...........................            91.0              90.2             91.2              90.7
Other (income) expense.............................             0.3               0.5              0.1               0.5
                                                             ------            ------           ------             -----
Income before income taxes.........................             8.7%              9.3%             8.7%              8.8%
                                                             ======            ======           ======             =====





Homes Closed                         Three Months Ended June 30,                Nine Months Ended June 30,
                               --------------------------------------  -------------------------------------------
                                      2002                2001               2002                     2001
                               ------------------  ------------------  -------------------   ---------------------
                                Homes               Homes               Homes                   Homes
                                Closed   Revenues   Closed   Revenues   Closed    Revenues      Closed    Revenues
                               -------   --------  -------   --------  -------   ---------   ---------   ---------
                                          ($'s in millions)                         ($'s in millions)
                                                                                
Mid-Atlantic ...............       788   $  167.3      725   $  158.8    2,016   $   431.0       1,950   $   432.3
Midwest ....................       472      119.4      437      105.2    1,323       333.5       1,311       313.6
Southeast ..................       838      139.1      818      143.6    2,516       429.7       1,976       348.3
Southwest ..................     3,062      516.4    2,277      378.9    7,971     1,352.9       5,955       981.7
West .......................     2,717      808.0    1,210      303.7    6,381     1,863.2       2,895       724.0
                               -------   --------  -------   --------  -------   ---------   ---------   ---------
                                 7,877   $1,750.2    5,467   $1,090.2   20,207   $ 4,410.3      14,087   $ 2,799.9
                               =======   ========  =======   ========  =======   =========   =========   =========





Net New Sales Contracts              Three Months Ended June 30,                Nine Months Ended June 30,
                               --------------------------------------   -------------------------------------------
                                      2002                 2001                2002                    2001
                               ------------------   -----------------   -------------------   ---------------------
                                Homes                Homes               Homes                  Homes
                                Sold         $       Sold        $       Sold         $         Sold          $
                               -------   --------   -------  --------   -------   ---------   ---------   ---------
                                          ($'s in millions)                         ($'s in millions)
                                                                                 
Mid-Atlantic ...............       960   $  201.3      674   $  146.7     2,471   $   512.0       2,084   $   459.4
Midwest ....................       543      126.8      520      139.2     1,394       341.1       1,441       374.8
Southeast ..................       976      161.9      868      152.9     2,680       438.6       2,266       404.8
Southwest ..................     3,520      590.5    2,453      411.0     9,537     1,583.7       6,927     1,142.2
West .......................     3,066      954.1    1,499      364.7     6,744     2,014.1       4,237     1,089.4
                               -------   --------   -------  --------   -------   ---------   ---------   ---------
                                 9,065   $2,034.6    6,014   $1,214.5    22,826   $ 4,889.5      16,955   $ 3,470.6
                               =======   ========   =======  ========   =======   =========   =========   =========





Sales Contract Backlog                                        June 30, 2002             June 30, 2001
                                                         ----------------------      --------------------
                                                           Homes          $           Homes         $
                                                         --------     ---------      -------    ---------
                                                                      ($'s in millions)
                                                                                   
Mid-Atlantic.......................................         1,277     $   271.3          957    $   234.7
Midwest............................................           989         270.4        1,030        286.6
Southeast..........................................         1,628         262.4        1,629        288.2
Southwest..........................................         5,868         984.4        4,161        711.9
West...............................................         3,824       1,159.7        2,831        740.0
                                                         --------      --------      -------     --------
                                                           13,586      $2,948.2       10,608     $2,261.4
                                                         ========      ========      =======     ========





                                      -20-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company's market regions consist of the following markets:
    Mid-Atlantic    Charleston, Charlotte, Columbia, Greensboro, Greenville,
                    Hilton Head, Maryland-D.C., Myrtle Beach, New Jersey,
                    Raleigh/Durham and Virginia-D.C.
    Midwest         Chicago and Minneapolis/St. Paul
    Southeast       Atlanta, Birmingham, Fort Myers/Naples, Jacksonville, Miami/
                    West Palm Beach and Orlando
    Southwest       Albuquerque, Austin, Dallas, Fort Worth, Houston, Killeen,
                    Phoenix, San Antonio and Tucson
    West            Colorado Springs, Denver, Fort Collins, Hawaii, Inland
                    Empire, Las Vegas, Los Angeles, Oakland, Orange County,
                    Portland, Sacramento, San Francisco, Salt Lake City, San
                    Diego, Seattle/Tacoma and Ventura County

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Revenues from  homebuilding  activities  increased  61.5%, to $1,779.6  million
(7,877 homes  closed) for the three months ended June 30, 2002,  from  $1,102.0
million (5,467 homes closed) for the comparable  period of 2001.  Revenues from
home  sales  increased  in four of the  Company's  five  market  regions,  with
percentage  increases ranging from 5.4% in the Mid-Atlantic region to 166.1% in
the West.  Home sales  revenues  declined  3.1% in the  Southeast  region.  The
increases in total homebuilding  revenues and revenues from home sales were due
to strong housing demand throughout the majority of the Company's markets,  the
acquisitions of  Fortress-Florida  and Emerald Builders during fiscal 2001, and
the merger  with  Schuler in  February  2002.  In  divisions  where the Company
operated  throughout  both periods,  home sales revenues  increased  20.6%,  to
$1,310.2 million (6,295 homes closed) for the three months ended June 30, 2002,
from $1,086.1 million (5,452 homes closed) for the comparable period of 2001.

The average  selling  price of homes closed  during the three months ended June
30, 2002 was $222,200,  up 11.4% from $199,400 for the same period in 2001. The
increase in average selling price was due primarily to the Schuler acquisition.
Schuler's  operations are  concentrated on the West Coast and in Hawaii,  where
average home selling  prices are  significantly  higher than in the rest of the
United States.

The value of net new sales contracts  increased 67.5% to $2,034.6 million (9,065
homes) for the three months ended June 30, 2002,  from $1,214.5  million  (6,014
homes)  for the same  period of 2001.  The  number  of net new  sales  contracts
increased in all of the Company's five market regions, with percentage increases
ranging  from  4.4% in the  Midwest  region to  104.5%  in the West  region.  In
divisions where the Company operated  throughout both periods,  the value of net
new sales contracts  increased  22.2%, to $1,481.8 million (7,047 homes) for the
three months ended June 30, 2002,  from $1,213.0  million  (6,009 homes) for the
comparable  period of 2001. The average price of a net new sales contract in the
three  months  ended June 30,  2002 was  $224,500,  up 11.2%  from the  $201,900
average in the comparable  period of 2001. The increase in average selling price
was primarily due to the effect of the Schuler acquisition.

At June 30, 2002,  the value of the  Company's  backlog of sales  contracts was
$2,948.2 million (13,586 homes),  up 30.4% from $2,261.4 million (10,608 homes)
at June 30,  2001.  In divisions  where the Company  operated  throughout  both
periods,  the value of the Company's backlog of sales contracts increased 3.0%,
to $2,328.4  million  (11,171 homes),  from $2,261.1  million (10,606 homes) at
June 30, 2001.  The average  sales price of homes in sales backlog was $217,000
at June 30, 2002, up 1.8% from the average price of $213,200 at June 30, 2001.

Cost of sales increased by 63.3%, to $1,442.0 million for the three months ended
June 30,  2002,  from $882.8  million  for the  comparable  period of 2001.  The
increase  in cost  of  sales  was  primarily  attributable  to the  increase  in
revenues.  Cost of home sales as a percentage of home sales  revenues  increased
0.9 percentage  points,  to 80.9% for the three months ended June 30, 2002, from
80.0% for the  comparable  period of 2001,  due  primarily  to $14.0  million in
charges related to the Schuler  acquisition,  the majority of which was a result
of recording  Schuler's  inventory at fair value on the  acquisition  date.  The
increase in cost of home sales as a percentage of revenues was also the cause of
the 0.9  percentage  point  increase  in total  homebuilding  cost of sales as a
percentage of total  homebuilding  revenues,  to 81.0% in the three months ended
June 30, 2002, from 80.1% in the comparable period of 2001.

                                      -21-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Selling,   general  and   administrative   (SG&A)  expenses  from  homebuilding
activities increased by 62.3%, to $177.0 million in the three months ended June
30, 2002, from $109.1 million in the comparable period of 2001. As a percentage
of  homebuilding  revenues,  SG&A expenses  remained  unchanged at 9.9% for the
three months ended June 30, 2002 and 2001.

Interest  expense  associated  with  homebuilding  activities  decreased to $1.5
million  in the three  months  ended  June 30,  2002,  from $2.1  million in the
comparable   period  of  2001.  As  a  percentage  of   homebuilding   revenues,
homebuilding interest expense was 0.1% for the three months ended June 30, 2002,
a decline of 0.1 percentage  points from 0.2% in the comparable  period of 2001.
During both periods,  the Company expensed the portion of incurred  interest and
other  financing  costs  which  could not be charged to  inventory.  The Company
follows a policy of capitalizing  interest only on inventory under  construction
or development.  Capitalized  interest and other financing costs are included in
cost of sales at the time of home closings.

Other expense  associated with  homebuilding  activities was $3.8 million in the
three  months ended June 30,  2002,  compared to $5.0 million in the  comparable
period of 2001. The expense in the three months ended June 30, 2002 is primarily
due to a  decrease  in the  fair  value  of the  Company's  interest  rate  swap
agreements  during the  quarter.  During the year-ago  quarter,  the expense was
primarily due to write-downs to estimated fair value of the carrying  amounts of
the Company's  investments  in venture  capital  entities,  offset in part by an
increase in the fair value of the Company's interest rate swap agreements during
the quarter.

Nine Months Ended June 30, 2002 Compared to Nine Months Ended June 30, 2001

Revenues from  homebuilding  activities  increased  56.6%, to $4,490.8  million
(20,207  homes  closed) for the nine months ended June 30, 2002,  from $2,867.9
million (14,087 homes closed) for the comparable period of 2001.  Revenues from
home  sales  increased  in four of the  Company's  five  market  regions,  with
percentage  increases  ranging from 6.3% in the Midwest region to 157.3% in the
West  region.  Revenues  from  homebuilding  activities  declined  0.3%  in the
Mid-Atlantic region. The increases in total homebuilding  revenues and revenues
from home sales were due to strong  housing  demand  throughout the majority of
the  Company's  markets,  and the  acquisitions  of  Fortress-Florida,  Emerald
Builders and Schuler.  In divisions where the Company operated  throughout both
periods,  home sales revenues increased 21.1% to $3,378.5 million (16,368 homes
closed) for the nine months ended June 30, 2002, from $2,790.0  million (14,048
homes closed) for the comparable period of 2001.

The average selling price of homes closed during the nine months ended June 30,
2002 was  $218,300,  up 9.8% from  $198,800  for the same  period in 2001.  The
increase in average selling price was primarily due to the Schuler acquisition.
Schuler's  operations are  concentrated on the West Coast and in Hawaii,  where
average home selling  prices are  significantly  higher than in the rest of the
United States.

The value of net new sales  contracts  increased  40.9%,  to  $4,889.5  million
(22,826 homes) for the nine months ended June 30, 2002,  from $3,470.6  million
(16,955  homes)  for the same  period  of  2001.  The  value  of net new  sales
contracts  increased  in  four  of the  Company's  five  market  regions,  with
percentage  increases ranging from 8.3% in the Southeast region to 84.9% in the
West region.  The value of net new sales contracts declined 9.0% in the Midwest
region.  In divisions where the Company operated  throughout both periods,  the
value of net new sales contracts  increased  10.8%, to $3,838.0 million (18,585
homes) for the nine months ended June 30, 2002,  from $3,464.3  million (16,928
homes) for the comparable  period of 2001. The average price of a net new sales
contract in the nine months ended June 30, 2002 was $214,200,  up 4.6% over the
$204,700 average in the nine months ended June 30, 2001.

Cost of sales increased  58.5%,  to $3,643.8  million for the nine months ended
June 30, 2002,  from $2,299.5  million for the  comparable  period of 2001. The
increase  in cost of  sales  was  primarily  attributable  to the  increase  in
revenues.  Cost of home sales as a percentage of home sales revenues  increased
0.8 percentage  points,  to 81.0% for the nine months ended June 30, 2002, from
80.2% for the  comparable  period of 2001,  due  primarily to $47.6  million in
charges related to the Schuler acquisition,  the majority of which was a result
of recording  Schuler's  inventory at fair value on the  acquisition  date. The
increase in cost of home  sales as a  percentage  of  revenues  was the primary


                                      -22-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


cause of the 1.0 percentage point increase in total  homebuilding cost of sales
as a percentage  of total  homebuilding  revenues,  to 81.2% in the nine months
ended June 30, 2002, from 80.2% in the comparable period of 2001.

Selling,   general  and   administrative   (SG&A)  expenses  from  homebuilding
activities  increased by 50.8%, to $444.9 million in the nine months ended June
30, 2002, from $295.1 million in the comparable period of 2001. As a percentage
of homebuilding  revenues,  SG&A expenses decreased to 9.9% for the nine months
ended  June 30,  2002,  from  10.3%  for the  comparable  period  of 2001,  due
primarily  to the fixed costs  leverage  achieved  by the large  amount of home
closings  revenues  generated by the Schuler  operating  divisions  between the
Schuler  acquisition date,  February 21, 2002, and the end of the quarter ended
March 31, 2002.

Interest  expense  associated with  homebuilding  activities  decreased to $5.2
million  in the nine  months  ended  June 30,  2002,  from $6.6  million in the
comparable   period  of  2001.  As  a  percentage  of  homebuilding   revenues,
homebuilding  interest expense  decreased 0.1 percentage points to 0.1% for the
nine months ended June 30, 2002,  from 0.2% for the comparable  period of 2001.
During both periods,  the Company expensed the portion of incurred interest and
other  financing  costs  which could not be charged to  inventory.  The Company
follows a policy of capitalizing  interest only on inventory under construction
or development.  Capitalized interest and other financing costs are included in
cost of sales at the time of home closings.

Other expense  associated with  homebuilding  activities was $4.0 million in the
nine months ended June 30,  2002,  compared to $14.0  million in the  comparable
period of 2001. The expense in 2002 is primarily due to the change in fair value
of the Company's interest rate swap agreements during the period. The expense in
2001 is primarily  due to  write-downs  to estimated  fair value of the carrying
amounts of the Company's  investments in start-up and emerging growth  companies
and the decline in the fair value of the Company's interest rate swap agreements
during the period.

                                      -23-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS - FINANCIAL SERVICES

The  following  table  summarizes  financial  and  other  information  for  the
Company's financial services operations:



                                                                      Three Months Ended            Nine Months Ended
                                                                           June 30,                      June 30,
                                                                   -----------------------        ---------------------
                                                                     2002           2001            2002         2001
                                                                   --------       --------        --------     --------
                                                                                       ($ in thousands)
                                                                                                  
Number of loans originated....................................        5,134          3,658          13,581        8,733
                                                                   --------       --------        --------     --------
Loan origination fees.........................................     $  5,884       $  3,969        $ 14,702     $  9,695
Sale of servicing rights and gains from sale of mortgages.....       13,485          8,326          37,785       21,512
Other revenues................................................        2,144          2,130           6,777        4,952
                                                                   --------       --------        --------     --------
Total mortgage banking revenues...............................       21,513         14,425          59,264       36,159
Title policy premiums, net....................................        7,351          4,590          18,387       11,394
                                                                   --------       --------        --------     --------
Total revenues................................................       28,864         19,015          77,651       47,553
Selling, general and administrative expense...................       18,220         12,540          48,261       32,507
Interest expense..............................................        1,155          1,575           3,490        3,582
Interest/other (income).......................................       (4,714)        (2,240)        (10,576)      (4,869)
                                                                   --------       --------        --------     --------
Income before income taxes....................................     $ 14,203       $  7,140        $ 36,476     $ 16,333
                                                                   ========       ========        ========     ========


Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Revenues from the financial  services segment  increased 51.8%, to $28.9 million
in the three months ended June 30, 2002,  from $19.0  million in the  comparable
period of 2001. The increase in financial services revenues was due to the rapid
expansion  of the  Company's  mortgage  loan  and  title  services  provided  to
customers of the Company's  homebuilding  segment and the effects of the Emerald
Builders acquisition.  Selling,  general and administrative  expenses associated
with financial  services  increased  45.3%, to $18.2 million in the three months
ended June 30, 2002,  from $12.5 million in the comparable  period of 2001. As a
percentage of financial services revenues,  selling,  general and administrative
expenses  decreased by 2.8 percentage points, to 63.1% in the three months ended
June 30, 2002, from 65.9% in the comparable period in 2001, due primarily to the
increase in revenues absorbing fixed costs.

Nine Months Ended June 30, 2002 Compared to Nine Months Ended June 30, 2001

Revenues from the financial  services segment  increased 63.3%, to $77.7 million
in the nine months ended June 30,  2002,  from $47.6  million in the  comparable
period of 2001. The increase in financial services revenues was due to the rapid
expansion  of the  Company's  mortgage  loan  and  title  services  provided  to
customers  of  the  Company's  homebuilding  segment  and  the  effects  of  the
Fortress-Florida  and  Emerald  Builders  acquisitions.   Selling,  general  and
administrative  expenses  associated with financial services increased 48.5%, to
$48.3 million in the nine months ended June 30, 2002,  from $32.5 million in the
comparable  period of 2001.  As a  percentage  of financial  services  revenues,
general and administrative expenses decreased by 6.2 percentage points, to 62.2%
in the nine months ended June 30, 2002,  from 68.4% in the comparable  period in
2001, due primarily to the increase in revenues absorbing fixed costs.


                                      -24-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2002, the Company had available  cash and cash  equivalents of $55.9
million.  Inventories  (including finished homes,  construction in progress, and
developed  residential  lots and other land) at June 30, 2002,  had increased by
$1,577.3 million since September 30, 2001, due to the acquisition of Schuler,  a
general  increase in business  activity and the  expansion of  operations in the
Company's  market  areas.  Net of  homebuilding  cash,  the  Company's  ratio of
homebuilding  notes  payable to total  capital at June 30, 2002,  increased  1.9
percentage  points, to 55.9% from 54.0% at September 30, 2001. The stockholders'
equity to total assets ratio increased 3.0 percentage  points,  to 37.2% at June
30, 2002, from 34.2% at September 30, 2001.

At June 30, 2002, the Company has an $805 million,  unsecured  revolving  credit
facility,  including  $125 million which may be used for letters of credit.  The
facility matures in January 2006, and is guaranteed by substantially  all of the
Company's   wholly-owned   subsidiaries   other  than  its  financial   services
subsidiaries.  The revolving  credit facility and the indentures  related to the
Company's Senior and Senior  Subordinated  Notes contain covenants which,  taken
together, limit amounts of debt that may be incurred,  investments in inventory,
stock  repurchases,   cash  dividends  and  other  restricted  payments,   asset
dispositions  and creation of liens,  and require certain levels of tangible net
worth. At June 30, 2002, these covenants limit the additional  homebuilding debt
the Company  could incur to $1,251.3  million,  which  included  $464.9  million
available  under the  revolving  credit  facility.  The Company has entered into
multi-year interest rate swap agreements,  aggregating a notional amount of $200
million,  that fix the interest rate on a portion of the variable rate revolving
credit facility.

In the normal course of business, the Company provides standby letters of credit
and performance  bonds,  issued by third parties,  to secure  performance  under
various contracts.  At June 30, 2002,  outstanding standby letters of credit and
performance  bonds,  the  majority of which  mature in less than one year,  were
$122.5 million and $632.1 million, respectively.

At June 30, 2002,  the financial  services  segment had mortgage  loans held for
sale of $288.5 million and loan  commitments  for $266.3 million at fixed rates.
The Company  hedges the interest rate market risk on these  mortgage  loans held
for  sale  and loan  commitments  through  the use of  best-efforts  whole  loan
delivery  commitments,  mandatory  forward  commitments to sell  mortgage-backed
securities and the purchase of options on financial instruments.

The  financial  services  segment has a $205 million,  one-year  bank  warehouse
facility that matures on August 13, 2002,  and is secured by mortgage loans held
for sale. The warehouse facility is not guaranteed by the parent company.  As of
June 30, 2002, $204.6 million had been drawn under this facility.  Substantially
all of the mortgage  company  activities  have been financed under the warehouse
facility.  To  supplement  the  warehouse  facility,  a new $100 million  credit
facility for  financial  services was  finalized in July 2002.  The new facility
will  mature on July 9, 2003,  and is also  secured by  mortgage  loans held for
sale.

On February 21, 2002,  Schuler  Homes,  Inc.  merged with and into D.R.  Horton,
Inc.,  with D.R.  Horton the surviving  corporation.  At the time of the merger,
Schuler's  assets  amounted to $1,364.4  million,  mostly  inventory.  The total
merger  consideration  consisted  of the issuance of  20,079,532  shares of D.R.
Horton, Inc. common stock, valued at $30.93 per share (the average closing price
of D.R.  Horton  common stock for a period of ten trading days from  December 4,
2001 to  December  17,  2001);  the  payment  of  $168.7  million  in cash;  the
assumption of $802.2 million of Schuler's debt, $238.2 million of which was paid
at closing; the assumption of trade payables and other liabilities  amounting to
$209.1  million;  and the  assumption  of $10.8  million of  obligations  to the
Schuler entities' minority interest holders. Also, D.R. Horton issued options to
purchase  approximately  527,000  shares of D.R.  Horton common stock to Schuler
employees to replace  outstanding  Schuler stock options.  The fair value of the
options  issued was $10.4  million and was recorded as additional  capital.  The
fair value of the unvested  options  issued was $7.8 million and was recorded as
unearned  compensation.  The unearned  compensation  is being amortized over the
remaining vesting period of the stock options. The fair value of the options was
estimated using the Black-Scholes option pricing model.

The  Schuler  merger was  accounted  for as a purchase.  Accordingly,  Schuler's
assets and  liabilities,  including  identifiable  intangibles,  were  initially
recorded at their fair  values as of the date of the  merger.  The excess of the
total consideration paid over the net assets' fair value  (approximately  $447.5
million) was recorded as an addition to goodwill.

                                      -25-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The Company's rapid growth and acquisition  strategy require significant amounts
of cash. It is anticipated that future home construction, lot and land purchases
and acquisitions will be funded through internally generated funds, existing and
future credit facilities and the issuance of new debt or equity  securities.  At
June 30, 2002,  under currently  effective shelf  registration  statements,  the
Company has  approximately 15 million shares issuable to effect,  in whole or in
part,  possible future acquisitions and the capacity to issue new debt or equity
securities  amounting to $1.0  billion.  In the future,  the Company  intends to
continue  to  maintain  effective  shelf   registration   statements  that  will
facilitate access to the capital markets.

During the three months ended June 30, 2002,  the  Company's  Board of Directors
declared a quarterly cash dividend of $0.06 per common share,  which was paid on
May 21, 2002 to  stockholders  of record on May 14, 2002. On March 4, 2002,  the
Company's Board of Directors declared a three-for-two stock split (effected as a
50% stock  dividend)  which was paid on April 9, 2002, to stockholders of record
on March 26, 2002. Cash was paid in lieu of fractional shares. On July 24, 2002,
the  Company's  Board of Directors  declared a cash dividend of $0.06 per common
share, payable on August 23, 2002 to stockholders of record on August 9, 2002.

On April 11,  2002,  the Company  issued $250  million of 8.5% Senior  notes due
2012.  The net proceeds from this offering were used to repay  borrowings  under
the  unsecured  revolving  credit  facility.   These  notes  are  guaranteed  by
substantially  all of the  Company's  wholly-owned  subsidiaries  other than its
financial services subsidiaries.

In 1999 and 2000, the Company  entered into three separate  limited  partnership
agreements  with the  purpose of  investing  in  start-up  and  emerging  growth
companies  whose  technology and business plans have the potential of permitting
the  Company  to  leverage  its  size,   expertise  and  customer  base  in  the
homebuilding  industry.  The Company originally  authorized  investment of up to
$125 million in such  companies  over a four-year  period.  In January 2001, the
original  $125 million  authorization  was reduced to the $31.3 million that had
been  invested  in  such  companies  as  of  that  date.  The   investments  are
concentrated in e-commerce  businesses that serve the homebuilding,  real estate
and financial service industries, as well as in businesses whose strategic focus
allows for the diversification of the Company's operations. As of June 30, 2002,
the carrying value of the Company's  investments in such companies,  reported in
homebuilding other assets, amounted to $5.0 million.

Except  for  ordinary  expenditures  for  the  construction  of  homes  and  the
acquisition  of land and lots for  development  and sale of  homes,  at June 30,
2002, the Company had no material commitments for capital expenditures.

                                      -26-




                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


SAFE HARBOR STATEMENT

Certain  statements  contained in this report,  as well as in other materials we
have filed or will file with the Securities and Exchange Commission,  statements
made by us in  periodic  press  releases  and oral  statements  made by  Company
officials to analysts, stockholders and the press in the course of presentations
about the Company,  may be construed as "forward-looking  statements" as defined
in the  Private  Securities  Litigation  Reform  Act of 1995.  Any or all of the
forward-looking  statements  included in this report and in any other reports or
public  statements of the Company are subject to risks,  uncertainties and other
factors,  many of which are outside of the Company's  control,  that could cause
actual  results  to  differ   materially  from  the  results  discussed  in  and
anticipated  by  the  forward-looking   statements.   The  following  risks  and
uncertainties  relevant  to  our  business  include  factors  we  believe  could
adversely  affect us. Other  factors  beyond  those listed could also  adversely
affect us.

      -  Changes in general economic, real estate and other business conditions
      -  Changes in interest rates and the availability of mortgage financing
      -  Governmental regulations and environmental matters
      -  The Company's substantial leverage
      -  Competitive conditions within the homebuilding industry
      -  The availability of capital
      -  The Company's ability to effect its growth strategies successfully

 We undertake no obligation to publicly update any  forward-looking  statements,
 whether as a result of new  information,  future events or otherwise.  However,
 any further disclosures made on related subjects in subsequent reports on Forms
 10-K, 1 and 8-K should be consulted.  Additional  information about issues that
 could lead to material  changes in  performance  is contained in the  Company's
 annual  report on Form 10-K,  which is filed with the  Securities  and Exchange
 Commission.


                                      -27-





ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to interest rate risk on its long term debt.  The Company
monitors its exposure to changes in interest  rates and utilizes  both fixed and
variable rate debt.  For fixed rate debt,  changes in interest  rates  generally
affect the value of the debt instrument,  but not the Company's earnings or cash
flows.  Conversely,  for variable rate debt, changes in interest rates generally
do not  impact  the fair  value  of the  debt  instrument,  but may  affect  the
Company's future earnings and cash flows. The Company has mitigated its exposure
to changes in interest  rates on its  variable  rate bank debt by entering  into
interest rate swap  agreements to obtain a fixed  interest rate for a portion of
the variable rate borrowings.  The Company generally does not have an obligation
to prepay fixed-rate debt prior to maturity and, as a result, interest rate risk
and changes in fair value would not have a  significant  impact on the Company's
fixed-rate  debt  until  such time as the  Company  is  required  to  refinance,
repurchase or repay such debt.

The Company's  interest rate swaps were not designated as hedges under Statement
of  Financial  Accounting  Standards  No. 133 when it was  adopted on October 1,
2000.  Since their  maturities  and other terms did not match the related  debt,
they were  determined to be  ineffective  hedges (as defined by the  Statement).
Therefore,  the Company is exposed to market risk associated with changes in the
fair  values of the  swaps,  since any such  changes  must be  reflected  in the
Company's income statements.

The  Company's  financial  services  segment is exposed  to  interest  rate risk
associated  with its mortgage loan  production  activities.  Mortgage  loans are
funded at fixed interest  rates before they are committed to specific  investors
and interest rate lock  commitments  (IRLC's) are extended to borrowers who have
applied for loan funding and who meet certain  defined  credit and  underwriting
criteria.  Forward commitments to sell mortgage-backed securities are designated
as fair value  hedges of the risk of changes in the overall fair value of funded
loans. The  effectiveness of the fair value hedge is continuously  monitored and
any  ineffectiveness,  which for the three and nine months  ended June 30, 2002,
was  not  significant,  is  recognized  in  current  earnings.  The  IRLC's  are
classified and accounted for as non-designated derivative instruments with gains
and losses  recorded in current  earnings.  Interest rate risk  associated  with
IRLCs  is  managed  through  the  use  of   best-efforts   whole  loan  delivery
commitments,  forward  commitments  to sell  mortgage-backed  securities and the
purchase of options on financial  instruments.  These instruments are considered
non-designated derivatives and are accounted for at fair market value with gains
and losses  recorded  in  current  earnings.  At June 30,  2002,  total  forward
commitments  to mitigate  interest  rate risk related to funded loans and IRLC's
were  approximately  $195.5  million,  the  duration of which was less than nine
months.

The following  table shows,  as of June 30, 2002,  the Company's  long term debt
obligations,  principal  cash  flows by  scheduled  maturity,  weighted  average
interest rates and estimated fair market value. In addition, the table shows the
notional  amounts,  weighted  average  interest  rates and estimated fair market
value of the Company's interest rate swaps.



                            Three Months                                                                                    Fair
                              Ended                                                                                        market
                             Sep. 30,                        Year ended September 30,                                     value at
                            ---------      -------------------------------------------------------------

                              2002          2003          2004         2005         2006      Thereafter        Total     06/30/02
                             ------        ------        ------      -------      -------     ----------      --------    ---------
                                                                ($'s in millions)
                                                                                                  
Debt:
  Fixed rate.............    $ 19.2        $ 20.0        $166.9       $210.7       $150.0       $2,047.1      $2,613.9     $2,543.9
  Average interest rate..     7.96%         6.62%         8.52%       10.69%       10.19%          8.15%         8.50%           --
  Variable rate..........    $210.8        $ 19.6        $  8.7           --       $261.1             --        $500.2       $500.2
  Average interest rate..     2.92%         5.75%         3.83%           --        3.73%             --         3.47%           --
Interest Rate Swaps:
  Variable to fixed......    $200.0        $200.0        $200.0       $200.0       $200.0         $200.0            --      ($11.2)
  Average pay rate.......     5.10%         5.10%         5.10%        5.10%        5.10%          5.07%            --           --
  Average receive rate...    90-day LIBOR



                                      -28-





PART II.    OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.


         (a)    Exhibits.
                3.1        Amended and Restated Certificate of Incorporation, as
                           amended, of the Company is incorporated herein by
                           reference from Exhibit 4.2 to the Company's
                           registration statement (No. 333-76175) on Form S-3,
                           filed April 13, 1999.

                3.2        Amended and Restated Bylaws of the Company are
                           incorporated herein by reference from Exhibit 3.1 to
                           the Company's Quarterly Report on Form 10-Q for the
                           quarter ended December 31, 1998.

               10.1*       D.R. Horton Deferred Compensation Plan, effective as
                           of June 15, 2002.

               10.2*       D.R. Horton, Inc. 1991 Stock Incentive Plan, as
                           amended and restated.

               10.3*       Amendment No. 1 to the D.R. Horton, Inc. 1991 Stock
                           Incentive Plan, as amended and restated.



------------
*Filed herewith.



         (b)      Reports on Form 8-K.
                  1.       On April 3, 2002, the Company filed a Current Report
                           on Form 8-K (Item 5), which included its press
                           release of that date announcing the Company planned
                           to sell approximately $250 million of senior notes to
                           qualified institutional buyers in reliance upon
                           Rule 144A.

                  2.       On May 30, 2002, the Company filed a Current Report
                           on Form 8-K (Item 5), which provided unaudited pro
                           forma combined condensed statements of income of D.R.
                           Horton, Inc. and Schuler Homes, Inc. for the six
                           months ended March 31, 2002 and the year ended
                           September 30, 2002.




                                      -29-





                                   SIGNATURES


 Pursuant  to the  requirements  of the  Securities  Exchange  Act of 1934,  the
 registrant  has duly  caused  this  report to be  signed  on its  behalf by the
 undersigned thereunto duly authorized.

                                    D.R. HORTON, INC.



Date: August 13, 2002               By  /s/ Samuel R. Fuller
                                      ------------------------------------------

                                    Samuel R. Fuller, on behalf of D.R. Horton,
                                    Inc. and as Executive Vice President,
                                    Treasurer and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



                                      -30-




                               INDEX TO EXHIBITS





               EXHIBIT
               NUMBER      DESCRIPTION
              --------     -----------

                3.1        Amended and Restated Certificate of Incorporation, as
                           amended, of the Company is incorporated herein by
                           reference from Exhibit 4.2 to the Company's
                           registration statement (No. 333-76175) on Form S-3,
                           filed April 13, 1999.

                3.2        Amended and Restated Bylaws of the Company are
                           incorporated herein by reference from Exhibit 3.1 to
                           the Company's Quarterly Report on Form 10-Q for the
                           quarter ended December 31, 1998.

               10.1*       D.R. Horton Deferred Compensation Plan, effective as
                           of June 15, 2002.

               10.2*       D.R. Horton, Inc. 1991 Stock Incentive Plan, as
                           amended and restated.

               10.3*       Amendment No. 1 to the D.R. Horton, Inc. 1991 Stock
                           Incentive Plan, as amended and restated.



------------
*Filed herewith.