M.D.C. Holdings, Inc. (NYSE:MDC) Friday morning announced a net loss for the quarter ended September 30, 2008 of $118.0 million ($2.55 per diluted share) including pre-tax charges of $95.4 million for asset impairments and a $61.1 million FAS 109 charge to deferred tax assets.
Total revenue for the quarter fell 47.4% to $361.2 million as homes closed fell 43% to 1,116 and average prices dropped 9% to $301,700. Home building gross margins increased to 15.3% compared with 14.1% for the same period in 2007.
Net new orders fell 46% to 667, and estimated value of new orders fell 50% to $182 million as new order average prices declined 8% to $272,900. The cancellation rate for the quarter was 46%, down from 57% in the year-ago quarter.
M.D.C. ended the quarter with a backlog of 1,127 homes with an estimated sales value of $364.0 million, compared with a backlog of 3,399 homes with an estimated sales value of $1.21 billion at September 30, 2007.
The home building loss before taxes for the quarter improved to $99.1 million, compared with $258.0 million for the same period in 2007, due largely to a decline in asset impairment charges of 62% and declines in home building commissions, marketing and general and administrative expenses("SG&A") of 44% from the comparable period last year to $59.3 million.
The company had an inventory of unsold homes under construction of 982, down from 1,151 in last year's third quarter and down from 1,400 at yearend, 2007. Owned lots were down to 7,762 from 11,515 at yearend 2007 and 13,427 at the end of last year's third quarter. Lots under option were down to2,752 from 3,615 at yearend 2007 and 3,993 in third quarter, 2007.
Land inventory was impaired by $70 million and work-in-process inventory was impaired by $21 million, impacting approximately 3,500 lots in 150 subdivisions. The quarter-end book value of the impaired subdivisions after the impairments was $213 million, consisting of $55 million of land and $158 million of work-in-process. More than 80% of the asset impairments were in the Mountain and West divisions.
M.D.C. had home building cash of $1.16 billion on its balance sheet at the end of the quarter and no borrowings on its home building line of credit.
Income before taxes from the Financial Services and Other segment for the quarter was $3.4 million, compared with $5.0 million for the same period in 2007.
Larry A. Mizel, M.D.C.'s chairman and CEO, said in the earnings release, "As national economic conditions continued to deteriorate during the third quarter of 2008, we generated in excess of $100 million in operating cash flow, largely through our efforts to reduce inventory balances and overhead expenses. As a result, we ended the quarter with $1.37 billion in cash and investments. Though many businesses across the country have struggled in the wake of tightening credit markets and overall market volatility, we believe that our capital structure currently provides us with adequate resources to pursue opportunistic land investments, given that our quarter-end cash and investments exceeded our total debt by more than $300 million and that our next debt maturity does not occur until 2012."
Shares of M.D.C. Were up 1% at $31.56 on light volume in mid-morning trading Friday.