D.R. Horton, Inc. (NYSE:DHI) early Tuesday reported select preliminary results for the quarter and six months ended March 31, 2020, in addition to select preliminary results for the month of March 2020.
The company’s homes closed in the second quarter of fiscal 2020 increased 8% to 14,539 homes compared to 13,480 homes in the same quarter of fiscal 2019. Home sales revenue for the quarter increased 10% to $4.4 billion from $4.0 billion in the same quarter of fiscal 2019. Homes closed in March 2020 increased 6% to 6,677 homes compared to 6,272 homes in March 2019. Homes closed in the first six months of fiscal 2020 increased 10% to 27,498 homes compared to 24,980 homes closed in the same period of fiscal 2019.
Gross sales orders for the second quarter ended March 31, 2020 were 24,657 homes compared to 20,701 homes in the prior year quarter. Cancellations in the second quarter were 4,570 homes compared to 3,896 homes in the prior year quarter, resulting in a cancellation rate of 19% in both periods. Net sales orders for the second quarter increased 20% to 20,087 homes from 16,805 homes in the prior year quarter, and the value of net sales orders increased 22% to $6.0 billion from $4.9 billion.
Gross sales orders for the month of March 2020 increased 14% to 8,511 homes compared to 7,495 homes in March 2019. Cancellations in March 2020 were 2,020 homes compared to 1,368 homes in the prior year month, resulting in a cancellation rate of 24% compared to 18% in the prior year month. Net sales orders in March 2020 increased 6% to 6,491 homes from 6,127 homes in March 2019, and the value of net sales orders increased 5% to $1.9 billion from $1.8 billion.
Gross sales orders for the first six months of fiscal 2020 were 40,990 homes compared to 35,229 homes in the same period of fiscal 2019. Cancellations during the first six months of the year were 7,777 homes compared to 7,382 homes in the same period last year, resulting in a cancellation rate of 19% compared to 21% in the prior year period. Net sales orders for the six-month period increased 19% to 33,213 homes from 27,847 homes in the same period of fiscal 2019, and the value of net sales orders increased 22% to $10.0 billion from $8.2 billion.
The company’s sales order backlog of homes under contract at March 31, 2020 increased 14% to 19,328 homes and 18% in value to $5.9 billion compared to 16,890 homes and $5.0 billion at March 31, 2019.
At March 31, 2020, the company had 33,400 homes in inventory, of which 16,700 were unsold. 4,700 of the company’s unsold homes at March 31, 2020 were completed.
The company ended the second quarter with $1.0 billion of unrestricted home building cash and $1.0 billion of available capacity on its $1.6 billion revolving credit facility for total home building liquidity of $2.0 billion. Home building debt at March 31, 2020 totaled $2.5 billion, with $400 million of senior note maturities in the next twelve months.
COVID-19
Regarding the coronavirus outbreak, DHI issued the following statement: “The company’s results of operations can be affected by changes in economic conditions that negatively impact the housing and financial services markets. Economic fundamentals remained solid in the housing market throughout most of the second quarter of fiscal 2020, as interest rates on mortgage loans remained low, demand was strong and there was a limited supply of homes at affordable prices across most of the company’s markets. During the latter part of March and into April, the impacts of the COVID-19 pandemic (COVID-19) and the related widespread reductions in economic activity began to adversely affect the Company’s business operations and the demand for its homes. The company has experienced increases in sales cancellations and decreases in sales orders in late March and early April, compared to the weeks leading up to the pandemic.
“There is uncertainty regarding the extent and timing of disruption that COVID-19 and related government directives, actions and economic relief efforts will have on the U.S. economy, capital markets, secondary mortgage markets, consumer confidence, demand for the company’s homes and availability of mortgage loans to home buyers. The extent to which this impacts the company’s operational and financial performance will depend on future developments, including the duration and spread of COVID-19 and the impact on D.R. Horton’s customers, trade partners and employees, all of which are highly uncertain and cannot be predicted.
“In almost all municipalities across the U.S. where social distancing and other restrictions have been issued, residential construction and financial services have been designated as essential businesses as part of critical infrastructure. D.R. Horton has continued its home building and financial services operations in those markets where allowed and has implemented operational protocols to comply with social distancing and other health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
“The company believes it is well positioned to operate in this uncertain environment, with experienced operating teams, low leverage and a strong liquidity position. The Company intends to maintain its flexible operational and financial position by generating strong cash flows from its home building operations, limiting land acquisition and land development spending and adjusting its product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on its inventory investments in each of its communities based on local housing market conditions.”
The company has withdrawn its previously issued fiscal 2020 guidance.
