D.R. Horton Inc. (DHI) depicted a loss of $12 million or 4 cents per share (excluding pre-tax charges to cost of sales for inventory impairments and land option cost write-offs) in the first quarter of fiscal 2011, meeting the Zacks Consensus Estimate. This compared with an income of $42.8 million or 12 cents per share (excluding a tax benefit of $149.2 million) in the first quarter of fiscal 2010.
The fall in income was attributable to decline in revenues reflecting rising foreclosures, high inventory, high unemployment, tight mortgage lending standards and weak consumer confidence during the quarter under review.
Homebuilding revenues in the quarter dipped 31% to $767 million, lower than the Zacks Consensus Estimate of $819 million. Homes closed fell 34% to 3,637 homes from 5,529 in the prior fiscal. Net sales orders for the quarter declined 17% to 3,363 homes (valued at $705.6 million) from 4,037 homes (valued at $850.1 million) in the prior-year quarter.
D.R. Horton’s cancellation rate (cancelled sales orders divided by gross sales orders) was 28% during the quarter. The sales order backlog of homes under contract as of December 31, 2010 decreased 7% to 3,854 homes (valued at $795.4 million) from 4,136 homes (valued at $884 million) in the comparable period a year ago.
In the quarter, the company repurchased a total of $62.5 million principal amount of its outstanding senior notes for a total purchase price of $63.8 million, excluding accrued interest.
D.R. Horton had cash and marketable securities of $1.50 billion as of December 31, 2010, a decline from $1.58 billion in the year-ago period. The company generated a cash flow of $49.5 million despite a loss as it managed to reduce the number of homes in inventory by 400 units.
D.R. Horton is the largest national builder, primarily engaged in the construction and sale of single-family houses in both entry-level and move-up markets. The company’s operations are spread over 77 metropolitan markets in 27 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the U.S. The company has a Zacks #4 Rank (Sell) on its stock as difficult market conditions are to continue in the near term.
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