10-KPeriod: FY2008

HORTON D R INC /DE/ Annual Report, Year Ended Sep 30, 2008

Filed November 26, 2008For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) faced significant headwinds in fiscal year 2008, heavily impacted by the severe downturn in the U.S. homebuilding industry. Revenues declined substantially, driven by a decrease in homes closed and a lower average selling price. The company incurred substantial net losses, primarily due to significant inventory impairments and land option cost write-offs, reflecting the challenging market conditions characterized by high inventory levels, elevated cancellation rates, and tight mortgage markets. Despite these challenges, D.R. Horton maintained a strong focus on financial condition by reducing inventory, controlling costs, and generating positive operating cash flow. The company's financial services segment also experienced a revenue decrease, aligning with the reduced homebuilding activity. DHI's extensive geographic diversification across 27 states and 77 markets, along with its scale of operations, are key strengths that are expected to support its long-term recovery as market conditions eventually improve.

Financial Highlights

19 data points
Beta

Net Income

-$2.63B

EPS (Diluted)

$-8.34

Cash & Equivalents

$1.39B

Free Cash Flow

$1.87B

Financial Statements
Beta
Net Income-$2.63B
EPS (Basic)$-8.34
EPS (Diluted)$-8.34

Key Highlights

  • 1For fiscal year 2008, D.R. Horton reported a substantial net loss of $2.63 billion, a significant increase from the $712.5 million net loss in fiscal year 2007, largely due to severe industry-wide downturn.
  • 2Homebuilding revenues decreased by 41% to $6.52 billion in fiscal year 2008, with homes closed down 36% to 26,396 and the average selling price down 10% to $233,500.
  • 3The company recorded significant inventory impairment charges and land option cost write-offs totaling $2.48 billion in fiscal year 2008, compared to $1.33 billion in fiscal year 2007, reflecting the impact of declining market conditions on asset values.
  • 4Sales order cancellations remained high at 40% for fiscal year 2008, significantly above the historical average, indicating continued buyer hesitancy and market difficulties.
  • 5D.R. Horton maintained a strong liquidity position, with $1.39 billion in cash and cash equivalents at the end of fiscal year 2008.
  • 6The company's financial services segment saw revenues decrease by 39% to $127.5 million in fiscal year 2008, reflecting the overall slowdown in home sales.
  • 7Despite the challenging environment, the company generated positive net cash provided by operating activities of $1.88 billion in fiscal year 2008.

Frequently Asked Questions

In fiscal year 2008, D.R. Horton experienced a significant downturn, reporting a net loss of $2.63 billion. This was driven by a 41% decrease in homebuilding revenues to $6.52 billion, a 36% drop in homes closed, and substantial inventory impairments totaling $2.48 billion. The challenging housing market, characterized by high cancellations and tight credit, heavily impacted the company's results.

D.R. Horton implemented strategies to strengthen its balance sheet and liquidity by reducing its land and lot inventory. This included selling excess land and lots, restricting land purchases and development spending, and renegotiating or canceling land option contracts. Homes in inventory decreased from 19,900 at the end of fiscal 2007 to 12,400 at the end of fiscal 2008.

The company acknowledged the ongoing challenges in the homebuilding industry, stating that market conditions may continue to deteriorate and the timing of a recovery remains unclear. D.R. Horton's primary focus remained on strengthening its financial condition by managing inventory, controlling costs, generating positive cash flow, and reducing debt. The company believes long-term fundamentals like population growth and household formation remain solid, suggesting a potential for eventual recovery as market conditions moderate.

D.R. Horton's financial services segment, which includes mortgage financing and title agency services, also saw a decline. Revenues decreased by 39% to $127.5 million in fiscal year 2008, reflecting the reduced volume of home sales. The segment's pre-tax income also fell by 49% to $35.1 million.