D.R. Horton Inc. Reports Operating Results (10-Q)

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Aug 05, 2009
D.R. Horton Inc. (DHI, Financial) filed Quarterly Report for the period ended 2009-06-30.

D.R. Horton Inc. one of the largest homebuilders in the United States builds high quality single-family homes designed principally for the entry-level and move-up markets. Founded in 1978 the company builds and sells homes with a geographic presence in the Midwest Mid-Atlantic Southeast Southwest and Western regions of the United States. The company also provides mortgage financing and title services. D.R. Horton Inc. has a market cap of $3.99 billion; its shares were traded at around $12.6 with and P/S ratio of 0.6. The dividend yield of D.R. Horton Inc. stocks is 1.2%.

Highlight of Business Operations:

We are one of the largest homebuilding companies in the United States, constructing and selling single-family housing through our operating divisions in 27 states and 76 markets as of June 30, 2009, primarily under the name of D.R. Horton, Americas Builder. Our homebuilding operations primarily include the construction and sale of single-family homes with sales prices generally ranging from $90,000 to $900,000, with an average closing price of $214,700 during the nine months ended June 30, 2009. Approximately 81% and 77% of home sales revenues were generated from the sale of single-family detached homes in the nine months ended June 30, 2009 and 2008, respectively. The remainder of home sales revenues were generated from the sale of attached homes, such as town homes, duplexes, triplexes and condominiums (including some mid-rise buildings), which share common walls and roofs.

Due to the challenging market conditions discussed above, we have continued to evaluate our homebuilding and financial services assets for recoverability. Our significant assets, excluding cash, and those whose recoverability are most impacted by market conditions include inventory, earnest money deposits and pre-acquisition costs related to land and lot option contracts, tax assets, both on amounts reflected as deferred and as a receivable, and owned mortgage loans, which collectively comprise 95% of our total non-cash assets. Our evaluations reflected our expectation of continued challenges in the homebuilding industry, and our belief that these challenging conditions will persist for some time. Based on our evaluations, we recorded inventory impairment charges of $102.9 million, wrote-off earnest money deposits and pre-acquisition costs related to land and lot option contracts we no longer plan to pursue of $7.9 million and recorded additional reserves for losses of $4.4 million associated with limited recourse provisions on previously sold mortgage loans and $4.8 million related to mortgage reinsurance activities during the three months ended June 30, 2009. While these impairment charges and write-offs are generally less than amounts recognized in the prior year periods, they reflect the continued weakness in market conditions. We will evaluate whether further impairment charges, valuation adjustments or write-offs are necessary on these assets in the coming quarters. Additional discussion of these evaluations and charges is presented below.

Read the The complete ReportDHI is in the portfolios of Brian Rogers of T Rowe Price Equity Income Fund, Charles Brandes of Brandes Investment.