Homebuilder D.R. Horton, Inc. (DHI) said Tuesday morning that net loss for the third quarter narrowed from last year on lower costs and SG&A expenses as well as a decline in inventory related impairment charges and write-downs. The company also witnessed a steep decline in its quarterly revenues, with home sales and orders falling year-over-year.
The housing slump has hurt the economy deeply. Homebuilders are finding it hard to sell homes, while buyers are waiting for prices to fall further. The Mortgage Bankers Association's weekly applications survey revealed on July 30 that mortgage application volume continued to fall during the week of July 25. Applications declined 13.7% from one week earlier and 30.3% from last year.
D.R. Horton is not the sole crusader among homebuilders as housing prices continue to reel under pressure and home valuations erode, hurt by a marked slowdown in broader economic activities in the U.S.
Others in the sector are also the victims of declining home sales and falling demand, being the byproducts of economic slowdown. Like Horton, its peer Lennar Corp. (LEN, LEN.B) on June 26 reported narrower loss in its second quarter, helped by lower expenses. However, the company's revenues dropped 61% amid the ongoing downward trend in the housing market. The Miami, Florida-based company also expects further deterioration in overall market conditions for the remainder of 2008.
Hurt by the housing turmoil, another peer KB Home (KBH) on June 27 reported a wider loss for the second quarter on charges as well as a 55% decline in total revenues. The company noted that market conditions remain difficult for the homebuilding industry, with inventories of unsold homes expanding as foreclosures rise to record highs.
Third Quarter Results
The Fort Worth, Texas-based company said net loss for the third quarter narrowed to $399.3 million or $1.26 per share from $823.8 million or $2.62 per share in the prior-year quarter.
On average, 13 analysts polled by First Call/Thomson Financial expected a loss of $0.70 per share in the quarter.
Results for the latest quarter include pre-tax charges of $330.4 million in cost of sales for inventory impairments and write-offs of deposits as well as pre-acquisition costs related to land option contracts that the company does not intend to pursue and $168.7 million in after-tax valuation allowance primarily for deferred tax assets created during the quarter.
D.R. Horton also reported a decline in quarterly homebuilding revenues to $1.43 billion from $2.55 billion in the same quarter last year, and marginally missed six Wall Street analysts' consensus estimate of $1.44 billion for the third quarter.
The company's home sales revenues fell to $1.42 billion from $2.47 billion in the prior-year quarter, while revenues from Land/lot sales were $18.3 million, lower than $77.6 million in the prior-year quarter.
Other Metrics
As of June 30, 2008, the company's sales order backlog was 8,281 homes or $1.90 billion, sharply lower than 15,801 homes or $4.35 billion, as of June 30, 2007. Net sales orders plunged to 5,501 homes or $1.24 billion from 8,559 homes or $2.03 billion in the same quarter of fiscal 2007.
During the latest third quarter, the company's cancellation rate was 39%. Homes closed during the quarter were 6,167 - valued at $1.47 billion, compared to 9,643 in the year-ago quarter, valued at $2.47 billion.
Operating loss from homebuilding for the latest quarter narrowed to $388.5 million from $1.13 billion in the prior-year quarter, while gross loss was $183.0 million, narrower than $428.3 million in the year-ago quarter. Selling, general and administrative expenses declined to $194.7 million from $267.5 million in the comparable quarter a year ago.
D.R. Horton declared a quarterly cash dividend of $0.075 per share, payable on august 28, to stockholders of record on August 18, 2008.
Commenting on the results, chairman of the board Donald Horton said, "Although market conditions in the homebuilding industry remain challenging, we continue to focus on reducing inventory and generating cash flow from operations."
"We also maintained our focus on controlling our costs, reducing our homebuilding SG&A expenses by approximately $73 million in our quarter ended June 30, 2008, compared to the year ago quarter," Horton added.
Nine-Month Highlights
D.R. Horton said net loss for the period widened to $1.83 billion or $5.81 per share from $662.3 million or $2.11 per share in the prior-year period.
The fiscal 2008 nine-month period includes pre-tax charges to cost of sales of $1.4 billion of inventory impairments and write-offs of deposits and pre-acquisition costs related to land option contracts that the company does not intend to pursue and an after-tax valuation allowance of $883.0 million to the deferred tax asset.
The company's nine-month total homebuilding revenues reached $4.76 billion, sharply lower than $7.97 billion in the same period last year.
Stock Quote
In Tuesday's regular trading session, DHI is trading at $10.82, down $0.40 or 3.57% on a volume of 1.84 million shares. In the past 52-week period, the stock has been trading in a range of $8.93 to $19.10.
For comments and feedback: editorial@rttnews.com