D.R. Horton, one of the largest home builders in the U.S., on Thursday reported its first quarterly loss in a decade on plunging sales and a land write-off.
The company’s net loss for fiscal third quarter ended June 30 was $823.8 million, or $2.62 a share, compared with a profit of $292.8 million, or 93 cents a share, for the same fiscal quarter a year ago.
The company said quarterly results included pretax charges to cost of sales of $835.8 million for inventory impairments and $16.2 million for write-offs of deposits and preacquisition costs related to land option contracts.
Quarterly earnings also included a pretax goodwill impairment charge of $425.6 million.
Home-building revenue for the third quarter of fiscal 2007 totaled $2.5 billion, compared with $3.6 billion in the same quarter of fiscal 2006, and homes closed in the current quarter totaled 9,643, compared with 13,377 homes closed in the year-ago quarter.
For the nine months ended June 30, 2007, the company reported a net loss totaling $662.3 million, or $2.11 per share. The nine-month results included pretax charges to cost of sales of $943.9 million for inventory impairments and $66.9 million for write-offs of deposits and preacquisition costs related to land option contracts.
Additionally, the results included a pretax goodwill impairment charge of $425.6 million. Net income for the nine months ended June 30, 2006, was $955.6 million, or $3.02 per diluted share.
Home-building revenue for the nine months ended June 30, 2007, totaled $8 billion, compared with $10 billion for the same period of fiscal 2006. Homes closed in the nine-month period totaled 29,637, compared with 35,838 homes closed in the same period of fiscal 2006.
Donald R. Horton, the company’s chairman of the board, noted that challenging market conditions with historically high inventory levels continue to impact the company.
“Increased use of sales incentives continues to put pressure on profit margins. In addition, home-price appreciation over the past few years, higher interest rates and tightened credit standards in the mortgage industry are all negatively impacting affordability,” Horton said in a statement.
“Even in the midst of this volatile housing market, we produced an operating profit before impairments this quarter and generated positive cash flow from operations for the fourth consecutive quarter,” he said.
The home builder believes market conditions will continue to challenge its margins. “For the remainder of fiscal 2007, we will focus on generating cash, reducing inventory balances and paying down outstanding debt to maintain a strong balance sheet,” Horton said.
D.R. Horton’s sales backlog of homes under contract at June 30, 2007, was 15,801 homes ($4.4 billion), compared with 24,956 homes ($7.4 billion) at June 30, 2006. As previously reported, net sales orders for the third quarter ended June 30, 2007, totaled 8,559 homes ($2 billion), compared with 14,316 homes ($3.8 billion) for the same quarter of fiscal 2006. Net sales orders for the first nine months of fiscal 2007 were 27,313 homes ($6.9 billion), compared with 41,550 homes ($11.4 billion) for the same period of fiscal 2006.