D.R. Horton, Inc. (NYSE:DHI) on Thursday reported net income for its fiscal third quarter ended June 30 increased 13% to $249.8 million, or $0.66 per diluted share, from $221.4 million, or $0.60 per diluted share, in the same quarter of fiscal 2015. The results met analyst expectations.
For the nine months ended June 30, 2016, net income increased 18% to $602.6 million, or $1.61 per diluted share, from $511.8 million, or $1.39 per diluted share, in the same period of fiscal 2015.
Net sales orders for the third quarter ended June 30, 2016 increased 13% to 11,714 homes and 14% in value to $3.4 billion, compared to 10,398 homes and $3.0 billion in the prior year quarter. The company’s cancellation rate was 21%. Net sales orders for the first nine months of fiscal 2016 increased 11% to 32,070 homes and 13% in value to $9.4 billion, compared to 28,903 homes and $8.3 billion in the first nine months of fiscal 2015.
Horton's sales order backlog of homes under contract at June 30, 2016 increased 15% to 14,670 homes and 17% in value to $4.4 billion, compared to 12,761 homes and $3.7 billion at June 30, 2015.
Home building revenue for the quarter increased 9% to $3.1 billion from $2.9 billion in the same quarter of fiscal 2015. Homes closed in the quarter increased 9% to 10,739 homes, compared to 9,856 homes in the prior year quarter. Home building revenue for the nine months ended June 30, 2016 increased 10% to $8.2 billion from $7.5 billion in the first nine months of fiscal 2015. Homes closed in the nine-month period increased 8% to 28,062, compared to 26,072 homes in the same period of fiscal 2015.
Pre-tax profit margin for the third quarter of fiscal 2016 improved 40 basis points to 11.7% from 11.3% in the same quarter of fiscal 2015. The improvement in pre-tax profit margin was driven by a 40 basis point increase in the company's home sales gross margin and a 10 basis point decline in home building SG&A expense as a percentage of revenues.
Home sales gross margin in the third quarter of fiscal 2016 was 20.3%, compared to 19.9% in the prior year quarter. The improvement in gross margin was primarily due to controlling cost increases while also reducing incentives or raising prices when possible. In the current housing market, Horton said it expects its average home sales gross margin to be around 20%, with quarterly fluctuations that may range from 19% to 21% due to product and geographic mix and the relative impact of warranty and interest costs. Home building SG&A expense as a percentage of revenues in the third quarter of fiscal 2016 was 8.9%, compared to 9.0% in the prior year quarter.
Net cash provided by operations for the first nine months of fiscal 2016 was $88.6 million. During the third quarter, the company repaid at maturity $372.7 million principal amount of its 6.5% senior notes. The Company ended the quarter with $862.9 million of home building unrestricted cash and home building debt to total capital of 30.0%. Home building debt to total capital consists of home building notes payable divided by total equity plus home building notes payable.
Donald R. Horton, chairman, said, “The D.R. Horton team delivered a strong third quarter, highlighted by $378.6 million of pre-tax income on $3.2 billion of revenues. Our pre- tax profit margin improved 40 basis points from the prior year quarter to 11.7%. Our net sales orders in the third quarter increased 13% due to continued improvement in our absorptions, while our consolidated revenues increased 10%, and the value of our sales order backlog increased 17%. We also generated positive cash flow from operations during the quarter.
The Company has declared a quarterly cash dividend of $0.08 per common share. The dividend is payable on August 19, 2016 to stockholders of record on August 8, 2016.