M.D.C. Holdings, which is reporting a net loss of $155.4 million for the third quarter ending Sept. 30, experienced what CEO Larry A. Mizel calls a "turbulent" period. M.D.C. was ranked No. 10 in the 2006 BUILDER 100.
The Denver-based builder's revenue, which dropped to $686.7 million from $1.08 billion in the same period last year, was hurt by what is affecting most home builders: turmoil in the mortgage industry, lower prices, and fewer closings.
"Throughout these turbulent times for the home building industry, we have remained focused on improving our investment-grade balance sheet, strengthening our financial position, and enhancing our operating structure and processes in preparation for an eventual recovery," Mizel said in a Wednesday night statement.
M.D.C. announced Thursday during its quarterly conference call that of the $249 million in impairments, the West accounted for $190.5 million, followed by $16.2 million in the East, and $6.9 million in the Mountain region.
M.D.C. also announced a number of strategies the builder is pursuing to navigate through the housing slump that Mizel said had "intensified over the last few months."
The company cut the number of home building divisions from 27 to 17 and reduced its work force by 40 percent since the beginning of 2006. Part of the payroll slashing included the removal of divisional presidents; the company says most regional presidents are now serving in that capacity.
In addition, the company, Mizel says, is focusing on designing new products to meet changing demand; unbundling construction costs; examining and improving each phase of construction; maintaining a commitment to customer focus; and preserving the integrity of the M.D.C. brand.
The company, which builds under the name Richmond American Homes and operates in Arizona, California, Colorado, Delaware, Florida, Illinois, Maryland, Nevada, Texas, Utah, and Virginia, closed 1,963 homes for the quarter, compared with 2,955 closings for the same period in 2006. The builder's average selling price was $331,700, which is down $23,900 from 2006's third quarter. The company also reported a 42 percent drop in orders and a 57 percent cancellation rate.
According to Paris G. Reece III, M.D.C.'s CFO, consumer confidence played a role in the company's third-quarter prospects.
"As buyer confidence continued to erode and competition for new-home sales intensified, we experienced reduced selling prices and increased incentive levels in most of our markets, which decreased our performance expectations with respect to certain subdivisions in these markets," says Reece. "As a consequence, we recognized $249 million in inventory impairments with respect to more than 7,000 lots in 132 subdivisions, which largely accounted for our third-quarter loss."
Learn more about markets featured in this article: Denver, CO.