M.D.C. Holdings, Inc., parent of Richmond American Homes, today reported a second quarter net loss of $106.1 million, or $2.32 per share. Total revenue for the second quarter of 2007 was $716.7 million, compared with revenue of $1.23 billion for the same period in 2006, a revenue loss of 41.7 percent.
"The home building market continued to show little improvement in the 2007 second quarter," said Larry Mizel, M.D.C.'s chairman and CEO, who spoke to analyst and reporters earlier today.
Total revenue for the first six months of 2007 was $1.46 billion, compared with revenue of $2.38 billion for the same period in 2006. Net loss for the six months ended June 30 was $200.5 million, or $4.40 per share, which included pre-tax charges of $302.5 million for asset impairments and $10.5 million for writeoffs of deposits and pre-acquisition costs associated with land option contracts the company does not intend to pursue.
"While we cannot predict when the recovery will occur, we can continue to prepare our company to take advantage of the opportunities that we believe will be present as the market begins to stabilize," Mizel said.
M.D.C.'s CEO said the company continues to focus on targeting its operating and administrative infrastructure to demand changes in each of its markets. The result is a year-over-year reduction in total second quarter general and administrative expense of more than $35 million. MDC also reduced its lot supply by 15 percent in the second quarter alone, which let the company generate almost $160 million in cash flow. At the same time, MDC minimized its incremental investment in work-in-process inventory by closely monitoring its supply of unsold homes.
"The combination of these efforts let us generate $50 million in operating cash flow this quarter, raising our cumulative total over the last 12 months to $675 million," Mizel said. "As a result, we ended the quarter with $668 million in cash and no borrowings under our $1.25 billion homebuilding line of credit, contributing to a 44 percent year-over-year increase in our cash and available borrowing capacity."
M.D.C. also reported that the tighter credit market following the subprime crisis had affected the type of loans it was writing. Prime loans shot up to 86 percent in the second quarter compared to 58 percent in the previous quarter. The number of Alt-A loans written slid to 5 percent in the second quarter compared to 35 percent in the previous quarter. M.D.C. typically does not deal in subprime loans, so there was no real change in its subprime loan levels.
The company continues to struggle in the West, primarily Arizona, California, and Nevada, and in Colorado, where closings were down 50 percent. M.D.C.'s average selling price was down $13,400 in the second quarter to $338,700, from $352,000 from the same quarter the year before.