Fiscal 2016 Third Quarter Highlights – comparisons to the same period in the prior year:
* Net income increased 13% to $249.8 million, or $0.66 per diluted share
* Pre-tax income increased 13% to $378.6 million
* Pre-tax profit margin improved 40 basis points to 11.7%
* Net sales orders increased 14% in value to $3.4 billion and 13% in homes to 11,714
* Homes closed increased 9% in value to $3.1 billion and 9% in homes to 10,739
* Sales order backlog increased 17% in value to $4.4 billion and 15% in homes to 14,670
* Net cash provided by operations for the first nine months of fiscal 2016 was $88.6 million
[Fort Worth, Texas] – D.R. Horton Inc., America’s Builder, reported Thursday that net income for its third fiscal quarter ended June 30, 2016 increased 13 percent to $249.8 million, or $0.66 per diluted share, from $221.4 million, or $0.60 per diluted share, in the same quarter of fiscal 2015. For the nine months ended June 30, 2016, net income increased 18% to $602.6 million, or $1.61 per diluted share, from $511.8 million, or $1.39 per diluted share, in the same period of fiscal 2015.
Net sales orders for the third quarter ended June 30, 2016 increased 13% to 11,714 homes and 14% in value to $3.4 billion, compared to 10,398 homes and $3.0 billion in the prior year quarter. The Company’s cancellation rate (cancelled sales orders divided by gross sales orders) for the third quarter of fiscal 2016 was 21%. Net sales orders for the first nine months of fiscal 2016 increased 11% to 32,070 homes and 13% in value to $9.4 billion, compared to 28,903 homes and $8.3 billion in the first nine months of fiscal 2015.
The Company’s sales order backlog of homes under contract at June 30, 2016 increased 15% to 14,670 homes and 17% in value to $4.4 billion, compared to 12,761 homes and $3.7 billion at June 30, 2015.
Homebuilding revenue for the third quarter of fiscal 2016 increased 9% to $3.1 billion from $2.9 billion in the same quarter of fiscal 2015. Homes closed in the quarter increased 9% to 10,739 homes, compared to 9,856 homes in the prior year quarter. Homebuilding revenue for the nine months ended June 30, 2016 increased 10% to $8.2 billion from $7.5 billion in the first nine months of fiscal 2015. Homes closed in the nine-month period increased 8% to 28,062, compared to 26,072 homes in the same period of fiscal 2015.
Pre-tax profit margin for the third quarter of fiscal 2016 improved 40 basis points to 11.7% from 11.3% in the same quarter of fiscal 2015. The improvement in pre-tax profit margin was driven by a 40 basis point increase in the Company’s home sales gross margin and a 10 basis point decline in homebuilding SG&A expense as a percentage of revenues.
Home sales gross margin in the third quarter of fiscal 2016 was 20.3%, compared to 19.9% in the prior year quarter. The improvement in gross margin was primarily due to the Company controlling cost increases while also reducing incentives or raising prices when possible. In the current housing market, the Company continues to expect its average home sales gross margin to be around 20%, with quarterly fluctuations that may range from 19% to 21% due to product and geographic mix and the relative impact of warranty and interest costs. Homebuilding SG&A expense as a percentage of revenues in the third quarter of fiscal 2016 was 8.9%, compared to 9.0% in the prior year quarter.
Net cash provided by operations for the first nine months of fiscal 2016 was $88.6 million. During the third quarter, the Company repaid at maturity $372.7 million principal amount of its 6.5% senior notes. The Company ended the quarter with $862.9 million of homebuilding unrestricted cash and homebuilding debt to total capital of 30.0%. Homebuilding debt to total capital consists of homebuilding notes payable divided by total equity plus homebuilding notes payable.
Donald R. Horton, Chairman of the Board, said, “The D.R. Horton team delivered a strong third quarter, highlighted by $378.6 million of pre-tax income on $3.2 billion of revenues. Our pre-tax profit margin improved 40 basis points from the prior year quarter to 11.7%. Our net sales orders in the third quarter increased 13% due to continued improvement in our absorptions, while our consolidated revenues increased 10%, and the value of our sales order backlog increased 17%. We also generated positive cash flow from operations during the quarter.
“Solid performance in our three core brands is enabling us to capitalize on market opportunities and continue to expand our industry-leading market share. We remain focused on growing our revenues and pre-tax profits at a double-digit annual pace, while generating positive operating cash flows and improved returns. With a sales backlog of 14,670 homes at the end of June and a robust lot supply and inventory of homes available for sale, we are well-positioned for the fourth quarter and fiscal 2017.”
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