10-QPeriod: Q2 FY2012

HORTON D R INC /DE/ Quarterly Report for Q2 Ended Mar 31, 2012

Filed April 23, 2012For Securities:DHI

Summary

D.R. Horton, Inc. (DHI) reported a significant turnaround in its financial performance for the quarter ended March 31, 2012, compared to the prior year. The company posted a net income of $40.6 million, a substantial improvement from a net income of $27.8 million in the same period of 2011, and a substantial increase from a net income of $7.4 million for the six months ended March 31, 2011. This positive trend is driven by a strong rebound in homebuilding revenues, which increased by 28% year-over-year, reaching $930.6 million. The average selling price of homes closed also saw a healthy increase of 5% to $219,500 for the quarter. The company's strategic focus on managing inventory, controlling costs, and improving gross margins appears to be yielding results. Home sales gross margins improved to 17.6% for the quarter. Furthermore, inventory impairments and land option cost write-offs significantly decreased, indicating a healthier inventory valuation. The financial services segment also contributed positively with a 42% increase in revenues and a substantial rise in pre-tax income. Overall, DHI demonstrated resilience and recovery in a challenging housing market, with key metrics like net sales orders and sales order backlog showing robust year-over-year growth.

Financial Highlights

35 data points
Beta

Revenue

$961.20M

Net Income

$40.60M

4.2% Net Margin

EPS (Diluted)

$0.13

Total Assets

$5.48B

Cash & Equivalents

$679.80M

Free Cash Flow

-$80.80M

Financial Statements
Beta
Revenue$961.20M
Interest Expense$6.30M
Net Income$40.60M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)317.60M
Shares Outstanding (Diluted)320.10M

Key Highlights

  • 1Homebuilding revenues increased 28% to $930.6 million for the quarter ended March 31, 2012.
  • 2Homes closed increased 21% to 4,240, with the average closing price up 5% to $219,500.
  • 3Net sales orders increased 19% to 5,899 homes, indicating stronger demand.
  • 4Home sales gross margins improved significantly to 17.6% from 16.2% in the prior year quarter.
  • 5Inventory impairments and land option cost write-offs decreased dramatically to $0.8 million from $14.3 million year-over-year.
  • 6Financial services revenues increased 42% to $25.6 million, with pre-tax income rising substantially.
  • 7Consolidated net income rose to $40.6 million from $27.8 million in the prior year quarter.

Frequently Asked Questions

D.R. Horton demonstrated a strong recovery and improvement in financial performance. The company reported significant increases in homebuilding revenues and a substantial rise in net income, driven by higher sales volumes, improved gross margins, and reduced inventory impairments. The financial services segment also contributed positively to the overall results.

The company noted a modest improvement in new home demand, with net sales orders and sales order backlog increasing year-over-year. While acknowledging that overall demand remains at a low level, D.R. Horton believes it is well-positioned for an eventual housing recovery due to its strong balance sheet and liquidity, allowing it to strategically invest in opportunities.

The improvement in home sales gross margins, which increased to 17.6% for the quarter, is attributed to several factors. These include the average selling price of homes increasing more than the average cost, a decrease in the amortization of capitalized interest and property taxes as a percentage of revenue, and a reduction in estimated costs for warranty and construction defect claims.

Based on the current sales order backlog and sales pace, D.R. Horton expects to close more homes in the second half of fiscal 2012 than in the first half, and anticipates continued pre-tax income generation. The company's strategy focuses on maintaining liquidity, managing inventory, controlling costs, and selectively investing in growth opportunities to capitalize on eventual market recovery.