D.R. Horton's Net Sinks,
Hit by Housing Slowdown

The country's largest home builder, D.R. Horton Inc., posted a 65% earnings decline and took land-related write-downs of $77.7 million in its fiscal first quarter as the company continued to battle a deteriorating housing market.

The Fort Worth, Texas, builder reported net income of $109.7 million, or 35 cents a share, down from $310.1 million, or 98 cents a share, year earlier. The results were slightly better than Thomson Financial's estimate of 33 cents a share. The results included land write-downs of $40.9 million, or eight cents a share, and land option write-downs of $36.8 million, or seven cents a share.

"Our people worked hard to achieve these results during a time when conditions in the homebuilding industry remain challenging," Chairman Donald Horton said in a statement. He offered no indication that he had seen signs the industry had bottomed.

The housing sector has been struggling with an inventory glut, a surge in cancellations from jittery buyers, and a pullback in demand, forcing most builders to slash prices and offer other incentives in order to move sales.

As reported, D.R. Horton's orders fell 23% in the quarter. The Northeast, South Central, Southeast and West took the biggest hits, where sales fell 32%, 30%, 24% and 23%, respectively.

The company's cancellation rate was 33% in the latest quarter, which was slightly better than the 40% cancellation rate reported in the fiscal fourth quarter. However, the company dismisses suggestions the small improvement is any sign that the industry is rebounding.

D.R. Horton continued to take steps to battle the weak conditions. It slashed the number of lots it owns or controls, and it reduced the number of homes under new construction. The company now owns or controls 297,000 lots, down 25% from the company's March 2006 peak of 396,000, and it currently has 26,000 homes under construction, down from its June 2006 peak of 40,000 homes.

The company is expected to update its guidance for fiscal 2007 and its expectations about future write-downs during a conference call later Tuesday morning.

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