http://www.reuters.com/article/pressRelease/idUS114388+30-Oct-2009+PRN20091030
DENVER, Oct. 30 /PRNewswire-FirstCall/ — M.D.C. Holdings, Inc. (NYSE: MDC) today reported results for its third quarter ended September 30, 2009. The Company announced a net loss for the quarter of $32.0 million, or $0.69 per diluted share, which included a pre-tax charge of $1.2 million for asset impairments. The 2009 third quarter net loss also included an $11.8 million increase in our deferred tax valuation allowance. The net loss for the 2008 third quarter was $118.0 million, or $2.55 per diluted share, which included a pre-tax charge of $95.4 million for asset impairments and an increase in our deferred tax valuation allowance of $61.1 million. Total revenue for the third quarter of 2009 was $203.2 million, compared with revenue of $362.7 million for the same period in 2008. Larry A. Mizel, MDC’s chairman and chief executive officer, stated, “During the third quarter, an increasing national unemployment rate overshadowed an improvement in overall homebuilding industry conditions. Our outlook remains cautious because of the employment situation and the overall uncertain state of the economy. However, we are encouraged by a year-over-year increase in our own net home orders for the second consecutive quarter.” Mizel continued, “We achieved the improvement in home orders in part due to our efforts to adapt our homes to the changing needs of our customers. During the third quarter, we continued to expand our offering of the smaller, more affordable homes that we introduced earlier this year. In addition, in an effort to improve affordability for our homebuyers, we initiated a new sales program during the quarter, which focused on providing low mortgage interest rates, and we positioned inventory to allow buyers the opportunity to close on a home prior to the impending expiration of the federal homebuyer tax credit.” “We strategically increased the number of unsold homes available for personalization in our inventory by more than 40% during the quarter, while we decreased our finished homes by more than 75%. This should help to improve our profitability, as the margins we realize on unsold homes available for personalization significantly exceed those on finished inventory. Generally, we stop construction on unsold units at the drywall stage. Once construction is restarted, these homes can close within 45 days, in direct competition with finished homes on the market. However, by holding the units at drywall, we offer our buyers the opportunity to personalize the home at one of our Home Galleries.” Mizel concluded, “After several years of relatively limited land acquisition activity, during the third quarter, we secured control of almost 1,300 lots through direct acquisitions or option contracts. With more than $1.6 billion in cash and investments available at the end of the quarter, we are well-positioned to continue making opportunistic investments as we build our land pipeline to support future home closings.” Homebuilding Highlights Net orders for the third quarter ended September 30, 2009 totaled 1,016 homes with an estimated sales value of $271.9 million, compared with net orders for 667 homes with an estimated sales value of $182.1 million during the same period in 2008. The improvement was driven by significant increases across all of the homebuilding segments. During the third quarter of 2009, the Company’s cancellation rate dropped to 23% compared with 46% during the same period in 2008, primarily due to a decrease in mortgage-related issues and a decline in the number of prospective homebuyers with a contingency to sell an existing home. Homebuilding revenue for the 2009 third quarter fell to $200.0 million, compared with $358.1 million in the third quarter of 2008. The decline in revenue was primarily the result of a year-over-year decline in home closings and average selling price of 41% and 6%, respectively. All of our markets experienced year-over-year decreases in closings with the exception of Colorado, which experienced a 3% increase. Nearly all of our markets experienced year-over-year decreases in average selling price. However, Virginia and Delaware Valley experienced a year-over-year increase in average selling price due to a change in the size and style of homes that closed during the third quarter of 2009 compared to the same period in 2008. Home gross margins during the third quarter of 2009 increased to 18.9% from 15.3% in the third quarter of 2008, primarily due to a $10.8 million reduction in the warranty reserve, compared with only a $3.2 million reduction in the third quarter of 2008. The third quarter 2009 warranty reserve reduction resulted from a decrease in warranty payments actually incurred and reaching a settlement on certain construction defect claims in Nevada. In addition, margins improved as a result of a decrease in the lot cost per home closed, primarily a result of prior impairments. Homebuilding SG&A decreased to $31.0 million for the quarter ended September 30, 2009, compared with $57.7 million for the same period in the prior year. The decrease in SG&A resulted from various cost saving initiatives associated with right-sizing our operations in response to the reduced level of home closings, including a 35% reduction in homebuilding headcount over the past year. Also contributing to this decrease was a reduction in marketing expenses, primarily due to a significant reduction in sales office and model home expenses, as well as a decline in commission expenses resulting from fewer home closings and lower average selling prices. During the third quarter of 2009, we recognized $1.2 million of asset impairments, a decrease of 99% from the $95.4 million recognized in the 2008 third quarter. Overall, the year-over-year decrease in asset impairments can be attributed to the impact of recording significant impairments over the last twelve quarters, thereby reducing our exposure to further impairments. Financial Services and Other Highlights Loss before taxes from the Company’s Financial Services and Other segment for the quarter ended September 30, 2009 was $4.3 million compared with income of $3.4 million for the same period in 2008. The decrease primarily resulted from a $5.2 million increase in general and administrative expense for the segment, due to a $7.3 million increase in our reserves for mortgage loan losses, compared with an increase in the reserve of only $0.8 million in the third quarter of 2008. In addition, we experienced a $1.5 million decrease in gains on sales of mortgage loans and broker origination fees, as we originated and sold fewer mortgage loans in connection with closing fewer homes during the quarter. Corporate Highlights Loss before taxes from the Company’s Corporate segment for the quarter ended September 30, 2009 was $27.4 million, compared with a loss of $21.3 million for the same period in 2008. The higher loss primarily resulted from a $5.7 million decrease in interest income, as lower interest rates offset a higher average cash balance for the quarter. Additionally, Corporate general and administrative expense increased by $2.7 million, primarily due to a $2.6 million increase in finance costs associated with the reduction of the commitment amount under our homebuilding line of credit.