10-QPeriod: Q1 FY2011

HORTON D R INC /DE/ Quarterly Report for Q1 Ended Dec 31, 2010

Filed January 28, 2011For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported a net loss of $20.4 million for the quarter ended December 31, 2010, a significant decline from the $192.0 million net income reported in the same period of the prior year. This downturn was primarily driven by a 31% decrease in homebuilding revenues to $767.0 million, reflecting a 34% drop in homes closed. The company cited continued challenging market conditions in the homebuilding industry, including weak economic conditions, high unemployment, and low consumer confidence, exacerbated by the expiration of the federal homebuyer tax credit. Despite the reported loss, DHI maintained a strong liquidity position with $1.2 billion in homebuilding cash and cash equivalents and $296.6 million in marketable securities. The company also reported a net homebuilding debt to total capital ratio of 17.0%, indicating a deleveraged balance sheet compared to the prior year. The company continues to implement a cautious operating strategy focused on maintaining liquidity, managing sales prices and incentives, and controlling costs, while acknowledging the uncertainty in the timing of a housing market recovery.

Financial Highlights

31 data points
Beta

Revenue

$788.20M

14.0% Gross Margin

Net Income

-$20.40M

-2.6% Net Margin

EPS (Diluted)

$-0.06

Total Assets

$5.73B

Cash & Equivalents

$1.22B

Free Cash Flow

$45.80M

Financial Statements
Beta
Revenue$788.20M
Gross Profit$110.20M
Net Income-$20.40M
EPS (Basic)$-0.06
EPS (Diluted)$-0.06
Shares Outstanding (Basic)319.10M
Shares Outstanding (Diluted)319.10M

Key Highlights

  • 1Net loss of $20.4 million for the quarter, compared to a net income of $192.0 million in the prior year period.
  • 2Homebuilding revenues decreased 31% to $767.0 million, with homes closed down 34% to 3,637.
  • 3Net sales orders declined 17% to 3,363 homes, attributed to the expiration of the federal homebuyer tax credit and continued weak demand.
  • 4Home sales gross margin decreased to 15.6% from 17.1% due to increased incentives and discounts.
  • 5Inventory impairments and land option cost write-offs increased to $8.4 million from $1.2 million.
  • 6The company maintained a strong liquidity position with $1.2 billion in cash and cash equivalents.
  • 7Net homebuilding debt to total capital ratio improved to 17.0% from 28.0% year-over-year, indicating reduced leverage.

Frequently Asked Questions

The decrease in net income was primarily due to a substantial drop in homebuilding revenues, driven by a 34% decrease in homes closed. This was a direct result of weaker overall economic conditions, high unemployment, low consumer confidence, and the expiration of the federal homebuyer tax credit, which significantly impacted demand for new homes.

D.R. Horton is actively managing its inventory and land assets. This includes evaluating assets for impairment, recording inventory impairment charges and land option cost write-offs totaling $8.4 million in the quarter. The company's strategy involves selectively starting construction, aggressively marketing unsold homes, and renegotiating lot option contracts to reduce costs and better match purchases with demand.

The company maintains a strong liquidity position with $1.2 billion in homebuilding cash and cash equivalents and $296.6 million in marketable securities as of December 31, 2010. Its net homebuilding debt to total capital ratio improved significantly to 17.0%, down from 28.0% in the prior year, indicating reduced financial leverage.

The company anticipates continued challenging market conditions for the homebuilding industry in the near term, expecting fiscal year 2011 to have lower home sales, closings, and profitability than fiscal year 2010. They are maintaining a cautious outlook and will adjust their operating strategy as needed based on market demand.