Horton warns of grim 2008
By ANDREA JARESStar-Telegram Staff Writer
The chairman of Fort Worth-based D.R. Horton home builder warned Thursday that the sharp downtown in housing sales nationwide is expected to continue in 2008.

Donald R. Horton told company shareholders at their annual meeting that 2008 is going to be more difficult than 2007.

The home-building industry is not in a recession, he said. It\'s in a depression.

Horton said the company will continue to cut costs as it adjusts to weakened consumer demand. It is pulling back on starts, having cut back by 42 percent in 2007. And it is paring back its exposure in areas hit hard by the bursting of the housing bubble, trying to reduce its five offices in California to one, for example, he said.

The company has also whittled existing inventory by 50 percent in the past year, he said.

D.R. Horton joins other publicly traded home-building companies that have been posting grim earnings results in recent quarters. D.R. Horton posted an annual loss for the first time in its almost three-decade-long history.

But at Thursday\'s meeting, Horton presented a number of slides that show how his company is doing better than the country\'s other largest builders during a tumultuous year.

Questions about bonuses

The downturn in the housing market prompted the Laborers International Union of North America to request that the company\'s executives have their compensation more closely tied to performance. The union represents construction workers and has more than 100 different investment funds, representing more than $30 billion in assets. Many of those assets are invested in home-building companies and mortgage lenders.

We just think that in order to get bonuses, they should be outperforming their peer group, said Jennifer O\'Dell, union spokeswoman.

Shareholders voted the proposal down by a wide margin.

The union also filed similar proposals at KB Home, Simon Property Group, Countrywide Financial, Wal-Mart, Lowes, Goldman Sachs, Lennar and Morgan Stanley, O\'Dell said.

Performance pay

Shareholder activists, including some pension funds, have increasingly called for corporate pay to be more closely tied to company performance, said Paul Hodgson, a senior research associate at The Corporate Library.

Generally, executive pay has increased 12 percent to 15 percent in each of the past three years, he said.

The company\'s philosophy on executive compensation is one that will attract, motivate and retain highly qualified and experienced executives, reward superior performance and provide incentives that are based on performance of the company, according to the proxy statement filed in December.

What it means

The compensation is important to keep executives from being lured to a competitor. Plus, many executives are veterans of downturns in the home-building market, which the report indicates would be valuable now that challenging times are back.

The company\'s stock (ticker: DHI) gained 10.5 percent Thursday, to close at $17.26 a share

Executive pay

D.R. Horton\'s top four executives received the following compensation in 2007. Chairman Don R. Horton and Donald Tomnitz each received $12 million in bonuses in 2006.

Don R. Horton, chairman: $3,096,939

Donald Tomnitz, vice chairman, president and chief executive: $2,784,182

Gordon Jones, vice president and region president: $1,163,547

George Seagraves, vice president and region president: $1,021,063

ANDREA JARES, 817 548 5522
[email protected]