Builder D.R. Horton Swings to Loss
D.R. Horton, the largest U.S. home builder, Tuesday reported a quarterly loss after taking charges for the lower value of land and other housing-related inventory, a reflection of the sagging U.S. housing market.
For the fiscal fourth quarter that ended Sept. 30, D.R. Horton reported a loss of $50.1 million, or 16 cents per share, compared with a profit of $277.7 million, or 88 cents per share in the year-earlier quarter.
Included in the latest quarterly results were pretax charges to cost of sales of $278.3 million for inventory impairments, and $40.3 million of write-offs for deposits and pre-acquisition costs related to land option contracts that the company does not intend to pursue.
The results also included a pretax goodwill impairment charge of $48.5 million. Several analysts expected the charges to total about $1 billion.
Home-building revenue fell about 35 percent to $3.1 billion, as the number of home sales that closed fell to 11,733 from 17,261 in the year-earlier quarter.
Last month, Fort Worth, Texas-based D.R. Horton said quarterly net orders for new homes plunged 39 percent, their value fell 48 percent, and the average price for a home on order was down 15.4 percent.
The company also said prospective buyers canceled outstanding orders at a rate of 48 percent during the quarter, up from 40 percent a year ago.
"Market conditions continued to decline in our Septemberquarter as inventory levels of both new and existing homes remained high while pricing remained very competitive," said Chairman Donald Horton, in a statement.
The U.S. housing market has been in a steep decline for more than a year, following such a quick escalation in home prices that many buyers were priced out of the market. As the number of unsold homes swelled, the mortgage market also turned sour, with defaults rising.
On Monday, the National Association of Home Builders, reported that U.S. home builder sentiment in November remained at a record low 19. A reading below 50 means more builders view market conditions as poor.
To weather the downturn, home builders have been slashing the number of homes they start and cutting prices on unsold new homes, reducing land holdings and payroll while looking to generate cash to pay down debt.
D.R. Horton said it was able to reach its goal of generating $1 billion in cash flow from operations for fiscal 2007.
The company said its goal in fiscal 2008 is to again generate at least $1 billion in cash flow from operations.