D.R. Horton this morning (April 19) reported sharply lower earnings for its fiscal second quarter ended March 31, 2007 as revenue from home building fell 25.7%.

Net income for the second fiscal quarter fell 85.3% to $51.7 million ($0.16 per diluted share), which included pre-tax charges to cost of sales of $67.3 million ($0.13 per diluted share) for inventory impairments and $13.9 million ($0.03 per diluted share) for write-offs of deposits and pre-acquisition costs related to land option contracts that the Company does not intend to pursue. Net income for the same quarter in 2006 was $352.8 million ($1.11 per diluted share).

Revenue from home building was down 25.7% to $2.6 billion as homes closed fell to 9,792 from 12,570 in the second fiscal quarter of 2006.

For the six months ended March 31, 2007, net income fell 75.6% from the same period last year to $161.4 million ($0.51 per diluted share), which included pre-tax charges to cost of sales of $108.2 million ($0.21 per diluted share) for inventory impairments and $50.6 million ($0.10 per diluted share) for write-offs of deposits and pre-acquisition costs related to land option contracts. Net income for the six months ended March 31, 2006 was $662.9 million ($2.09 per diluted share). Home building revenue for the six months ended March 31, 2007 totaled $5.4 billion compared to $6.4 billion for the same period of fiscal 2006. Homes closed in the six-month period totaled 19,994, compared to 22,461 homes closed in the same period of fiscal 2006.

The Company's sales backlog of homes under contract at March 31, 2007 was 16,885 homes ($4.8 billion), compared to 24,017 homes ($7.1 billion) at March 31, 2006. As previously reported, net sales orders for the second quarter ended March 31, 2007 totaled 9,983 homes ($2.6 billion), compared to 15,771 homes ($4.4 billion) for the same quarter of fiscal 2006. Net sales orders for the first six months of fiscal 2007 were 18,754 homes ($4.9 billion), compared to 27,234 homes ($7.5 billion) for the same period of fiscal 2006.

Donald R. Horton, D.R. Horton's chairman, said, "Market conditions in the home building industry continue to be challenging in most of our markets as inventory levels of both new and existing homes remain high, and further increases in the use of sales incentives continue to put pressure on profit margins. Our focus on managing our balance sheet in a disciplined manner resulted in positive cash flows from operations for the third consecutive quarter. We also improved our ratio of home building debt to total capitalization, net of cash, to 40.9% from 43.9% a year ago."