Losses Slow, Seasonal Sales Pick up at DR Horton

Home builder D.R. Horton (DHI) late Monday reported a quarterly net loss  of $108.6m, or 34 cents per share, as lack of demand continues to pressure the residential construction industry. The company saw signs of several small recoveries, however, as year-over-year losses narrowed and net sales increased over the previous quarter. The quarterly loss, driven by costly inventory impairments and land option contracts the builder said it no longer intends to pursue, illustrates a slowing of losses since the year-ago period, when D.R. Horton lost $1.3bn, or $4.14 per share. The builder closed 3,585 unit sales in the quarter for $775.3m in revenue, compared with the 6,719 units sold in the year-ago quarter at $1.6bn in revenue. Not only were the company’s business and losses larger last year, but so was its backlog of homes under contract. In the quarter ended March 31, 2008, D.R. Horton had 8,947 homes — at $2.1bn — on its sales order backlog. In the same quarter this year, the builder had 4,581 homes — or $963m — in backlogged orders. The company’s cancellation rate came in at 30% for the quarter. The company reported 4,160 net home sales in the quarter alone and a total of 6,937 net home sales for the running six-month period. The figures indicate the previous quarter saw only 2,777 net home sales, for a quarter-over-quarter increase of 49.8% in net sales. “We saw a seasonal increase in sales activity in the March quarter, with our net sales increasing 50% from our December quarter,” chairman Donald Horton says in the earnings statement. “However, market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of both new and existing homes, increasing unemployment, tight credit for homebuyers and eroding consumer confidence.” The company announced it had terminated its homebuilding revolving credit facility and refused to borrow its potential $275m, which D.R. Horton said it would not need, as it has a “substantial cash balance.” Terminating the facility also allows the company to save more than $3m annually in fees. Read the earnings statement. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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