D.R. Horton Conference Call Highlights

D.R.Horton

reported its third quarter earnings on Monday. Shares of the company are up 2 percent. Below are some key highlights from its conference call: Financial Metrics: • Net income for the fourth quarter increased 19% to $166.3 million or $0.45 per diluted share compared to $139.5 million or $0.40 per diluted share in the year ago quarter. • Our consolidated pre-tax income increased 24% to $250.8 million in the fourth quarter, compared to $202.8 million in year ago quarter. • In homebuilding pre-tax income increased 25% to $236.6 million compared to $189.4 million. • Our four quarter home sales revenues increased 33% to $2.4 billion on 8,612 homes closed, up from $1.8 billion on 6,866 homes closed in the year ago quarter. • Our average closing price for the quarter was $279,100 up 6% compared to the prior year primarily driven by a 4% increase in average home size and a small increase in our average sales price per square foot. Guidance and Performance: • The value of our net sales orders in the fourth quarter increased 41% from the year ago quarter to $2 billion and home sold increased 38% to 7,135 homes on a 10% increase in average active selling communities. • Our average sales price on net sales orders in the fourth quarter increased 2% to $281,700. • The cancellation rate for the quarter was 28% down from 31% in the year ago quarter. • The value of our backlog increased 29% from a year ago to $2.9 billion with an average sales price per home of $289,100 and homes in backlog increased 21% to $9,888 homes. • Our backlog conversion rate for the fourth quarter was 76%. • We expect backlog conversion rate for the first quarter of fiscal 2015 to be around 75% which is higher than our long-term first quarter average. • We also expect our home closings for the full year of fiscal 2015 to increase • 20% to 30% compared to fiscal 2014 based on the current relatively stable housing market conditions. • This quarter Express accounted for 10% of our homes sold, 6% of homes closed, and 4% of home sales revenue. • The average closing price at an Express Home in the fourth quarter was $169,000. • For the year, Express accounted for 7% of our homes sold, 5% of homes closed, and 3% of home sales revenue. • Customer response to our affordable express product offerings has been extremely positive, and we expect to have Express Homes communities open in the majority of our markets by the end of fiscal 2015. • Emerald Homes, our branch - brands for hirings, move up and luxury communities is now available on 34 markets across 14 states. • In the fourth quarter 7% of our homes closed were priced higher than $500,000 accounting for 17% of our home sales revenue up from 5% of homes closed and 13% in revenues in the same quarter last year. • For the year 6% of our homes closed were priced higher than $500,000, accounting for 16% of our home sales revenue up from 4% in homes closed and 10% of revenues in fiscal 2013. • In the current stable housing environment, we generally expect our average home sales gross margin to be around 20%, with quarterly fluctuations that can range from 19% to 21% due to product and geographic mix and the relative impact of warranty litigation and interest costs. Closing Remarks: • In closing, our fourth quarter and 2014 growth in sales, closings, and profits in a relatively stable market is a result of the strength of our operating platform and we are excited about our opportunities ahead. • This quarter, the value of our sales and closings increased by 41% and 33% respectively and we've generated another solid quarter of profitability with consolidated pre-tax income of $250.8 million on $2.5 billion of revenue. • For the year, the value of our sales, closings, and backlog increased by 27%, 30%, and 29% respectively. • And consolidated pre-tax income increased 24% to $814.2 million on $8 billion of revenues. • We also made considerable progress this year toward our long-term goal of producing positive cash flow from operations.