D.R. Horton's troubles continued as the big builder reported a $128.8 million net loss for its fiscal 2008 first quarter ending Dec. 31, 2007.
The quarterly results included $245.5 million in pre-tax charges to cost of sales for inventory impairments and write-offs of deposits and pre-acquisition costs related to land options contracts that Horton does not intend to pursue.
Net income for the same quarter of fiscal 2007 was in the black at $109.7 million. Home building revenue for 2008's first quarter was $1.7 billion, compared to $2.8 billion in the same quarter of fiscal 2007. Homes closed totaled 6,549 homes, compared to 10,202 homes in the same quarter last year.
On the plus side, D.R. Horton reported $558 million in net cash in the quarter ending Dec. 31, 2007. The two main sources of cash from operating activities were a reduction in inventories of $476 million and a decrease in mortgage loans held for sale of $278 million.
D.R. Horton's sales order backlog of homes under contract on Dec. 31, 2007 was 8,138 homes worth $2.0 billion compared to 16,694 for $4.7 billion during the same period a year ago. Net sales orders for the quarter were 4,245 homes for $900 million compared to 8,771 homes for $2.3 billion for the same quarter a year ago.
One of the more striking numbers this quarter was Horton's 72 percent drop in net sales orders in California. The company's net sales orders in the state were 371 in fiscal 2008's first quarter compared to 1,336 in the same quarter a year ago.
D.R. Horton's president and CEO Don Tomnitz was very clear about what the analysts could expect.
"In California, I don't see a recovery in the next 12 months," Tomnitz said. "Every past downturn in California has been about three to five years in length, so I think we have at least another 12 to 18 months," he concluded.
The analysts were also concerned with D.R. Horton's high cancellation rates, which were at 44 percent for the first quarter of fiscal 2008.
While Tomnitz did not provide too many specifics on the high cancellation rates, he did say the company's highest cancellation rates were in high-profile building areas such as Arizona, California, Florida, and Nevada.